Banking Bitcoin-Related Businesses: A Primer for Managing BSA/AML Risks

To date, much of the attention directed toward Bitcoin has focused on its use as a preferred payment method by criminal enterprises because it allows users to transact pseudonymously. But Bitcoin offers more than just pseudonymity. It is a fast, low-cost, and secure payment solution that can also be used for many legitimate purposes. As investment and interest in the Bitcoin ecosystem have grown since its 2009 start, new businesses have emerged seeking to advance Bitcoin as a mainstream payment solution. The pseudonymous nature of Bitcoin transactions heighten Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) Act compliance risks, making it especially challenging for these new businesses to establish banking relationships. This paper examines the current regulatory environment for Bitcoin-related businesses as well as measures these businesses can adopt to mitigate the BSA/AML risks inherent in the Bitcoin protocol. It also presents a framework for financial institutions (FIs) to consider for managing the risks associated with banking these companies. This paper is not a replacement, update, or supplement to BSA/AML guidance requirements provided in November 2014 by the Federal Financial Institutions Examination Council (FFIEC). By making a commitment to BSA/AML compliance, Bitcoin-related businesses can both better position Bitcoin as a mainstream payment system and enhance the ability of FIs to successfully bank them.