FinCEN Hints At Some Decentralized Applications May Qualify Under US Money Transmitter Rules
There are some decentralized applications that could be considered as money transmitters by the U.S. law in specific circumstances. This is according to the anti-money laundering (AML) regulator in the country, the Financial Crimes Enforcement Network (FinCEN).
Some dApps Could Be Subject To US Money Transmitter Rules
As the blockchain and crypto market continues to expand, there are new companies and firms working on different decentralized applications to offer different services and products to their customers and users. Nonetheless, in a recently published guidance sheet by the FinCEN on Thursday, there are different companies, individuals and platforms that could be considered money transmitters under the Bank Secrecy Act (BSA).
That means that these dApps, individuals or companies should have a license in the states in which they operate to do business and follow federal AML and Know-Your-Customer (KYC) regulations.
The document explains that decentralized applications were created in order for them to operate in a decentralized way without any central authority controlling what happens with the network. However, if the application s accept and transmit value, they qualify as a money transmitter.
The report reads as follows:
“Accordingly, when dApps perform money transmission, the definition of money transmitter will apply to the dApp, the owners/operators of the dApp, or both.”
It is worth mentioning that an app would fall in this category only if it is already offering services to users and it transfer funds. Some of these companies affected could include crypto payment processors.
There are some wallets such as those in which users control their funds that are exempted from this classification, but other wallets and services such as Coinbase or other exchanges are not excluded.
Additionally, payment processors that convert crypto to fiat or fiat to crypto are not exempted. The FinCEN said that the exemption is usually granted to processors that facilitate the purchase of goods and services.
Thus, companies and individuals that are affected by this regulation are required to register with the regulatory agency as a money services business (MSB). They also need to report currency transactions, suspicious activities and participate in anti money laundering programs.
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