But for MSB purposes, BTC has its feet planted firmly in currency, and the entire money transmitter regulatory framework applies. As to challenging this designation, well, where to start? The bar for challenging an administrative rule is a very high one: the rule must be "arbitrary and capricious". These rules don't strike me as such. In any event, the cost of challenging the rules would likely top a million dollars for competent litigators in the field to bring such a case to completion.
What is your basis for this? The definition of currency in 31 CFR 1010.100 clearly refers to legal tender. Bitcoin is not legal tender in any country.
Are you supposing that a future change to the regulations could expand the definition of currency to include bitcoin, and then, at that point, someone might challenge that designation?
The definition of 'virtual currency' in the recent FinCEN guidance is not part of any law of regulation. It's not really clear to me that this guidance has much legal weight, except possibly in relation to the scienter requirement of 18 USC section 1960. If one follows the guidance, and is accused of breaking the law, they can argue that they did not knowingly do so. Does the guidance have any applicability beyond that?