US Treasury's Financial Crimes Enforcement Network "Reaching Out" To Bitcoin Businesses

Tyler Durden's picture


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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Tue, 12/17/2013 - 23:16 | 4255842 Tinky
Tinky's picture

Does this mean that fonestar is now Bitfucked?

Tue, 12/17/2013 - 23:26 | 4255860 tmosley
tmosley's picture

Government doesn't want you to own gold?


Government doesn't want you to buy bitcoin?


>Dat double standard.

Tue, 12/17/2013 - 23:31 | 4255869 Pseudonymous
Pseudonymous's picture

What I am wondering is... are statists legislating legitimate activities out of existence... or are they instead legislating themselves out of relevance?

Tue, 12/17/2013 - 23:44 | 4255909 forwardho
forwardho's picture

I believe the previous will be the causus belli for the latter.

Wed, 12/18/2013 - 00:02 | 4255969 Grande Tetons
Grande Tetons's picture

It is like going home with twins back in the 80s.....when everything made sense...and when Audrey and Judy landers were Silver and Gold. 

Tasty, indeed. 

Wed, 12/18/2013 - 00:19 | 4256007 CounterPartyVice
CounterPartyVice's picture

Bitcoin, then bullions, then cash.

Wed, 12/18/2013 - 01:08 | 4256076 layman_please
layman_please's picture

I'm afraid bitcoin might not die of old age but at least it made me realise that next founding fathers are probably hackers. One thing that is certain to expand is technology and at one point revolution in this field can have more impact than standing armies, governments, and banks.

Wed, 12/18/2013 - 02:14 | 4256190 e-recep
e-recep's picture

This just in : Turkish prosecutors raid the bank that does the Iranian oil-gold trade, arrest its CEO and the jeweler who carries the gold to Iran. The pretext is totally different, of course.

Wed, 12/18/2013 - 02:29 | 4256223 Carpenter1
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Governments aren't against Bitcoin. They view it as the perfect "divide and conquer" weapon to use against Libertarians. Already the Libertarian movement is dividing along pro BTC and anti BTC lines.

Wed, 12/18/2013 - 06:02 | 4256388 fiftybagger
fiftybagger's picture is financially finished.  Their epitaph will be played long before Bitcoin's will.

The Bitcoin Channel

Wed, 12/18/2013 - 17:51 | 4258798 MeelionDollerBogus
MeelionDollerBogus's picture

Clearly bitcoin is backed by remnimbi & dollars.
No one wants bitcoins, only fiat at high leverage.
btc is just another pathway to try to get there, leaving a tsunami of bagholders in its wake.
if btc is above zero when the dollar dies it certainly will be at zero when it's dollars are gone.
No bid for any good or service at any price.
US gov, however, is now a corporate fascist non-national entity - it will outsurvive any currency now because it spreads like a virus.

Wed, 12/18/2013 - 00:01 | 4255957 fonestar
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Conceivably, if they managed to shut down every exchange on Earth (somehow?) they could create $0 official price for Bitcoin.  Well aware of that fact, I am still buying Bitcoin in the $700 range.

Wed, 12/18/2013 - 00:08 | 4255984 UP Forester
UP Forester's picture

So, is that like the paper exchange price of PMs going to $0, and the physical price of PMs finding a much higher equilibrium?

If so, what's the price of a physical Bitcoin?

Wed, 12/18/2013 - 00:18 | 4255992 fonestar
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Yes, these same people can create an official $0 price for silver too.  Does that mean I will stop buying it?  Of course not, these people and what they say the value of things are is irrelevant in the long term.

Wed, 12/18/2013 - 00:30 | 4256024 TruthInSunshine
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Yes, because just as in the case of silver, even if they fix the price of bitcoin below its FMV, there will be buyers for it in the real world for its FMV, since things such as advanced circuitry can't be fabricated without fiction.

There are 5 ounces of Satoshi used to make the circuitry in every Tomahawk missile.

Wed, 12/18/2013 - 00:35 | 4256039 fonestar
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Comparing silver's technical utility and Bitcoins transactional utility is dumb.  They are not alike but both have a real-world application in their respective spheres.

Wed, 12/18/2013 - 00:46 | 4256060 TruthInSunshine
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Are they?

What real world inherent value does a bitcoin have? Can I tell the guy selling venison in Croatia that I'll get him some bitcoin for a few pounds of backstrap when my power comes back on, I repair my bullet riddled btc mining server & if everything else works out?

Wed, 12/18/2013 - 01:01 | 4256080 fonestar
fonestar's picture

Only a literalist blockhead would argue that a global transactional network as zero value.

Wed, 12/18/2013 - 01:10 | 4256099 ElvisDog
ElvisDog's picture

But here's the thing, fonestar. The government doesn't have to explicitly make bitcoin illegal. They will do exactly what this article says - make it really expensive in fees, paperwork, etc., for any business to accept bitcoin. That will kill the viability of bitcoin, because the only people left trading it will be you and CH1 and the small handful of individuals who want to "stand up to the man" or whatever. It doesn't matter if you have your super, double-secret encrypted wallet, if you can't use bitcoin as a medium of exchange in day-to-day transactions, bitcoin is not a currency.

Wed, 12/18/2013 - 01:24 | 4256121 Schmuck Raker
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Sorry ElvisDog:

"The government doesn't have to explicitly make bitcoin illegal. They will do exactly what this article says - make it really expensive in fees, paperwork, etc., for any business to accept bitcoin. That will kill the viability of bitcoin,"

is an arguement that doesn't hold any water. For example apply that logic to India, and Indians' desire to obtain and trade in gold.

Wed, 12/18/2013 - 04:16 | 4256311 Harlequin001
Harlequin001's picture


Why would you want to compare bitcoin with gold?

If the Indian authorities loaded up any gold trader with costs and expensive papwerwok they simply wouldn't declare it. That's been the beauty of gold for 5000 years. 

Compare that to a block chain that has every single transaction since 'inception' contained in it and you have a long list of transactors, any one of whom can be arrested at any furture point and bankrupted in fines or thrown in jail. You can't. Bitcoin is nothing like gold, not in any way, shape or form.

Wed, 12/18/2013 - 20:37 | 4259219 TheReplacement
TheReplacement's picture

You didn't hear about the btc lined toilets they found in Saddam's palaces about 10 years ago?

More seriously though.  You can swallow a gold coin (gonna hurt on the exit) to hide it while you transit.  Who's up for swallowing a USB stick?

Wed, 12/18/2013 - 06:32 | 4256400 tmosley
tmosley's picture

But here's the thing, ElvisDog. The government doesn't have to explicitly make gold illegal. They will do exactly what this article says - make it really expensive in fees, paperwork, etc., for any business to accept gold. That will kill the viability of gold, because the only people left trading it will be you and CH1 and the small handful of individuals who want to "stand up to the man" or whatever. It doesn't matter if you have your super, double-secret vault, if you can't use gold as a medium of exchange in day-to-day transactions, gold is not a currency.

This is how ridiculous you sound, ElvisDog.

Wed, 12/18/2013 - 08:32 | 4256511 N2OJoe
N2OJoe's picture

Because when .gov outlaws something, it has to go down in value, right?

*cough* drugs, organs, guns, exotic animals, PM's *cough*

The black market tends to drive UP the price of anything forced into it while eliminating transparency to TPTB. How could they not outlaw something as dangerous(to their power) as crypto currencies?

Then again, I don't give 2 shits what the price of a bitcoin is because I'm not speculating on it. My interest is in its potential as a medium of exchange.

Wed, 12/18/2013 - 09:57 | 4256802 ElvisDog
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But the dream of bitcoin-istas is that bitcoin becomes the defacto world currency that is accepted at Starbucks, Wegmans, etc. What you describe is bitcoin returning to its origins as a black market currency used to buy and sell drugs, weapons, and so on.

Wed, 12/18/2013 - 02:02 | 4256182 DoChenRollingBearing
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With luck, I am about to find (tomorrow Wedsnesday) out how good is here in my city...  And I am really looking forward to getting my 0.25 oz Au...

Soon, the Bearing Guy will have news to report, stay tuned to this Bearing Channel!

Wed, 12/18/2013 - 04:25 | 4256320 Deo vindice
Deo vindice's picture

I'm looking forward to hearing how it worked out for you, DCRB.

Wed, 12/18/2013 - 11:09 | 4257020 rubiconsolutions
rubiconsolutions's picture

fonestar - ultimately isn't BTC just a fiat currency, digital in nature just like the USD? Backed by the full faith and credit of your motherboard? - "In the ATI Radeon 5970 we trust". It's also nearly impossible for the average person going it alone to mine any. You have to belong to a pool (a collective) to have any success. Like I really want to join another collective. I'd rather have a tonsillectomy by way of my sphincter.

Wed, 12/18/2013 - 01:08 | 4256082 Pseudonymous
Pseudonymous's picture

If you don't live in Croatia, better start thinking how to ensure that you have reliable power and have your stuff safe. You might just need it one day, and it might just be better than the alternatives (if any).

Wed, 12/18/2013 - 03:31 | 4256292 hidingfromhelis
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That's why I always keep my GLD stock certificate on me know, just in case.

Wed, 12/18/2013 - 01:14 | 4256094 Schmuck Raker
Schmuck Raker's picture

"What real world inherent value does a bitcoin have?"

Perhaps a BTC magnate in China could easily effect a purchase of real estate in the US(despite any "laundering" "concerns").


edit: To clarify - what real world inherent value does gold have except that enough people should desire having some?


Wed, 12/18/2013 - 02:37 | 4256237 TruthInSunshine
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Gold is apparently a good enough PHYSICAL, TANGIBLE, COLLATERAL ASSET for central banks to post counter-central bank activity upon, so there's that (alone).

How exactly does one "hold & keep" bitcoin in phyz form? There was that company that was printing medallions that served as a physical form of proof of ownership of bitcoins, so maybe that will succeed...

At any rate, bitcoin's very structure, at least as it is now established, makes it al too convenient for governments and their regulatory pit bulls to track & trace, given its near exclusive dependence on electronic transmission, relying predominately on the internet.

I'm not making an emotional observation regarding btc; I neither love nor hate it, and certainly haven't romanticized it as the "fight the power" panacea some have.

I'm just remarking upon facts known to me.

Wed, 12/18/2013 - 02:53 | 4256260 Oracle of Kypseli
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We don't need to bankrupt the state to win, we need to restore the constitution by any means necessary and start over. That will be good for another 80 or so years before the corruption takes effect again. 


Wed, 12/18/2013 - 04:35 | 4256322 greenbear
greenbear's picture

"Gold is apparently a good enough PHYSICAL, TANGIBLE, COLLATERAL ASSET for central banks to post counter-central bank activity upon, so there's that (alone)."  If gold is better money than silver because it's only other use is jewelry, then how much better is bitcoin than gold?

"How exactly does one "hold & keep" bitcoin in phyz form?"  A USB stick or a paper wallet. 

"At any rate, bitcoin's very structure, at least as it is now established, makes it al too convenient for governments and their regulatory pit bulls to track & trace, given its near exclusive dependence on electronic transmission, relying predominately on the internet."  Bitcoin is as anonymous as you want it to be.  And you give them way too much credit.  They just don't have the resources to monitor everything everyone does, regardless of what they would like us to believe.  They know they are losing control, so they are trying to get people to self-regulate.  But the more people that opt out of their fake money system, the weaker they get, and the stronger the people become.


Wed, 12/18/2013 - 10:26 | 4256902 noless
noless's picture

I can't even believe we've already circled back to the "what inherent value does gold have" argument. I thought this was settled, but i guess it'll just be the same argument on repeat until the end of humanity.

Wed, 12/18/2013 - 07:38 | 4256445 tradewithdave
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This theory works fine as long as you don't need a plane ticket, a driver's license, a passport, a credit card, an EZ Pass, a bank account, employment or direct deposit, Then again I am not sure the Amish accept BTC.

That being said there's a valid argument that regulatory scrutiny leads to price stability which is bullish for BTC as a means of exchange if not as a vehicle for speculation. Closing the barn door at this point may only serve to widen the base of ownership (that's not a $700 buy recommendation) to "Star's" point.

Wed, 12/18/2013 - 01:50 | 4256163 Non Passaran
Non Passaran's picture

I'm glad to see you're on the record for buying at this price.
I will begin buying at $250.

Wed, 12/18/2013 - 06:36 | 4256403 tmosley
tmosley's picture

Why don't you cost average?  It might not get down to your target.  Hell, all of China getting shut out only dropped it by 50%.  What's it going to take to drop it a further 2/3rds?  Probably a shutdown of US and European exchanges.  If that happens, good luck buying them.

Wed, 12/18/2013 - 07:22 | 4256434 trader1
trader1's picture

are you still buying in the $400 range?

Wed, 12/18/2013 - 00:19 | 4255987 Pseudonymous
Pseudonymous's picture

Can you ever tell if a successful Bitcoin-based business is closing, or whether it is simply going incognito? Statists might fool themselves that something that doesn't stick in their eyes doesn't exist, so things could also go on peacefully.

Wed, 12/18/2013 - 00:29 | 4256026 Money Squid
Money Squid's picture

Statist work to control your mind. If do not think it exists, does it?

Wed, 12/18/2013 - 01:12 | 4256100 jonjon831983
jonjon831983's picture

Theoretically, BTC's could continue existing... Just make it something like them AirMiles.  Those are "almost" like a currency, you can buy some stuff with it, but you just can't convert to cash.  Plus, it'd solve the problem of Air Miles inflation (which for a long time is why I hated those things).

Wed, 12/18/2013 - 10:01 | 4256820 ElvisDog
ElvisDog's picture

There is no way that any business of any size above a mom-and-pop, backroom kind of thing would accept bitcoin behind the governments back. Too easy to find out what is going on, too easy to slap them with a 7 or 8 figure fine. 


Wed, 12/18/2013 - 23:07 | 4259571 TheReplacement
TheReplacement's picture

Got NSA?

Tue, 12/17/2013 - 23:47 | 4255916 fonestar
fonestar's picture

Every law passed against Bitcoin is a great thing in my opinion.  Unlike the war on drugs, terror, etc, etc the war on a virtual currency won't even have any symbolic victories.  They shall flounder for all the world to see as the price of Bitcoin skyrockets in spite of all their best efforts.

Your society is shit, your government is shit, your laws are shit.

Wed, 12/18/2013 - 00:26 | 4256021 Money Squid
Money Squid's picture

If you think that every law passed against bitcoin is a great thing I suspect you do not understand how the law works.

Wed, 12/18/2013 - 00:31 | 4256030 fonestar
fonestar's picture

It is not important for us to understand these laws.  They are meaningless on a global scale and laws do not spell adherence.

Personally, I am in favour of repealing laws until we get back closer to 12 of them.  That's a more manageable number.

Wed, 12/18/2013 - 01:25 | 4256123 ElvisDog
ElvisDog's picture

A dangerous, rogue like yourself, fonestar, can flout the law, but legitimate businesses cannot. What good is bitcoin, if no merchants will accept them. And it's not about laws really, but fees and regulations and certifications and so on that governments can impose on businesses for them to accept bitcoin.

Oh, and the price of bitcoin has not exactly been "skyrocketing" lately. I think "flaccid" would be a better description.

Wed, 12/18/2013 - 05:26 | 4256370 greenbear
greenbear's picture

How is fonestar breaking the law by posting on Zero Hedge that he thinks bitcoin is a good idea?  What kind of a statist dog are you anyway, Elvis?


What we see are rogue governments flouting their own laws to attack free market money which they officially admit they have no authority over.  As long as bitcoin, or any other crypto-currency, is valued over $0.00001, their death grip on money is finished. 

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