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United States

In 2019 FinCEN issued a guidance on virtual assets. The guidance emphasised that the Travel Rule is in effect. 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.

USA
Breakdown of the USA's Travel Rule Regulations

Who are the supervisory bodies for VASPs in the US?

FinCEN plays an essential role in regulating cryptocurrencies within the USA. However, different cryptocurrency activities are regulated by various US agencies.

What is the Travel Rule threshold in the US (FinCEN)?

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

What is the scope of the Travel Rule in the US?

The proposed Travel Rule would apply to virtual assets in the context of:

  • US Exchanges,

  • Trading Desks,

  • ATM’s,

  • 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.

What are FinCEN's requirements for Travel Rule information to be exchanged? 

  • originator’s name,

  • originator's account number (when available),

  • originator's address,

  • 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. 

FinCEN Travel Rule Breakdown
Breakdown of FinCEN Travel Rule.

What are the FATF's requirements for Travel Rule information to be exchanged?  

  • originator’s name

  • originator's account number,

  • originator's address, or national identity number, customer identification number, or date and place of birth,

  • beneficiary’s name,  

  • beneficiary’s account number.

FATF Travel Rule Breakdown (blue)
Breakdown of FATF Travel Rule.

When do you need to comply with the Travel Rule in the US?

Now.

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.

Which regulations are applicable to the US Travel Rule?

Department of the Treasury Semiannual Agenda

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

Application of FinCEN’s Regulations to Certain Business Models Containing Convertible Virtual Currencies.

What else do you need to know about the Travel Rule in the US?

  • 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.

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