US Treasury's FinCEN says in letter that its rules apply to those who sell convertible virtual currency including developers and exchanges running ICOs
new from @valkenburgh and a critical read for anyone interested in ICOs http://coincenter.org/...
Context & Ripple Effects
By early 2018 the ICO market had shrugged off regulatory risk: months after the SEC's warning that securities law applies to token sales, dozens of offerings were still announced and moving forward (46 new ICOs and 204 in progress despite the SEC's warning). FinCEN's letter closes the gap from a different direction — even a token that is not a security is still convertible virtual currency, so selling one triggers Bank Secrecy Act obligations.
That makes the Coin Center analysis by Peter Van Valkenburgh significant for issuers who structured around securities law alone: the Treasury's financial-intelligence unit is asserting jurisdiction over developers and exchanges running ICOs, not just traditional money transmitters.
First-order effects
- ICO developers and the exchanges hosting their sales now face money-services-business duties — registration, KYC, AML programs, suspicious-activity reporting — regardless of how their tokens are classified under securities law.
Second-order effects
- Exchanges gain a compliance reason to vet or delist token issuers who cannot meet BSA obligations, shifting listing decisions toward teams with legal infrastructure; startups get a second regulator to satisfy alongside the SEC, which soon after stood up FinHub specifically to help ICO-launching fintech startups navigate the legal maze.
Third-order effects
- The letter is an early step in a pattern that ends with the Treasury treating crypto intermediaries like stockbrokers — its later proposal would require exchanges to report gross proceeds to the IRS (broker-style gross-proceeds reporting starting in 2026) — and with its warning that non-compliant DeFi services pose the most significant current illicit-finance risk, pointing toward AML duties attaching directly to code rather than companies.
The trend: US regulators are converging on token issuance from multiple fronts — securities, tax, and anti-money-laundering — steadily converting crypto fundraising from a legal gray zone into a fully regulated activity.