Treasury Officials Detail Approach To Virtual Currency

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This week, Treasury Under Secretary David Cohen and FinCEN Director Jennifer Shasky Calvery outlined the Treasury Department’s approach to regulation of virtual currency. Mr. Cohen acknowledged that large scale adoption of virtual currency is possible, but asserted that the long term viability of virtual currency is dependent on establishing consumer and investor protections, and addressing the risk that virtual currency can be used to facilitate illicit finance. Although Treasury does not currently see widespread use of virtual currencies in terrorism financing or sanctions evasion, Mr. Cohen highlighted those risks in addition to money laundering risk posed by the anonymous nature of virtual currencies. Treasury’s basic policy approach is to seek a balance between allowing new technologies to flourish while ensuring systems are sufficiently transparent to protect the U.S. economy. Mr. Cohen made clear that Treasury will err on the side of transparency when necessary. Currently, Treasury and FinCEN are focused on “the moment ‘real’ money is exchanged into virtual currency, and when virtual currency is exchanged back into ‘real’ money.” Mr. Cohen believes that such an approach is sufficient given current adoption levels, but added that Treasury will need to consider whether to  apply “cash-like” reporting requirements to virtual currency when it appears that “daily financial life can be conducted for long stretches fully ‘within’ a virtual currency universe.” Treasury is advancing its objectives and approach internationally through the Financial Action Task Force, which Treasury anticipates will publish an updated paper on virtual currency definitions and risks later this year. Finally, both officials announced that, for the first time, Treasury will include a member of the virtual currency community as part of the Bank Secrecy Act Advisory Group, which advises Treasury on anti-money laundering and counter-terrorist financing policy.

Topics:  Bitcoins, FinCEN, IRS, Virtual Currency

Published In: Finance & Banking Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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