DEFIREGULATION

FBI warns against using unregistered MSB companies for crypto transfer services, criticized for vague definition

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FBI warns against using unregistered MSB companies for crypto transfer services, criticized for vague definition

According to a statement from the Federal Bureau of Investigation (FBI) on Thursday, the agency strongly urges Americans not to use cryptocurrency transfer services that are not registered as Money Services Businesses (MSBs). However, this warning is widely seen as targeting mixing protocols that have recently come under regulatory scrutiny.

FBI: Avoid Using Unlicensed Cryptocurrency Transfer Services

The FBI has issued a warning advising Americans to avoid using cryptocurrency services provided by companies that are not registered as Money Services Businesses (MSBs) and do not comply with anti-money laundering regulations:

The FBI recently took enforcement actions against unregistered cryptocurrency services and cautioned users of their cryptocurrency transfer services that their funds may be restricted during enforcement, especially when their cryptocurrency activities are linked to money laundering.

It also added, "Services that allow the sending of cryptocurrencies without the need for KYC information should also be avoided as they may not be legal."

It is reported that MSB licenses are issued by the Financial Crimes Enforcement Network (FinCEN) as proof of registration by the government to enforce anti-money laundering and anti-terrorist financing, but do not endorse or protect their products and investor protection.

Cryptocurrency services that intentionally violate the law or facilitate illegal transactions will be investigated by law enforcement agencies; users who use such services may lose the funds they have invested after enforcement actions.

Check MSB License with Tool: Verify Doubts First

Furthermore, the FBI provides a MSB License Lookup Website from FinCEN, stating that if there are doubts, one can search for the service company by name:

A few simple steps can prevent you from unintentionally using non-compliant services.

MSB License Lookup Tool

Aim at Cryptocurrency Mixing Protocols?

In response to the FBI's warning, Cointelegraph cited lawyer Michael Bacina expressing concerns about the cryptocurrency industry:

Perhaps drafting appropriate cryptocurrency regulations and clear guidance early on, instead of repeated enforcement actions, would be a good thing for investors.

It was also noted, "While the warning seems to be aimed at recent cases involving mixing protocols like Tornado Cash, it is overly broad and overlooks many details of how decentralized systems operate."

Looking back at enforcement actions from various countries in recent months to years, mixing protocols have been heavily targeted.

  • March 2023: Dark web's largest money laundering protocol busted! Germany and the US seized over 1,900 bitcoins from the cryptocurrency mixer ChipMixer
  • January 2024: South Korea regulators to crack down on illegal use of mixing protocols following Orbit Bridge hack
  • March 2024: Founder of mixing protocol Bitcoin Fog convicted of money laundering, Tornado Cash case to follow suit?
  • August 2022 to April 2024: Tornado developer Roman Storm pleads "code is speech" and demands US Justice Department drop charges
  • April 2024: Regulatory crackdown on mixing services continues! Founder of Samourai Wallet indicted for money laundering by the US Justice Department

Dangerous to be Outside MSB?

Co-founder of Bankless, Ryan Sean Adams, expressed concerns on Twitter about the vague definition of MSB in the FBI's warning, reminding users and developers to be cautious about what services may be considered MSBs but have not applied for registration:

Avoid using unregistered cryptocurrency transfer services? So if you're not in this database, it's not allowed.

He also said, "Is your code or wallet an MSB? Maybe, maybe not, but we are currently arresting privacy protocol developers."