The United States Treasury’s Financial Crimes Enforcement Network (FinCEN) has offered some clarity on the matter of renting bitcoin miners (or mining power from bitcoin mining farms) in a letter dated April 29th.
The letter comes in response to an inquiry from a redacted entity, who questions whether or not renting mining power qualifies as a money services business, thus requiring the business to register with FinCEN in addition to meeting a number of standards as per the Bank Secrecy Act (also referred to as the BSA).
Such standards include AML/KYC (anti-money laundering/know-your-customer) compliance, in addition to the reporting of suspicious financial activity to appropriate authorities.
The response (bold emphasis ours):
[blockquote style=”2″]This responds to your letter mailed to us on February 26, 2014, seeking an administrative ruling from the Financial Crimes Enforcement Network (“FinCEN”) regarding the status of [ ] (the “Company”) as a money services business (“MSB”) under the Bank Secrecy Act (“BSA”). Specifically, you ask whether the rental of computer systems for mining virtual currency would make the Company an administrator of virtual currency or a money transmitter under the BSA. Based on the following analysis of the facts and circumstances described in your letter, FinCEN finds that the Company is not functioning as an administrator of virtual currency and that the Company’s renting of mining computer systems to third parties does not make the Company a money transmitter under BSA regulations.[/blockquote]
Additional information provided:
[blockquote style=”2″]The rental of computer systems to third parties is not an activity covered by FinCEN regulations. The regulations specifically exempt from money transmitter status a person that only provides the delivery, communication, or network data access services used by a money transmitter to supply money transmission services. Based on this exemption, and on the description of the service offered by the Company, we find that, even if the Company rents a computer system to third parties that will use it to obtain convertible virtual currency to fund their activities as exchangers, such rental activity, in and of itself, would not make the Company a money transmitter subject to BSA regulation.[/blockquote]
As the business of hosted mining continues to grow, FinCEN’s latest guidance will help businesses in the industry avoid costly and time-consuming registration processes.
The Enforcement Network also made note in the today’s letter that escrow services operating in the digital currency space are also not considered money services businesses.
It’s welcomed news in the community, it seems.