FinCEN Issues Convertible Virtual Currency Guidance And Advisory

On May 9, 2019, the Financial Crimes Enforcement Network ("FinCEN") issued a guidance, Application of FinCEN's Regulations to Certain Business Models Involving Convertible Virtual Currencies (CVC) ("Guidance"), together with an Advisory on Illicit Activity Involving Convertible Currency("Advisory"). The Guidance largely summarizes FinCEN's existing regulatory framework regarding the application of the Bank Secrecy Act ("BSA") to virtual currency activities. FinCEN applies that framework to a number of specific business models involving convertible virtual currency ("CVC"),¹ including to CVC wallets and to "the issues most frequently raised by industry, law enforcement, and other regulatory bodies within this evolving financial environment." The Advisory warns financial institutions of the use by criminals and other bad actors of CVC schemes involving darknet marketplaces, P2P exchangers, foreign-located MSBs, and CVC kiosks. It also lists so-called "red flags" that