The SEC, CFTC and FinCen got together to say follow the rules or you'll get trampled.
The SEC, CFTC, and FinCen got together to say follow the rules or you'll get trampled. (via Wikimeedia Commons).
Regulation

Three agencies issue direct warning: everyone must comply

Anti-money laundering and terrorism financing laws must be followed; registration with the correct agency is your responsibility

By  / October 14, 2019 /

The three main U.S. agencies overseeing cryptocurrencies and digital assets just issued an unusual joint warning.

On October 11, the Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN), and the Securities and Exchange Commission (SEC) issued the blunt statement.

Anyone undertaking activities involving digital assets must comply with “anti-money laundering” (AML) and “countering the financing of terrorism” (CFT) rules, as well as have reporting systems in place that detect suspicious transactions, the statement said.

The agencies cautioned that any person or company engaged in these activities that the Bank Secrecy Act (BSA) “defines as ‘financial institutions’… are obligated to register” with the appropriate agency. 

They added that it doesn’t matter what those assets are called.

“We are aware that market participants refer to digital assets using many different labels.” it said. “The label or terminology used to describe a digital asset or a person engaging in or providing financial activities or services involving a digital asset, however, may not necessarily align with how that asset, activity, or service is defined under the BSA, or under the laws and rules administered by the CFTC and the SEC.”

It is the economic reality of how those assets, activities, and services are used is key, the statement noted.

“For example, something referred to as an ‘exchange’ in a market for digital assets may or may not also qualify as an ‘exchange’ as that term is used under the federal securities laws,” according to the statement.

Another warning the statement made is that cryptocurrency market participants should not assume that they are only regulated by one agency.

“The AML/CFT activities of a futures commission merchant will be overseen by the CFTC, FinCEN, and the National Futures Association (NFA),” it pointed out.

“[T]hose of a money services business will be overseen by FinCEN,” said the statement. “[A]nd those of a broker-dealer in securities will be overseen by the SEC, FinCEN and a self-regulatory organization, primarily the Financial Industry Regulatory Authority (FINRA).”

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.