By Jeffrey Sparshott
The Wall Street Journal
Thursday, March 21, 2013
The U.S. is applying
money-laundering rules to "virtual currencies," amid growing
concern that new forms of cash bought on the Internet are being used to fund
illicit activities.
The move means that firms
that issue or exchange the increasingly popular online cash will now be
regulated in a similar manner as traditional money-order providers such as
Western Union Co. They would have new bookkeeping requirements and mandatory
reporting for transactions of more than $10,000.
Moreover, firms that
receive legal tender in exchange for online currencies or anyone conducting a
transaction on someone else's behalf would be subject to new scrutiny, said
proponents of Internet currencies.
The rising popularity of virtual currencies, while no more than a drop in the
bucket of global liquidity, is being fueled by Internet merchants, as well as
users' concerns about privacy, jitters about traditional currencies in
Europe, and the age-old need to move money for illicit purposes.
The arm of the Treasury
Department that fights money laundering said Monday that the standard federal
banking rules aimed at suspicious dollar transfers also apply to firms that
issue or exchange money that isn't linked to any government and exists only
online.
One of the
fastest-growing alternative cash products is Bitcoin,
an online currency launched in 2009 that isn't backed by a central bank or
controlled by a central administrator. Currency units, known as "bitcoins" and consisting of a series of numbers, are
created automatically on a set schedule and traded anonymously between
digital addresses or "wallets." Certain exchange firms buy or sell bitcoins for legal tender at a rate that fluctuates with
the market.
It isn't clear if the
latest guidance would apply to a merchant's online scrip. Amazon.com Inc.,
for example, in February announced Amazon Coins, which starting in May can be
used to buy apps and games on Kindle Fire. An Amazon Coin is worth one cent.
Amazon didn't respond to
a request for comment.
"We are beyond the
stage where this was just funny money and a fun online thing. This is used as
a currency," said Nicolas Christin, associate
director of Carnegie Mellon University's Information Networking Institute.
Bitcoins can be used in a host of
legitimate transactions -- for example, website Reddit
allows users to upgrade services using bitcoins and
blog service Wordpress.com's store accepts them as
a form of payment. Pizzaforcoins.com also lets bitcoin
savers pay for deliveries through Domino's and other pizzerias.
On the other hand, at
least one online service takes bitcoins as payment
for illegal drugs, according to a Federal Bureau of Investigation report last
year. Bitcoin's backers point out that criminals will use any currency for money laundering
or illegal purchases.
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