You are conflating 2 issues.
They claimed prosecutors talked to staffer that claimed they donβt qualify as MSB.
FinCen never issued a formal ruling that Smourai didnβt have to register.
And the whole thing is moot when they pleaded guilty to running an illegal MSB.
The most important thing you have to understand.
FinCEN guidance β binding law
βUnhosted wallets are software hosted on a personβs computer, phone, or other
device that allow the person to store and conduct transactions in CVC. Unhosted wallets do not require an additional third party to conduct transactions. In the case of unhosted, single-signature wallets, (a) the value (by definition) is the property of the owner and is stored in a wallet, while (b) the owner interacts with the payment system directly and has total independent control over the value. In so far as the person conducting a transaction through the unhosted wallet is doing so to purchase goods or services on the userβs own behalf, they are not a money transmitter.β
https://www.fincen.gov/system/files/2019-05/FinCEN%20CVC%20Guidance%20FINAL.pdf
What does this have to do with anything? They ran whirlpool on their servers and made money from mixing and distributing mixed coins as a business without registering with FinCen. Thatβs where they got them.
Not creating an unhosted wallet.
