WASHINGTON — Treasury Secretary Steven Mnuchin on Friday warned traders and firms offering services related to cryptocurrencies like bitcoin that anti-money-laundering and know-your-customer rules apply to them — and regulators are watching closely.
Speaking during a moderated discussion sponsored by the Economic Club of Washington Friday morning, Mnuchin said that he's concerned cryptocurrencies could be used to conduct money laundering, and that he and other regulators are looking into the issue. He noted that the Financial Stability Oversight Council last month set up an interagency working group to examine the burgeoning market. Mnuchin added that he is in discussions with foreign regulators to shore up AML rules for cryptocurrencies.
“In the United States — and people may not realize this — under our laws, if you have a wallet to own bitcoins, that company has the same obligation as a bank to Know Your Customer,” Mnuchin said. “So, in the United States, we have rules for anti-money-laundering, for all different types of entities, we can track those types of [transactions]. The rest of the world doesn’t have that. So one of the things we are working very closely with the G-20 on is making sure that this doesn’t become the Swiss numbered bank account.”
Mnuchin added that he was worried about heightened levels of speculation in the bitcoin market. The virtual currency went from being valued at under $1,000 per coin a year ago to almost $20,000 in December. The currency closed at $13,287.26 on Thursday.
“The other concern I have is, there’s a lot of speculation in this, and I want to make sure that consumers who are trading this understand the risks,” Mnuchin said. “I am concerned that consumers may get hurt.”
Mnuchin’s comments come amid increasing regulatory scrutiny of the boom in virtual currencies. Federal Reserve Vice Chairman for Supervision Randal Quarles warned about the dangers of virtual currencies last month, and outgoing Fed Chair Janet Yellen called cryptocurrencies "highly speculative" in her final press conference last month. In July the Treasury’s Financial Crimes Enforcement Network, or Fincen, levied a $110 million fine against the bitcoin exchange BTC-e for a series of AML violations.
Fincen had issued a guidance in March 2013 that said that the Bank Secrecy Act and regulations promulgated under its authority apply to “persons administering, exchanging or using virtual currencies,” and further stipulated in a January 2014 guidance that persons mining bitcoin or other virtual currencies would be treated as “money transmitters” for the purposes of the Bank Secrecy Act.