Cryptocurrency Maker Ripple Labs Fined $700K for Flouting Financial Regs

Wednesday, May 6, 2015

Today federal regulators announced a fine (PDF) of $700,000 against cryptocurrency company Ripple Labs for failing to register as a money service business. Ripple Labs built a payment transfer platform that people can use to move real or virtual money, and the company maintains its own cryptocurrency, called XRP II, which loosely compares to Bitcoin. (Unlike Bitcoin, XRP was fully generated before it went on the market, so an equivalent to Bitcoin miners doesn’t exist in XRP.)

In the cryptocurrency world, XRP was second only to Bitcoin in terms of market capitalization in 2015, according to the settlement (PDF) reached between Ripple and the Financial Crimes Enforcement Network (FinCEN), a branch of the US Department of the Treasury. FinCEN accused the company of violating the Bank Secrecy Act by failing to register as a Money Services Business while selling XRP and failing to set up an adequate anti-money laundering program. In 2013,FinCEN ruled that virtual currencies had to be properly registered with the US government and take steps to combat money laundering.

In addition to the $700,000 fine, Ripple will have to comply with all the rules and regulations set down by FinCEN for money-transferring companies, in addition to reviewing the last three years of its transactions for suspicious activity. The company must also submit to audits of its practices every two years until 2020.

Source: Ars Technica (link opens in a new window)