Bitcoin Lightning node and FinCen: ‘It’s just silly. Honestly, people, stop with this stuff,’ says Legal Officer
The Financial Crimes Enforcement Network [FinCen] issued its guidance on the ‘Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies’ on May 9, 2019. The guidance elucidates how money transmission regulations apply to a business involved in providing convertible virtual currency services. This includes P2P exchanges, wallets, hosted and un-hosted wallets providers, multi-sig wallet providers, kiosks, providers of anonymity-enhanced convertible virtual currencies, and more.
This created a lot of buzz in the crypto-verse, with several influencers speaking about the impact this would have. Emin Gun Sirer was one of them and stated that this was “mostly bad news”. Others included the Chief Legal Officer of Blockchain, Marco Santori, who went on to explain that this would have “major implications for wallets, exchanges, ICO issuers, dApps, DEXs”.
Marco Santori tweeted,
4/ FinCEN is a big data agency. They scoop as much transaction data, identifying information, suspicious activity reporting as possible, and use it to stop the bad guys. They’ve been doing it for crypto, too – since at least 2013!
— Marco Santori (@msantoriESQ) May 9, 2019
Further, the Legal Officer spoke about the guidance’s stance on wallets, stating that non-custodial wallets were not going to be considered as money transmitters in the United States, adding that they would be unregulated. The officer said,
“This is an historic day for @blockchain, @Ledger @BRDHQ , @EdgeWallet and all the rest. I’ll confess to personal delight here, too […] Why? Because, even if many crypto users rely on their availability, they do not *control* funds any more than an operating system or a mobile device does.”
Santori also spoke about what the guidance meant for exchanges. He stated that usually, banks send customer’s personal identifying information to the receiving financial institution when the customer makes a transfer. He added that this was for “backup purposes”, a way for the FinCen to gain access to data even if “one of the banks goes bust”. The Legal Officer said,
“FinCEN says crypto exchanges have to do this too […] How is the exchange supposed to know whether it is for another FI or just a noncustodial wallet? There is no real way to implement this without an interstitial (mandatory?) layer over the core network, just so that FIs can message each other […] Anyway, that’s a nightmare.”
Further, Santori also spoke about the most controversial topic surrounding the guidance, Lighting nodes and money transmitter license. On this, he stated that FinCen did not mention anything pertaining to the Lighting nodes nor will they. He said, “It’s just silly. Honestly, people, stop with this stuff.”
However, the guidance did shed light on its regulatory stance on Decentralized Exchanges [DEX].
18/ DEXes that just post bids and asks without settling the funds – they are unregulated. They don’t actually “control” any funds. DEXes that settle trades, though, they both “accept” and “transmit” crypto, making them just as regulated as any other exchange.
— Marco Santori (@msantoriESQ) May 9, 2019
This was followed by Satori explaining its impact on ICOs and developer applications, stating that according to FinCen, ICO sellers could fall under money transmitter regulations in a few situations. Importantly “only if they actually transmit money”. He said,
“FinCEN mostly speaks in jargon here so I’ll boil it down: software development? not regulated. *deploying* software? still not regulated deploying software that transmits money? Very much regulated Not super helpful but as good as their guidance gets.”
To this, Riccardo Spagni, the lead developer of Monero [XMR], said,
“FinCEN comes out swinging, and confirms that Bitcoin, Monero, and others are safe in developing and deploying cryptocurrency software.”
The post Bitcoin Lightning node and FinCen: ‘It’s just silly. Honestly, people, stop with this stuff,’ says Legal Officer appeared first on AMBCrypto.
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