FinCEN recently released two administrative rulings further defining what companies qualifies at money transmitters. The letters can be read here and here. The first of the two letters establishes that exchanges which facilitate the transfer of bitcoin into fiat currency are classified as money transmitters and must register with FinCEN. This classification applies to all exchanges even if they are merely facilitating the exchange between two parties. The second letter, applies to payment processors, ruing they are also mandated to register as money transmitters with FinCEN. These rulings have far reaching implications and are going to impose costly regulatory hurdles for most bitcoin businesses. Where the true cost is going to raise its head is at the State regulatory level, where every jurisdiction has its own burdensome procedure for registering as a money transmitter and its own bonding requirements. Since most State regulators pay very close attention to what FinCEN determines, you can expect every State to expand its definition of money transmitters just as FinCEN has done.