Feds Won’t Treat Bitcoin Like PayPal

The federal government won’t treat Bitcoin mining as money transmitting, however state and local governments could still offer some rules for the digital currency.

by / January 31, 2014

The U.S. Department of the Treasury announced this week that Bitcoin miners will not be subject to regulations as money transmitters like Western Union or PayPal. The Treasury Department’s Financial Crimes Enforcement division (FinCEN) also announced that companies transmitting digital currency for profit won’t be subject to money transmitting enforcement

The two administrative rulings are seen as big wins for personal and corporate Bitcoin miners. They also come at a time when Bitcoin has been stung by a spate of bad news: In early December, the People’s Bank of China issued a memo warning that all Bitcoin trading in the country should end before the Chinese New Year (January 31st). After that memo was issued, Bitcoin value fell almost $300 over a two-week span. 

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And just last week, a major player in the Bitcoin market was arrested on money laundering and drug charges at JFK airport in New York City. Federal investigators say Charlie Shrem used his position as CEO of Bitcoin exchange BitInstant to funnel money through Silk Road, a digital black market known for its connection to the illicit drug trade. 

FinCEN’s administrative ruling also gives guidance to state governments, which also have rules and regulations for the money transmitting sector. However, state and local governments can still regulate Bitcoin exchanges in various ways. That includes New York City, which just concluded two days of hearings on Bitcoin. 

The Bitcoin Board has long addressed its view on regulation through the currency’s website: 

“The challenge for regulators, as always, is to develop efficient solutions while not impairing the growth of new emerging markets and businesses.”