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Last week, the U.S. Financial Crimes Enforcement Network (FinCEN) further clarified its rules for virtual currency mining operations, exempting contract-based cloud mining services from money transmitter rules. Given the high cost of acquiring money transmitter licenses and the significant start up costs for creating a cloud-mining service, a negative ruling could have crippled this rapidly growing niche.
As FinCEN’s Policy Division Associate Director Jamal El-Hindi explains, contract-based mining operations do not meet the requirements of a money-transmission business.
All virtual currency mined by the third party remains the third party’s property, and the Company has no access to the third party wallet, nor receives or pays virtual currency on the third party’s behalf. … The rental of computer systems to third parties is not an activity covered by FinCEN regulations.
The regulations specifically exempt from money transmitter status a person that only provides the delivery, communication, or network data access services used by a money transmitter to supply money transmission services.
In January, FinCEN ruled that bitcoin miners were not covered by the agency’s regulations, and thus not subject to money-transmission rules.
Written on 07 May 2014.