A Guide to Anti-Money Laundering for Crypto Firms

Cryptocurrency Regulations in the United States

AML Compliance Crypto Knowledge & Training

Is Cryptocurrency Legal in the US?

  • Cryptocurrencies: Not considered legal tender
  • Cryptocurrency exchanges: Legal, regulation varies by state

While it is difficult to find a consistent legal approach at the state level, the US continues to progress in developing federal cryptocurrency legislation. The Financial Crimes Enforcement Network (FinCEN) does not consider cryptocurrencies to be legal tender but considers cryptocurrency exchanges to be money transmitters on the basis that cryptocurrency tokens are “other value that substitutes for currency.” The Internal Revenue Service (IRS) does not consider cryptocurrency to be legal tender but defines it as “a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value” and has issued tax guidance accordingly.

US Cryptocurrency Regulations – Exchanges

Cryptocurrency exchanges are legal in the United States and fall under the regulatory scope of the Bank Secrecy Act (BSA). In practice, this means that cryptocurrency exchange service providers must register with FinCEN, implement an AML/CFT program, maintain appropriate records, and submit reports to the authorities. Meanwhile, the US Securities and Exchange Commission (SEC) has indicated that it considers cryptocurrencies to be securities and applies securities laws comprehensively to digital wallets and exchanges. By contrast, The Commodities Futures Trading Commission (CFTC) has adopted a friendlier, “do no harm” approach, describing Bitcoin as a commodity and allowing cryptocurrency derivatives to trade publicly.

In response to guidelines published by FATF in June 2019, FINCEN made clear that it expects crypto exchanges to comply with the “Travel Rule” and gather and share information about the originators and beneficiaries of cryptocurrency transactions. It places virtual currency exchanges in the same regulatory category as traditional money transmitters and applies all the same regulations, including those set out in the Bank Secrecy Act – which has established its own version of the Travel Rule. In October 2020, FINCEN released a Notice of Proposed Rulemaking (NPRM) on adjustments to the Travel Rule, signaling the introduction of new compliance responsibilities for cryptocurrency exchanges.

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Future Cryptocurrency Regulations in the US

The US Treasury has emphasized an urgent need for crypto regulations to combat global and domestic criminal activities. In December 2020, FINCEN proposed a new cryptocurrency regulation to impose data collection requirements on cryptocurrency exchanges and wallets. The rule is expected to be implemented by Fall 2022 and would require exchanges to submit suspicious activity reports (SAR) for transactions over $10,000 and require wallet owners to identify themselves when sending more than $3,000 in a single transaction.

The Justice Department continues to coordinate with the SEC and CFTC over future cryptocurrency regulations: US authorities are focusing their efforts on ensuring effective consumer protection and on streamlining regulatory oversight. In 2021, the Biden administration turned its attention to stablecoins, with the intention to address the danger of the tokens’ growth in value. Later in 2021, the President’s Working Group on Financial Markets released a report which included recommendations for new legislation to protect stablecoin users, and for interim regulatory measures to address stablecoin risks under the existing Electronic Fund Transfer Act, the Gramm-Leach-Bliley Act, and the Consumer Financial Protection Act. 

Congress also debated the status of cryptocurrency service providers in 2021, with new rules included in the Biden administration’s infrastructure bill. Under the new rules, cryptocurrency exchanges are regarded as brokers and must comply with the relevant AML/CFT reporting and record-keeping obligations.

Following an analysis of criminal trends, the US Office of Foreign Assets Control (OFAC) has also issued sanctions compliance guidelines for the regulation of virtual currency. In a report released at the end of 2021, OFAC outlined benchmarks with which US firms may assess the adequacy of their sanctions screening programs – including how to block virtual currency transactions that breach sanctions regulations. OFAC included a series of screening best practices to help firms identify sanctions breaches. 

In March 2022, President Biden issued an executive order detailing plans to introduce a cryptocurrency regulatory framework. The order involved 6 digital asset priorities: consumer and investor protection, the promotion of financial stability, action against illicit finance, US global financial leadership, financial inclusion, and responsible innovation. The order also included a call for research into the US’ capability to issue a central bank digital currency (CBDC). By providing clarity on regulatory priorities, the executive order offers a glimpse into what future US cryptocurrency legislation might look like. 

Complying with US Cryptocurrency AML Regulations

ComplyAdvantage offers a range of AML tools, including screening and monitoring tools to help organizations comply with cryptocurrency regulations in the US.

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Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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