Casascius pointed out on BitCoin Talk yesterday that BitInstant the BitCoin exchanger has received a Money Service Business (MSB) license from the US Financial Crime Regulator FinCEN. Here is the official letter from FinCEN
This is quite big news as it is yet another step in legitimizing it. From what I understand most European regulators have decided they don’t need Bitcoin exchangers to be licensed (see yesterdays story about Denmark).
Personally I don’t think they need to be regulated, but in the US this I believe will help remove some of the reluctance businesses have had to adopt BitCoin. They still have to battle their book keepers to move away from checks but this might help them to persuade their legal counsel to allow them to start experimenting.
BitInstant provides good old fashioned own account exchange services between a series of BitCoin market places as well as US bank accounts and Dwolla.
As a regulatory scheme goes on an international level the US MSB registration is fairly simple. Recent changes have added a much broader definition, so even foreign businesses dealing with US residents are required to register.
Registering essentially just means that you are bound to various anti money laundering rules, including identifying customers (aka KYC) and reporting large and suspicious transactions.
Most larger Bitcoin including Bitcoinica and MtGox exchanges already do KYC and probably limit transaction sizes in some way. So this shouldn’t be a problem for them.
In the US the larger hurdle is state regulation. Every state has different rules and around 40 of them require Money Transfer Businesses to be licensed and bonded. This is a very big hurdle for most startups in the field and could potentially be so as well for Bitcoin businesses when Western Union and the banks start worrying and lobby the state governments to enforce this.