Issuers Of Initial Coin Offerings To Comply With Bank Secrecy Rules

ICOs Startups May Likely Need To Comply With Bank Secrecy Rules

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  • ICOs startups and cryptocurrency exchanges must abide by the Treasury’s bank secrecy rules.
  • This rule is to combat money laundering and the financing of terrorism.

United States: Aside the increasing scrutiny emanating from the US regulators, there seems to be something new that both issuers and investors in Initial Coin Offerings (ICOs) should worry about. The Department of the Treasury recently released a letter which states that some startups that accept digital or fiat currencies in exchange for their newly issued tokens (ICOs issuers) are money transmitters, and must therefore comply with bank secrecy rules and know-your-customer guidelines.

A Treasury official, in a letter to Senator Ron Wyden (D-Ore.) dated Feb. 13 though released Tuesday, stated that companies and organizations must be in compliance with rules devised to fight money laundering and terrorism financing. In order to comply with these bank secrecy rules, organizations have to investigate customers and report suspicious transactions to authorities.

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According to Peter Van Valkenburgh, the director of research at industry advocacy Coin Center in Washington, the interpretation of this Bank Secrecy Act could suggest trouble for new ICOs startups as well as those ICOs issuers who have already sold tokens or coins, as Treasury’s Financial Crimes Enforcement Network (FinCEN) could possibly retroactively enforce this rule. Though some ICOs have already registered with FinCEN in anticipation of the rule, however many haven’t yet. And violating the Treasury’s rule could be taken as felony, which is punishable with up to 5 years of jail time.

This development could make many states whose cryptocurrencies regulations are still in progress to adopt the Treasury’s system and require ICOs to get money transmitter licenses, Van said in a telephone interview.

“In general it will continue to chill that activity in relation with U.S. purchasers,” Van said.

According to CoinSchedule, individuals and startups issuing tokens and coins raised almost $4 billion in funds last year alone. Most of these startups are based overseas, and may not want to comply with this rule, while some other are operated by a couple of people who might not have the ability to comply with his rule.

However, a FinCEN spokesman stated in an email that FinCEN will subject organizations and companies to registration depending on the activities that the organizations engage in and on the specific facts and circumstances surrounding the ICOs.

Do you think the bank secrecy rule is a welcome development for ICOs? Tell us in the comment box.


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