FinCEN Says Some Dapps Are Subject to US Money Transmitter Rules
Decentralized applications (dapps) may qualify as money transmitters under U.S. law in certain circumstances, the nation’s anti-money-laundering (AML) regulator said.
The Financial Crimes Enforcement Network (FinCEN) published a new guidance sheet Thursday, outlining when and how different companies, individuals and platforms in the
crypto space may be money transmitters under the Bank Secrecy Act (BSA) and other relevant laws. The document highlighted dapps among other models.
Being designated a money transmitter under FinCEN rules means a firm or person must follow federal AML and know-your-customer (KYC) regulations.
In Thursday’s notice, the U.S. Treasury Department’s AML bureau said that while it “does not establish any new regulatory expectations or requirements,” it does combine several previous documents issued over the past eight years, and details in greater specificity how participants in the space might violate AML regulations.
Dapps, the document noted, are “designed such that they are not controlled by a single person or group of persons,” meaning there is no single entity operating as the dapp’s administrator.
However, if a dapp “accept[s] and transmit[s] value,” it qualifies as a money transmitter under the same regulatory interpretation applied to crypto-dispensing vending machines, FinCEN said.
The guidance said:
“Accordingly, when dapps perform money transmission, the definition of money transmitter will apply to the dapp, the owners/operators of the dapp, or both.”
However, the developers behind a dapp – even a dapp specifically designed to issue cryptocurrencies or at least facilitate financial services in crypto – do not qualify as money transmitters until the dapp is put into use.
Users of a dapp may also fall under FinCEN regulations, the guidance said. Any investors or operators of a dapp who use it to transfer funds would be classified as money transmitters themselves.