Businesses Using Blockchain to Transfer Precious Metal is Money Transmitters Says FinCEN


Businesses Using Blockchain to Transfer Precious Metal is Money Transmitters Says FinCEN

The Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes that businesses using Bitcoin’s blockchain to transfer precious metals are considered money transmitters.

Looks like, the FinCEN is tightening the noose on the businesses which have been using blockchain technology to transfer precious metals. This also is part of FinCEN’s director’s desire who had candidly expressed its mission in November 2013 as “to safeguard the financial system from illicit use, combat money laundering and promote national security.

This has not surprised many people as it was on the way. The ruling came in response to an inquiry from an unnamed company, which engages in the brokerage and storage of precious metals. The reports say that it issues a “digital proof of custody”, registered on Bitcoin’s blockchain, through which the customer can then transfer ownership.

The FinCEN has targeted the companies that have in the past year have sprung up offering consumers the ability to trade precious metals via Bitcoin’s technology. According to FinCEN the company is both a money transmitter and a dealer in precious metals, precious stones, or jewels, and is thereby subject to the regulations of both regimes.

The organization also claims that the business must assess the risk of money laundering arising out of non-exempt transactions and implement an anti-money laundering (AML) program to mitigate such risk. The enforcement agency has also asked the companies have recordkeeping, reporting, transaction monitoring requirements complied with.

FinCEN has been Giving its Opinion on Virtual Currencies over the Years

Nonetheless, FinCEN has also argued that the fact the Bitcoin blockchain powers the transfers does not absolve the business outside the realm of money transmitters. The following clarification has been issued by the organization:

The Company does not fall under the e-currencies or e-precious metals trading exemption from money transmission because, when the Company issues a freely transferable digital certificate of ownership to buyers, it is allowing the unrestricted transfer of value from a customer’s commodity position to the position of another customer or a third-party, and it is no longer limiting itself to the type of transmission of funds that is a fundamental element of the actual transaction necessary to execute the contract for the purchase or sale of the currency or the other commodity.

From the observation it appears crystal clear that it is not for the first time that such a decision has been taken by the FinCEN as earlier in July 2011, it had said that other value that substitutes for currency to its definition of money services businesses in preparation to adapt the respective rule to virtual currencies.

To contact the reporter of this story: Deepak Tiwari at