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MtGox Gets FinCEN MSB License

Op-ed - MtGox Gets FinCEN MSB License

Nearly one and a half months ago, the world’s largest Bitcoin exchange took a sudden and crushing blow from the United States government when the Department of Homeland Security shut down MtGox’s Dwolla account, claiming that MtGox (or, more specifically, its US subsidiary Mutum Sigillum LLC) had been operating as a money transmitter without a license and had falsely said otherwise when applying for their bank account in 2011. Now, the situation appears to have taken a considerable step toward resolution. Today, the exchange has received its money services business (MSB) license from FinCEN, the federal money transmission regulator in the United States. The license document can be found on FinCEN’s website by searching for MtGox’s registration number, 31000029348132.

The license lists MtGox as intending to carry out money services business activities in sixty US territories including all fifty states, granting the company federal permission to carry out their Bitcoin exchange activities in all of those regions (although the exchange still needs money transmitter licenses from forty eight states just like all other exchanges in the US; these are much harder to obtain, although certainly not impossible. Notably, the license specifically lists MtGox, Inc and not Mutum Sigillum LLC; this is not a mistake, as MtGox set up a new Delaware corporation with that name on June 11, presumably intending to use it for all Bitcoin exchange-related activities in the United States in the near future.

Since MtGox has received the MSB license, it can be assumed that they are simultaneously working with the Department of Homeland Security to resolve that agency’s Dwolla complaint. However, there is still one major thorn in MtGox’s side that remains unresolved: the Coinlab deal. On February 27, MtGox announced a deal with Coinlab in which Coinlab would take over MtGox’s activities in the United States, but in the months that followed it appears that MtGox procrastinated on their side of the agreement, leading to Coinlab suing them for contract violation on May 2. Perhaps MtGox intends to make amends with Coinlab and follow through on the agreement, in which case MtGox would not need to bother with money transmitter licenses; that would be Coinlab’s respnsibility. Alternatively, MtGox may be setting itself up to forge ahead in the United States on its own; the decision to create a new Delaware corporation can certainly be interpreted as evidence pointing at least slightly toward that conclusion.

Although MtGox’s recent legal and banking debacles, culminating with their recent decision to suspend all USD withdrawals, have led to serious difficulties for the exchange, its market share is remaining surprisingly resilient at 65-70 – much lower than the 75-90 the exchange was used to before the sudden rise in Bitcoin price and popularity earlier this year, but higher than the more extreme predictions of MtGox doomsayers these past two months, myself included. Perhaps the engine still has quite a bit of steam left inside.