Bitcoin, Money and Funds: the Application of the Unlicensed Money Transmitting Services Statute to Virtual Currency

A popular tool used to prosecute Bitcoin business operators is 18 UsaC. § 1960, the Federal prohibition against operating an unlicensed money transmitting business. Bitcoin is the main thing on the electronic currency market.

With 10 billion USD in market cap, there is now a significant amount of “real” money invested into this virtual currency. Though Bitcoin has survived its early stages within the investment market, the legal framework through which Bitcoin lives has been slow to solidify. Along with the nascent and complicated regulatory framework on the Federal and State level, Bitcoin business operators are being prosecuted under 18 UsaC. § 1960, which criminalizes the operation of your unlicensed money transmitting business. This article addresses the first question as to if Bitcoin is protected by 18 UsaC. § 1960, and, more specifically, whether this has been characterized as “money” or “funds” under that statute. Despite conflicting classifications by Federal regulators to what Bitcoin is really, the few Courts which may have addressed this concern have held that 18 United statesC. § 1960 covers Bitcoin because “dictionaries, courts, and also the statute’s legislative history all point to exactly the same conclusion: Bitcoins are funds.” See America v. Murgio, No. 15-cr-769, 2016 WL 5107128, at *4 (S.D.N.Y. Sep. 19, 2016); United States Of America v. Budovsky, No. 15-cr-368, 2015 WL 5602853 (S.D.N.Y. Sep. 23, 2015); United States Of America v. Faiella, 39 F. Supp. 3d 544 (S.D.N.Y. 2014).

The Department of Justice Has Wanted to Prosecute Individuals for Failures to Comply With the Virtual Currency Registration Requirements

In 2013, the Department of Justice (“DOJ”) stated its policy position to prosecute individuals for neglecting to register their Bitcoin-related business. Specifically, the DOJ presented its determination that Bitcoin and also other virtual currencies are protected by 18 United statesC. § 1960, plus the money laundering and spending statutes 18 UsaC. §§ 1956, 1957:

Any cash transmitter that fails to sign up with FinCEN or to obtain the requisite state licensing might be at the mercy of criminal prosecution under 18 United statesC. § 1960. Additionally, the normal money laundering and spending statutes, 18 United statesC. §§ 1956 and 1957, cover financial transactions involving virtual currencies. Finally, where virtual currencies are utilized in furtherance of underlying criminal activity, the Department can depend on traditional criminal statutes proscribing that activity, including narcotics, cybercrime, child exploitation, and firearms laws.


Statement of Mythili Raman Acting Assistant Attorney General United states Justice Department Criminal Division Before the Committee on Homeland Security and Governmental Affairs United States Of America Senate For a Hearing Entitled “Beyond The Silk Road: Potential Risks, Threats and Promises of Virtual Currencies,” DOJ 13-1230, 2013 WL 6056457, News Release (Nov. 18, 2013).

This information principally addresses the applicability with the unlicensed money transmitting business statute to certain Bitcoin-business operators and whether or not the DOJ can and should prosecute individuals under that statute.


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