¶ 3301
Overview
Scope of the chapter. This chapter examines the anti-money-laundering obligations of businesses that exchange, hold or transmit digital assets for others. In United States usage these businesses are money services businesses and, more specifically, money transmitters. International standards call them virtual asset service providers, abbreviated VASPs, and the European Union calls them crypto-asset service providers. The chapter covers the Bank Secrecy Act framework as the Financial Crimes Enforcement Network (FinCEN) has applied it to convertible virtual currency since 2013; the program, reporting, registration and recordkeeping duties that follow from money-transmitter status; the rulemakings on unhosted wallets and mixing that were proposed and later withdrawn; the federal crime of operating an unlicensed money transmitting business under 18 U.S.C. § 1960; the principal enforcement actions against exchanges and developers; the shift in federal charging policy announced in April 2025; and the international standards set by the Financial Action Task Force and implemented by the European Union. The funds travel rule and sanctions compliance are treated in ch. 34, state licensing and the New York BitLicense in ch. 37, and the securities and commodities perimeter in chs. 35 and 36.
Why the subject matters to private practitioners. Anti-money-laundering law is usually discussed as a compliance subject for regulated firms. It reaches further than that. A trustee, family office or operating company that exchanges tokens for a fee, holds tokens for others or runs a payment flow in stablecoins may become a money transmitter without intending to. A lawyer advising a protocol team must know where FinCEN draws the line between software and money transmission, because the line decides whether the client must register, build a program and file reports, and whether its founders face exposure under § 1960. A lender or acquirer must evaluate a target's compliance history, because the liabilities described in this chapter run into the billions of dollars and have produced prison terms for chief executives. A fiduciary choosing a custodian or exchange must know what the counterparty's obligations are and how to test whether they are met (see infra ch. 11).
The organizing distinction. Almost every question in this chapter turns on one distinction: whether a person accepts value from one person and transmits it to another person or location as a business, or only supplies tools that others use for that purpose. FinCEN's regulations, its 2019 guidance and the criminal cases all apply that distinction. A hosted wallet provider that holds customers' assets and moves them on instruction is a money transmitter. A software developer whose code lets users move their own assets is a supplier of tools. The difficult cases lie between: smart contracts that pool and redistribute users' assets, multi-party wallets in which a service holds one key, and protocols whose developers retain administrative powers. ¶¶ 3320 and 3350 infra examine those cases.
The record of enforcement. The enforcement record against digital-asset businesses is large. FinCEN's November 2023 consent order with Binance assessed a civil money penalty of $3.4 billion, the largest in the history of the Treasury Department, and the company's parallel criminal plea carried a stipulated sentence of $4.316 billion in fines and forfeiture. Its founder pleaded guilty to failing to maintain an effective anti-money-laundering program and served a four-month sentence. BitMEX, KuCoin and OKX entities pleaded guilty in 2024 and 2025. Developers of two privacy services were prosecuted under § 1960, with one convicted at trial and two sentenced after guilty pleas. Each matter is examined in ¶¶ 3350 to 3370 infra. The record has a second chapter: in 2025 and 2026 the federal government changed course. The Deputy Attorney General directed prosecutors in April 2025 to stop charging registration violations against digital-asset businesses absent proof of willfulness; pardons were granted to the BitMEX founders and to the Binance founder; and in October 2026 FinCEN withdrew both its 2020 unhosted-wallet proposal and its 2023 mixing proposal. The statutes and regulations did not change. The obligations described in ¶¶ 3310 to 3330 remain in force, and the enforcement policy of one administration does not bind its successor or limit state regulators and private litigants.
Plan of the chapter. ¶ 3310 sets out the statutory and regulatory framework, beginning with the definition of a money transmitter. ¶ 3320 applies FinCEN's May 2019 guidance to the business models found in practice. ¶ 3330 describes the program, reporting and recordkeeping obligations. ¶ 3340 examines the rulemakings on unhosted wallets and mixing and the use of section 311 of the USA PATRIOT Act against foreign exchanges. ¶ 3350 treats § 1960 and the prosecutions of developers. ¶¶ 3360 and 3370 discuss the major enforcement actions and compare them. ¶ 3380 summarizes state licensing, the Financial Action Task Force standards, the European Union regime and the problem of bank de-risking. ¶ 3390 offers a design for a compliance program and a checklist.