Treasury Said Many ICO Token Sellers Were Money Transmitters

A U.S. Treasury Department letter dated February 13, 2018 said that a developer selling convertible virtual currency—including coins or tokens distributed through an initial coin offering—would generally be a money transmitter when accepting another form of value that substitutes for currency.

The position mattered because it placed many token sellers within the Bank Secrecy Act framework administered by the Financial Crimes Enforcement Network, or FinCEN. During a period when public debate concentrated heavily on whether ICO tokens were securities, Treasury identified a separate federal compliance question: whether issuing and selling the tokens constituted regulated money transmission.

The document did not create a new token-specific statute or declare every ICO unlawful. It described how Treasury and FinCEN interpreted rules already in force, with the outcome dependent on the activity and structure involved.

Extending an existing virtual-currency framework

FinCEN’s March 18, 2013 guidance had divided participants in convertible virtual-currency systems into users, administrators and exchangers. A person obtaining virtual currency to buy goods or services was generally a user rather than a money-services business. Administrators and exchangers accepting and transmitting convertible virtual currency, or buying and selling it as a business, generally qualified as money transmitters unless an exemption applied.

The February 13, 2018 letter applied that framework more directly to token offerings. It said a developer that sold newly created convertible virtual currency for currency or other value substituting for currency generally fell within the money-transmitter category. It similarly said exchanges selling ICO coins or tokens would typically be money transmitters.

Classification carried operational obligations. A covered money-services business could be required to register with FinCEN, maintain a written anti-money-laundering program, identify customers, keep specified records, and file reports including suspicious-activity and currency-transaction reports when the applicable conditions were met.

Those requirements addressed financial-crime controls, not the economic merits of a token or the truth of an issuer’s promotional claims. FinCEN registration would not amount to government approval of an ICO.

One offering could cross several regulatory systems

Treasury also recognized that the same activity could fall within another regulator’s jurisdiction. Depending on its structure, a token or the business selling it might be subject to Securities and Exchange Commission or Commodity Futures Trading Commission oversight while also carrying Bank Secrecy Act obligations.

That overlap was institutionally significant. Determining that a token was not a security would not necessarily resolve whether its developer was transmitting money. Conversely, money-transmitter status did not establish that a token was a security or commodity. Each conclusion depended on its own statutes, regulations and facts.

The February 13 letter therefore narrowed an important ambiguity without eliminating it. Its language focused on developers that actually sold convertible virtual currency in exchange for value. It did not say that writing open-source software, creating a token without selling it, or merely using virtual currency automatically made someone a money transmitter. FinCEN’s earlier distinction between users and businesses remained relevant.

For ICO organizers, the practical implication was that compliance analysis could begin before any secondary-market exchange listing. The initial sale itself could trigger registration, customer-verification and reporting duties if it fit FinCEN’s money-transmission interpretation.

Later publication context

Although the letter was dated February 13, 2018, it was not released publicly until March 6, 2018. Consequently, it should not be described as public market-moving information available on February 13, and no cryptocurrency price or volume reaction is attributed to it here. Legal analyses published after March 6 treated the letter as an important statement of FinCEN’s position and questioned how it would apply to token sales already conducted. Those later reactions clarify the document’s significance but do not change what the letter itself said on February 13.