Virtual Currency: Recent Federal Regulatory Considerations

Bitcoin is a virtual currency – it has no physical form in paper or metal and is not connected with any central bank or governmental authority. It is freely tradable via the internet or other electronic means. Transactions in bitcoin can be largely anonymous – making them difficult to track and nearly impossible to tax – and bitcoin transactions also raise potential consumer protection issues. Bitcoin and other virtual currencies that have either an "equivalent value in real currency" or that can act as a "substitute for real currency" have been noticed by the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN), which has issued guidance, focused on "convertible" virtual currency and effective immediately, concerning when parties that transact in virtual currencies would be considered "money services businesses" (MSBs).