WASHINGTON—The world’s largest bitcoin trading exchange appears to have taken a key step to comply with U.S. anti-money-laundering rules and potentially avoid additional run-ins with authorities.
A company listed as Mt. Gox this week registered as a money services business with the Treasury Department’s Financial Crimes Enforcement Network, according to FinCen’s website. Tokyo-based Mt. Gox, which says it handles about 80% of all trading in the virtual currency, couldn’t immediately be reached for comment.
FinCen in March started applying traditional money-laundering rules to “virtual currencies” amid growing concern that new forms of digital cash are being used for illicit activities. Those rules mandate that exchanges register with FinCen, follow stricter bookkeeping requirements and report transactions of more than $10,000.
About a month after the edict, the Department of Homeland Security seized an account tied to Mt. Gox, alleging the company and a subsidiary were conducting transactions “as part of an unlicensed money service business.”
According to FinCen’s website, the agency received Mt. Gox’s registration on Thursday. The online form listed a street in Dover, Del., as the company’s address.
A spokesman for FinCen had no comment on the development. Earlier this month, FinCen’s director, Jennifer Shasky Calvery, said that “those offering virtual currencies must comply with…regulatory requirements, and if they do so, they have nothing to fear from Treasury.”
Mt. Gox’s move may bring the company in line with Treasury’s rules, but could also open the exchange to increased regulatory attention.
“It gives them the color of legitimacy,” said Mercedes Kelley Tunstall, a partner with the law firm Ballard Spahr LLP, who works on banking compliance issues. “It suggests that they get it, that they need to be careful in these areas. It also means that now they have put themselves on the radar screen and they need to have policies and procedures to watch out for fraudulent activity and illegal activity.”
Mt. Gox already had taken measures to beef up its identification procedures for users who deposit or withdraw traditional currencies, a central tenet of anti-money-laundering procedures. In May the company said all user accounts must be verified in order to perform any fiat currency deposits or withdrawals. Verification includes submission of a valid photo ID and proof of residence such as a utility bill or tax return, according to the website.
At the time, Mt. Gox said it had more than doubled its verification support staff.
More recently, Mt. Gox halted U.S. dollar withdrawals. The company said it needed to make systems improvements amid increased trading volume.
The recent regulatory attention paid to bitcoin-related companies has likely caused some banks to become leery of doing business with such companies, attorneys have said.
But becoming registered with FinCen or state agencies that have requirements for money transmitters may not make financial institutions more comfortable working with such firms, Ms. Tunstall said.
“I think that the virtual currency industry still needs to mature before banks will feel comfortable with them,” she said.
The rising popularity of virtual currencies, while no more than a drop in the bucket of global liquidity, is being fueled by Internet merchants, as well as user concerns about privacy and jitters about traditional currencies in Europe.
source: http://stream.wsj.com/story/latest-headlines/SS-2-63399/SS-2-265472/
Bitcoin Exchange Makes Apparent Move
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