The problems that cyber currencies will have with regulators is something we have covered here on the blog. In this case a well known cyber currency called Ripple runs into trouble. Here is the news release from FinCen (Financial Crimes Enforcement Network). It lays out the reasons for the fines being issued. Here are a couple of quotes from the release:
“Virtual currency exchangers must bring products to market that comply with our anti-money laundering laws," said FinCEN Director Jennifer Shasky Calvery. "Innovation is laudable but only as long as it does not unreasonably expose our financial system to tech-smart criminals eager to abuse the latest and most complex products.”
. . . .
“Federal laws that regulate the reporting of financial transactions are in place to detect and stop illegal activities, including those in the virtual currency arena,” said Richard Weber, Chief, IRS Criminal Investigation. “Unregulated, virtual currency opens the door for criminals to anonymously conduct illegal activities online, eroding our financial systems and creating a Wild West environment where following the law is a choice rather than a requirement.”
The release has a link to the detailed statement of facts and violations which you can read here. Basically the company operated for a period of time without registering properly as a money service business (MSB) and also failed to report some suspicious transactions as defined by the regulations. Note that all the violations listed happened prior to March 2014 when Ripple hired an ex Federal Reserve employee to head up its regulatory compliance efforts.
As we might expect, some believe these regulations on virtual currencies like Ripple are an intrusion by the government on individual freedoms. Simon Black of Sovereign Man writes this article from that point of view. Here is quote from that article that gives you a feel for the tone of the article:
It should be noted that if you look on page 6 of the statement of fact and violations linked above, it also lists another violation that the Simon Black article did not mention:
"On September 30, 2013, XRP II negotiated an approximately $250,000.00 transaction by email for a sale of XRP virtual currency with a third-party individual. XRP II provided that individual with a “know your customer” (“KYC”) form and asked that it be returned along with appropriate identification in order to move forward with the transaction. The individual replied that another source would provide the XRP virtual currency and did not “require anywhere near as much paperwork” and essentially threatened to go elsewhere. Within hours, XRP II agreed by email to dispense with its KYC requirement and move forward with the transaction. Open source information indicates that this individual, an investor in Ripple Labs, has a prior three-count federal felony conviction for dealing in, mailing, and storing explosive devices and had been sentenced to prison, see United States v. Roger Ver, CR 1-20127-JF (N.D. Cal. 2002)"