Recently some of the more naive, not to mention top-ticking, financial commentators assumed that just because US regulators had not snapped shut a trap surrounding Bitcoin and other digital currencies yet, that this state of blissful cohabitation would continue indefinitely. Unfortunately, as we warned back in March during the initial leg higher in BTC following the Cyprus deposit confiscations, the well-known “honeypot” strategy was meant to draw out as many digital currency fans and participants as possible – who after all were warned by none other than the ECB that the current regime will never adopt a parallel, and quite threatening monetary unit – only to see the regulatory and enforcement fist of the nation that (still) hosts the reserve currency slowly but surely start to clench around the binary currency.
Because, finally, after testing the ground long enough, the fist is starting to not only close but squeeze tight. And as Reuters reports, it is the U.S. Treasury Department’s anti money-laundering unit that is now warning businesses linked to Bitcoin that they “may have to comply with federal law and regulation as money transmitters, a Treasury spokesman said. ” Specifically, the Treasury’s Financial Crimes Enforcement Network (FinCEN) has sent “industry outreach” letters to about a dozen firms, regarding potential anti-money laundering compliance obligations related to Bitcoin businesses, FinCEN spokesman Steve Hudak told Thomson Reuters’ regulatory information service Compliance Complete.
What is interesting is that unlike in traditional cases of money laundering, where the law is cut and dry, in the case of digital currencies, nobody really knows what the Treasury’s jurisdiction – if any – or the law is. Which is why FinCEN is not only treading lightly but effectively giving so-called offenders a warning in advance of potential future action.
According to Reuters, a legal expert with years of experience representing digital currency firms said FinCEN seemed to be establishing a new regulatory enforcement precedent by warning individual businesses of compliance obligations before taking action. “Is this setting a new standard that in the future if there are any questionable business models there will be notice given before any action is taken?” said Carol Van Cleef, a partner with the Washington law firm Patton Boggs LLP. In response, Hudak said the letters are an attempt at gathering information. He likened them to the letters that banks sometimes send to customers seeking information about the customer’s transactions in an effort to determine whether suspect transactions are truly linked to illicit activity.
Actually no: this is not a standard, new or otherwise, but is merely meant to telegraph the authorities displeasure with ongoing digital monetary activities, with an intent of halting all major activity before an enforcement mandate is handed down.
In the meantime, FinCEN’s letters have had a “chilling effect” on Bitcoin businesses, which are intimidated by the threat of civil and criminal sanctions for non-compliance, said Jon Matonis, executive director of the Bitcoin Foundation, an advocacy group. The firms, he said, may effectively be “put out of business in an extrajudicial manner.”
Which, basically, means the US government wants you to shut down regardless of what the law says. Which is precisely what happened with Utah’s digital-to-coin converter Casascius as we reported previously.
And, as Reuters further adds, the fist grab is almost ready to pulverize:
While some Bitcoin businesses reject FinCEN’s assertion that they are money transmitters, a number have still registered with the agency, a search of the Treasury bureau’s website shows.
FinCEN sent letters to Bitcoin-related businesses on the Internet that appeared to fall under its definition of money transmitters but had not registered, Hudak said. He said FinCEN will keep sending letters to unregistered Bitcoin businesses.
“As we come across them, and as people tip us off, we’ll make inquiries. That is part of what we do,” Hudak said.
Perhaps this explains why at last check Bitcoin was now under $700 and gradually drifting lower. After all Uncle Sam is no longer shy about his true intentions regarding the digital currency.
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/IWLmo3bD4zQ/story01.htm Tyler Durden