In 2019 FinCEN issued guidance on virtual assets. The guidance emphasised that the Travel Rule had been in effect since 2013. Cryptocurrency can be legally bought and sold from another person, crypto exchanges, bitcoin ATMs, and some banks throughout the United States. Overseen by FinCEN, the Bank Secrecy Act (BSA) is the primary regulation for all AML/ CFT activities within the USA.
Under the current Biden Administration, the USA is more focused on imposing further crypto regulations on the crypto world. Additionally, the US Securities and Exchange Commission (SEC) has paid greater attention to regulating crypto markets.
FinCEN plays an essential role in regulating cryptocurrencies within the USA. However, different cryptocurrency activities are regulated by various US agencies.
Financial Crimes Enforcement Network (FinCEN) For regulated crypto assets for AML/CFT purposes,
Commodity Futures Trading Commission (CFTC) Regulates virtual assets, which are considered commodities (BTC + ETH),
Officer of the Comptroller of Currency (OCC) For banks participating in the crypto ecosystem,
Internal Revenus Serviice (IRS) Responsible for tax collection,
Federal Bureau of Investigations (FBI) Responsible for crime enforcement at a federal level,
Office of Foreign Assets Control (OFAC) Responsible for overseeing compliance of the US cryptocurrency regulation involving sanctions.
FinCEN: USD 3000. There is an ongoing proposal to lower this amount to USD 250 for funds entering or leaving the USA.
FATF: USD / EUR 1000
Scope of the Travel Rule
The proposed Travel Rule would apply to virtual assets in the context of:
Custody Providers (in the future).
As per cryptocurrency regulations in the USA, virtual assets can be classified as
Cryptocurrencies, for example, Stablecoins,
Crypto-securities, for example, Bitcoin and EFTs,
Crypto commodities, for example, BTC and ETH and so forth.
Information to be exchanged as per FinCEN
Originator's account number (when available),
Originator's financial institution,
Transfer amount and date.
Beneficiary’s name (when available),
Beneficiary’s account number (when available),
Beneficiary's address (when available),
Beneficiary's financial institution.
The virtual asset service provider (VASP) is to keep copies of all payments and transfers performed by the customer. The regulation’s text does not confirm how the information is to be collected, verified or transferred.
Breakdown of FinCEN Travel Rule.
Information to be exchanged as per the FATF
Originator's account number,
Originator's address, or national identity number, customer identification number, or date and place of birth,
Beneficiary’s account number.
Breakdown of FATF Travel Rule.
When do you need to comply?
The Travel Rule has been in action since 2013 but has not been heavily enforced. However, the Biden Administration is working towards a more regulated crypto market. While not directly confronting the crypto market, a Bill was signed in 2021 stating that all VASPs will need to track and report transactions to the IRS as of 2023.
What else do you need to know?
While the FATF uses the terms virtual asset and virtual asset service provider FinCEN makes use of the terms convertible virtual currency (CVC) and money services business (MSB). Moreover, the terms transmitter and receiver replace the terms originator and beneficiary. Lastly, a (virtual asset) transfer is referred to as a transmittal order.
Cryptocurrency exchanges that do not register as an MSB will be in breach of the Bank Secrecy Act and AML/CFT regulations.
Crypto fund managers that invest in crypto futures must be licenced with the Commodity Futures Trading Commission (CFTC) as a Commodity Trading Advisor and Commodity Pool Operator.
Cryptocurrency is taxed under capital gains or loss (if the virtual assets are held for less than a year, short-term capital gains are applied, and the opposite for long-term investments). Moreover, cryptocurrency is classed as property.
US taxpayers must retain detailed records for crypto transactions and report this to the IRS.
The IRS taxes cryptocurrency mining and payment for services/goods with cryptocurrency as income.
Department of the Treasury: Threshold for the Requirement To Collect, Retain, and Transmit Information on Funds Transfers and Transmittals of Funds That Begin or End Outside the United States, and Clarification of the Requirement To Collect, Retain, and Transmit Information on Transactions Involving Convertible Virtual Currencies and Digital Assets With Legal Tender Status