Regulators Increase Oversight of Virtual Currencies
A virtual currency is a medium of exchange without government backing that can be circulated over the Internet. The Obama administration has made oversight of virtual currencies such as Bitcoin a high priority given the rise of criminal activity that exploits their quick and anonymous nature. Treasury’s Financial Crimes Enforcement Network (“FinCEN”) has been working to bring regulatory certainty for businesses engaged in money transmitting services and offering virtual currencies. In fact, FinCEN has recently clarified expectations to make sure businesses are aware of their regulatory responsibilities. The Securities and Exchange Commission, the Internal Revenue Service, the Federal Election Commission and the Federal Reserve are also looking into the regulatory implications of virtual currencies as concerns regarding the facilitation of illicit drug transactions and money laundering through this payment mechanism increase. The IRS, for example, is in the final stages of approving public guidance on virtual currencies. Earlier this year, Federal Reserve Chairman Ben Bernanke commented that there are areas where virtual currencies may have long-term promise. It now appears as though the Fed plans to work with other financial regulators under the Federal Financial Institutions Examination Council to ensure that any use of virtual currencies in the banking sector is closely monitored for compliance with the Bank Secrecy Act and anti-money laundering rules. Depending upon the particular facts and circumstances, Bitcoin and other virtual currencies may likely to fall under SEC supervision.