OTC Bitcoin trading expert Adam S. Tracy discusses over-the-counter bitcoin trading and the Money Service Business registration requirements involved.
TRANSCRIBED FROM: http://adamtracy.io/video/otc-bitcoin-trading/
So OTC trading of Bitcoin and other cryptocurrency really emanated from the local Bitcoins types of website. And recently you hear local Bitcoins isn’t doing cash transactions and somehow that absolves them from what they’re doing, but it doesn’t. Now you have sites like Paxful which registers the money service business, which is smart, but it doesn’t necessarily cover the people who are trading. So at the end of the day, if you’re actively engaged in over-the-counter Bitcoin trading or any cryptocurrency, but let’s stick with Bitcoin for purposes of today, you are an exchanger cryptocurrency. [FinCEN 00:01:04] regulation exchanger. And as I’ve detailed here before, there’s administrators, like sponsors of cryptocurrency, there’s exchangers, exchangers of cryptocurrency, and users, people who’ve used cryptocurrency to buy and sell things. Exchangers are always required to register as money service businesses. That’s just across the board.
So being in any way actively engaged as an OTC Bitcoin trader really requires you to register as an MSP and there’s no threshold in terms of how much trading volume or anything like that that you must have or not have to trigger that requirement to register as an MSP. It just doesn’t matter. In theory, if you did 20, $10 deals, you’re acting as an unregistered money service business. By the Black Letter Law, that’s what’s happening. And again, you see this. I mean, there’s cases popping up, and most recently the Power’s case, which was a civil case that FinCEN brought against an OTC trader who had facilitated some five million and over-the-counter trades, and was an unregistered money service business. And he should never have been there. And I would argue that if you’re on local Bitcoins, whether you’re taking cash or not, you need to register as a money service business because these regulations are there for a reason. And FinCEN’s recent pronouncements in the Power’s case suggests that enforcement is going to increase.
And again, there’s no threshold. Even your small, small players on local Bitcoins or Paxful, they still have the same requirements. And obviously as an MSP, you trigger the Bank Secrecy Act regulations concerning having a comprehensive AML program, having an audit program, KYC, filing SARS, filing STRs, things of that nature, which you should be doing anyway. You should be doing anyway for OFAC compliance to make sure you know who you’re dealing with and you know where those people are in the world because there’s some countries you simply cannot transact with. But to the extent that you have an AML program, it’s really not that difficult to administer. The SARS and STRs can be difficult, but those typically revolve around cash transactions, so if you’re not in the cash, physical cash, transaction game, you’re really not going to find many instances where you’re filing or having to file suspicious activity or suspicious transaction reports.
And also, even irrespective of whether or not you are a money service business, if you accept $10,000 cash for anything, the IRS has its own requirement, form 8300, that you have to file. So it doesn’t necessarily get around any sort of reporting requirement or create any extra requirement in most Bitcoin cash transaction cases. But from an OTC perspective, especially in light of the Power’s case, MSP registration is an absolute must. It’s an absolute must.
So that’s my advice to anybody. I would definitely, if you’re engaged at any level with any sort of volume, obviously you can go argue that, “Hey, no one’s going to come after me because I’m a small player,” well, that doesn’t matter, there’s no monetary numbers put to this.
So definitely check me out. Hit me up with any questions at email@example.com. Happy to answer anything that you throw my way.
A former professional rugby player, Adam S. Tracy brings over twenty years’ experience as an attorney, consultant and dealmaker with a particular focus on cryptocurrency, digital products, payments and immersive corporate structures. As an accomplished executive and advisor to high risk merchants and stakeholders, Adam has proven himself as a results oriented, decisive leader with proven success advising early market entrants, technology adapters, as well as established participants across a wide range of verticals. Adam Tracy’s attack-first personality allows him to excel in dynamic, demanding environments including complex corporate negotiations, distressed environments and regulatory investigations.
In addition, Adam S. Tracy also has a successful track record co-founding high risk industry ventures, building & leading cross-functional teams, and spearheading diverse corporate transactions. A serial entrepreneur, Adam has successfully started and created exits across a wide swath of markets, including various mobile SaaS ventures, nutraceuticals, peer-to-peer payment systems, and several telemarketing-based ventures. Moreover, as a recognized expert in the payments field, Adam Tracy has been a blockchain and digital currency evangelist and influencer since the early days of Bitcoin.
Utilizing his proprietary “Pre-Event Driven™” strategy for decision making, Adam S. Tracy further leverages his over twenty years’ experience to create cost-effective, value-add solutions for each client. A data-driven acolyte, Adam continually refines his strategies based on field studies and data collection. Moreover, Adam Tracy further augments his range of solutions by actively networking with regulators, liquidity providers, legal and compliance experts, deal-flow brokers, investors and management of leading high risk industry ventures.
Adam S. Tracy earned his Bachelor of Science in Computer Applications and Bachelor of Science in Finance from the University of Notre Dame. He subsequently earned his Masters in Business Administration from the DePaul Kellstadt Graduate School of Business, while concurrently earning his Juris Doctorate from the DePaul College of Law. Adam lives outside Chicago with his with his wife, four dogs, and two cats.
On the Web: http://www.adamtracy.io
Email me: firstname.lastname@example.org