One of the best things about There is our legal team at DLA Piper. Not only are they great partners in matters like IP (Intellectual Property and Patents), contract negotiations (when we did things like that) and dealing with various governmental organizations like the FTC and FCC, they are also, like us, well versed in matters of virtual currency.
One of the Government’s big concerns about virtual currency has been around the issue of “money laundering” (let’s leave aside the issue of the amounts involved in There, or any other virtual world for that matter). One of the ways the government controls money laundering is through what’s called the “FinCEN”, or Treasury’s Financial Crimes Enforcement Network. FinCEN uses something called the “Bank Secrecy Act” to require companies who handle money (“Money Service Businesses”) (say, like “banks”) to do alllll sorts of things (like reporting the transfer of large amounts of money).
Fortunately, we’re not a MSB, because we really don’t want to do that.
However, FinCEN just issued new guidelines for companies which use virtual currency. I’ll attach the whole guideline, but the important sentences are:
“Many online gaming companies whose platforms generate a virtual currency for use in the game have taken the position historically that the issuance of the virtual currency is essentially a license to use the game. As such, it does not trigger MSB obligations. This position may still be correct, but the guidance requires that the virtual currency have certain limiting features, including that it (i) not be redeemed for real currency; and (ii) not be transferrable to other players or parties or otherwise exchanged, in order for the gaming company to be exempt from Bank Secrecy Act requirements of an MSB.”
I emphasized (i) because it basically means we, nor anyone else, can exchange T$ for real US $ without becoming a MSB, and therefore subject to FinCEN’s attentions.
I’m not so sure about (ii), but I’m pretty sure there’s an “and” there for a reason – they don’t don’t you to give your T$ to your presumably terrorist and/or drug dealing friend so they can exchange them for T$. They certainly don’t mean to shut down the ability to transfer virtual currency between players in-game if all it can be used for is to purchase an excess of virtual fizzy burps.
In any case, I think this lays to rest the concept of T$ buybacks, or allowing 3rd party exchange of virtual currency. Unless FinCEN changes it’s mind, to conduct such exchanges would require There, or a 3rd party reseller, to become a MSB (Money Service Business). Good luck with that one.
Good thing we have “Real Money” (for Virtual Goods purchases) coming.
Now, I’m sure that some people will see this as There conspiring with the government to surveil your secret lives, control your gun purchases, and report you to the Obama Death Panels. Well, you’re right. In fact, I was there at the gun store holding the bag when Obama was buying those 1.6 trillion rounds of ammunition ordered for “Homeland Security”, which we really know is for martial law and the U.N. takeover of the United States.
And I can see Russia from my house.
Here’s the quote from DLA Piper:
Last week, Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued the attached guidance that may be of interest to certain of your clients. It is designed to “provide clarity and regulatory certainty for businesses and individuals engaged in an expanding field of financial activity … [which is the use of] convertible virtual currencies or mak[ing] a business of exchanging, accepting, and transmitting them.” This release follows the European Central Bank’s release of a working paper on Virtual Currency Schemes in October of 2012.
FinCEN generally regulates anti-money laundering requirements of financial institutions in the US under authority of the Bank Secrecy Act. Among the categories of financial institutions subject to the Bank Secrecy Act is a subset of entities referred to as money services businesses, or MSBs. MSBs must register with FinCEN and comply with certain anti-money laundering, recordkeeping and reporting obligations.
The guidance confirms that users of virtual currency are not MSBs, but those parties who issue virtual currency or put it into circulation and have the authority to redeem or withdraw it from circulation, referred to as administrators, are MSBs. Similarly, parties who engage in the business of exchanging virtual currency for real currency or other virtual currency, referred to as exchangers, are also MSBs.
Many online gaming companies whose platforms generate a virtual currency for use in the game have taken the position historically that the issuance of the virtual currency is essentially a license to use the game. As such, it does not trigger MSB obligations. This position may still be correct, but the guidance requires that the virtual currency have certain limiting features, including that it (i) not be redeemed for real currency; and (ii) not be transferrable to other players or parties or otherwise exchanged, in order for the gaming company to be exempt from Bank Secrecy Act requirements of an MSB.
Here’s the actual FinCEN document: FinCEN Guidance on Virtual Currency