FinCEN (Financial Crimes Enforcement Network), a powerful U.S. regulatory and enforcement agency, recently released a 30 page breakdown of new guidelines that “does not establish any new regulatory expectations or requirements”, but “consolidates current FinCEN regulations” and “applies these rules and interpretations to other common business models involving CVC” (convertible virtual currencies).

[tweet align=’left’] As Jake Chervinsky discussed via twitter, the aggregated guidance specifically mentions which crypto participants are subject to AML laws by further clarifying which participants fall under the “money transmitters” classification. Jake goes on to clarify that “this guidance isn’t the law, it’s FinCEN’s non-binding opinion of the law” and that “FinCEN lawyers can change their minds or be proven wrong in court.” Nonetheless, the document can still be “a useful guide to their views on enforcement” and how market participants should behave.

Jake brings attention to various aspects of the guidance and classifications including traders, anonymous mixers, developers, some DApps and other parties that benefit from the new document, but peer-to-peer traders, ICOs, crypto ATM providers, and some DApps suffer a disadvantage from the new guidance.


Increasing regulatory clarity has winners and losers.

[tweet align=’right’] FinCEN does clarify that developers can be exempt from various regulations so long as they simply created the software/platform and are not actively using the software/platform.

“a developer or seller of either a software application or a new CVC platform may be exempt from BSA obligations associated with creating or selling the application or CVC platform, but may still have BSA obligations as a money transmitter if the seller or developer also uses the new application to engage as a business in accepting and transmitting currency, funds, or value that substitutes for currency, or uses the new platform to engage as a business in accepting and transmitting the new CVC.”

This also carries over to consumers using anonymizing software such as transaction mixers.

“An anonymizing software provider is not a money transmitter. FinCEN regulations exempt from the definition of money transmitter those persons providing ‘the delivery, communication, or network access services used by a money transmitter to support money transmission services.’ This is because suppliers of tools (communications, hardware, or software) that may be utilized in money transmission, like anonymizing software, are engaged in trade and not money transmission.”

However, FinCEN further specifies that “a person that utilizes the software to anonymize the person’s own transactions will be either a user or a money transmitter, depending on the purpose of each transaction”. Further, there is uncertainty around DApps since the guidance also says that “when DApps perform money transmission, the definition of money transmitter will apply to the DApp, the owners/operators of the DApp, or both”. While some parts still remain unclear, the overall guidance provides more important clarifications to enable the building and use of cryptocurrencies with limited unknown risk of government regulations and/or prosecution.

Increased clarity benefits Dash’s attributes

Since Dash both has a privacy mixing attribute, PrivateSend, as well as currently building DApp features, the refined guidance helps provide more clarity to individuals currently using Dash, as well as investors and business owners looking to explore utilizing Dash more frequently. Dash is also pursuing a no-action letter from the SEC, which will further help provide confidence to Dash users that Dash is digital cash rather than a security. Additionally, the increased clarity that developers are not held directly responsible for the code that they write can provide developers with more liberty to freely innovate within the crypto space. The increasing amount of crypto friendly, or at least not hostile, regulations bodes well for the overall sector, especially for coins like Dash that want to see use in everyday life by everyday individuals.