We have explored the emerging technology of virtual currencies, after delving into the blockchain space last month. We explored how virtual currencies are being regulated—a hitherto unclear area of law that befits our general understanding of the technology itself. After all, the blockchain was specifically designed to avoid the vicissitudes of politics that accompany regulation, which is what has allowed it to be such an engine of wealth. The technology can be tethered to tokens and commodities, or simply used in exchange for Central Bank backed currencies. We explored unclaimed property, gift, licensure, and tax laws, and how each applies to virtual currencies. This week we hone our gaze on more specific laws and their effects on virtual currency: The Patriot Act and Bank Secrecy Act. We will also focus on data privacy and security.
These two federal laws have achieved many things. Their statutory requirements can apply when something of value is exchanged between parties (e.g., goods, currencies), or stored value is issued, redeemed, or sold, or even when electronic wallets are simply held.
These requirements run the gamut regarding what those who fall under the federal statutes must accomplish. For example, often those engaging in the above-listed activities must retain specific information on whatever transfer or holding they engaged in the transaction. This helps the government track information it needs to bring the transactions under whatever legal scope it deems proper. Yet, much information is already stored, however, as the blockchain essentially acts as a ledger, but it can also be difficult to extract sometimes.