If you operate a witness node you might be a Money Services Business

I was originally going to write an article about the inability of US Government agencies to apply uniform logic to their treatment of virtual currencies. I certainly expect them to be illogical but I mistakenly thought that they might be consistently illogical. That was a failing on my part I suppose but a man can dream.

I will get to the original point at the end of this post but while researching I stumbled onto something I thought would be greater importance to us here on steem.

As a footnote on the last page of a letter from Drew Malone, Assistant Secretary for Legislative Affairs at FinCEN I found this:

If you think about witness nodes for a moment they do create units of virtual currency and they both accept value and transmit value. Based on FinCEN guidance they would all be considered money services businesses and required to comply with AML/KYC laws among others.

Personally I find that interpretation to be ridiculous but what I think on the matter won't matter much if they decided to come after any steemians. If you are running a witness node you might want to consider locating said node outside of the US.

Now as far as my original intent for this post. In the same letter Mr. Malone states that anyone running an ICO that is not deemed a security is at risk of also being a money transmitter. I suppose the upside is that the SEC thinks pretty much every ICO is a security offering under its jurisdiction so I am really not sure what that leaves for FinCEN to do but I am sure they will think of something.

IRS and FinCEN appear to be at odds with their crypto regulations however. While FinCEN says that ICOs and Virtual Currencies are all currencies that can pull you under their jurisdiction, the IRS claims pretty much the exact opposite. The following statements are taken from IRS Notice 2014-21

For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency.

So according to the IRS it is property and FinCEN says it is money and SEC says it is a security. The sad part is all three could probably file an action against the same person and that would be just fine in the government's eyes.