Sometimes there is a misconception that if you are based outside of the US and operating a digital currency exchange with US customers that there is no requirement to comply with US rules.
That is clearly wrong.
First let’s start with guidance from FinCEN itself in this area.
In 2011 FinCEN Director James H. Freis, Jr clarified that foreign entities conducting money transmission activities in the US need to register with FinCEN. FinCEN suggested an amendment to the Federal Register that made it clearer that MSB registration would apply to foreign operators. The update to the regulations can be found here and a summary of the update can be found here.
The premise for the update was to clarify that registration was not based on establishment (setting up an office or any physical presence through agents) it was based on ‘activities’ within the US.
More specifically, FinCEN recognised that the “Internet and other technological advances makes it increasingly possible for persons to offer MSB services in the United States from foreign locations”. Consequently, FinCEN sought to “ensure that the BSA rules apply to all persons engaging in covered activities within the United States, regardless of their physical location”.
Also with respect to digital currency exchanges, FinCEN have been unequivocal that a virtual currency exchange that “accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter” (see here). No exception is provided for foreign based businesses.
So, in summary, if you are a digital currency exchange servicing the US market don’t forget that you need to register with FinCEN.