As cryptocurrency becomes more integrated into mainstream finance, legal scrutiny has intensified around how virtual currency transactions are conducted. One of the most critical but under-discussed legal concerns is structuring, also known as “smurfing.” This illegal practice involves deliberately splitting up transactions to avoid triggering mandatory reporting thresholds, and it applies just as much to cryptocurrency as it does to cash. Under 18 U.S.C. § 5324, structuring is a federal offense with significant penalties. This guide explores how the law applies to virtual currency, the potential consequences, and how individuals and businesses can stay compliant.

What Is Transaction Structuring?

Transaction structuring refers to the act of intentionally breaking down a large financial transaction into smaller increments to avoid government reporting requirements. Originally developed to combat money laundering and illegal cash flows, these laws now encompass digital assets.

Structuring Example
Imagine an individual wants to deposit $15,000 in cryptocurrency but is aware that transactions over $10,000 may trigger a Currency Transaction Report (CTR). To avoid this, they make two separate transfers of $7,500 each on different days. This deliberate fragmentation—designed to conceal the total amount—constitutes structuring under federal law.

§ 5324 and Cryptocurrency: Legal Foundations

Section 5324 makes it illegal to structure any transaction for the purpose of evading reporting requirements set forth in § 5313 of the Bank Secrecy Act. The key components of a structuring violation include:

• Engaging in structured transactions
• Knowing about the reporting requirement
• Acting with intent to evade that requirement

These rules were initially designed for cash transactions but are now being applied to virtual currencies like Bitcoin, Ethereum, and other digital assets, particularly as regulatory agencies tighten their oversight.

Virtual Currency as Currency Equivalent

Federal courts and regulatory bodies increasingly treat cryptocurrency as a currency equivalent in the context of financial reporting. In United States v. Bird, the court recognized that digital assets could be used to avoid traditional oversight mechanisms. This trend is consistent with the broader legal application of cryptocurrency in areas such as computer fraud, where digital tokens are often used as anonymous payment tools in cybercrimes.

The $10,000 Reporting Threshold

Under federal law, financial institutions must file a CTR for any transaction exceeding $10,000. Structuring laws prohibit individuals from breaking up transactions to remain under this threshold, regardless of:

• Whether the source of funds is legal
• Whether the structuring succeeds
• Whether other crimes are involved

Even if someone structures a transaction for privacy, without criminal intent, they may still be violating federal law.

Key Court Interpretations of Structuring

Several court cases provide guidance on how prosecutors must prove structuring violations:

1. Engagement in Structuring
In United States v. Taylor, the court found that repeated small deposits—clearly intended to avoid the $10,000 threshold—met the definition of structuring.

2. Knowledge of Reporting Requirements
A defendant does not need to know that structuring is illegal. Prosecutors only need to show that the individual knew about the bank's reporting duties under federal law.

3. Specific Intent to Evade
In United States v. Sweeney and United States v. Souza, courts highlighted the necessity of proving intent to evade. Innocent behavior or coincidental timing is not enough for conviction.

How Structuring Applies to Cryptocurrency Transactions

While cryptocurrencies do not move through traditional banks, they are often exchanged or converted through centralized platforms like Coinbase, Binance, or Kraken. These platforms are subject to federal reporting regulations and must file reports for large or suspicious transactions.

Common Examples of Cryptocurrency Structuring

• Dividing a $20,000 transaction into multiple trades under $10,000
• Using multiple wallets or accounts to complete the same overall transaction
• Coordinating with others to split and transfer cryptocurrency holdings
• Conducting high-frequency trades designed to avoid detection

As blockchain technology reshapes the financial landscape, so does the need for regulatory compliance. Blockchain's transparency does not prevent structuring; in fact, it makes forensic detection easier when transactions are examined on the blockchain ledger.

Criminal and Civil Penalties for Structuring Violations

Violating § 5324 can result in both criminal and civil penalties, depending on the facts of the case.

Criminal Penalties

• Up to 5 years in federal prison
• Fines up to $250,000 for individuals
• Fines up to $500,000 for institutions
• Forfeiture of funds involved in the structuring
• Enhanced penalties if more than $100,000 is involved over a 12-month period

Civil Penalties

• Monetary fines even without a criminal conviction
• Forfeiture of cryptocurrency involved
• Regulatory sanctions or licensing impacts
• Damage to reputation and institutional trust

As seen in United States v. Richeson, courts may enforce civil penalties even if criminal conviction is not obtained.

Compliance Best Practices for Cryptocurrency Holders

Whether you're an investor, trader, or business accepting crypto payments, avoiding unintentional structuring violations is essential. The following strategies can help:

• Avoid arbitrary transaction fragmentation: Always allow natural transaction flows, even if it means exceeding $10,000.
• Document legitimate business reasons: If multiple transactions are necessary, maintain written explanations.
• Know your exchange's reporting thresholds: Understand when and how your platform reports large transactions.
• Seek legal guidance: Consult with attorneys who specialize in financial and digital asset regulation.
• Keep clear transaction records: Maintain receipts, transaction IDs, wallet addresses, and correspondence.

As regulations evolve, staying informed about cryptocurrency legislation and regulatory developments will be key to remaining compliant and avoiding unexpected legal exposure.

Virtual Currency Structuring Attorneys in California: Compliance and Defense You Can Trust

Virtual currency is no longer a legal gray area. If you transact in cryptocurrency, the risks of triggering structuring violations under § 5324 are real. The Bulldog Law is a California-based law firm equipped to help you navigate these complexities. Our attorneys have deep experience in digital asset compliance, financial crime defense, and regulatory risk management. Whether you need help building a proactive compliance plan or defending against federal investigation, our legal team is here to protect your interests and your freedom.