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.
The definition of currency in 31 CFR 1010.100 clearly refers to legal tender. Bitcoin is not legal tender in any country.
...18 USC section 1960.
I think that most of your post is on the right track. Even in the portion above, you identified the correct provision (18 USC 1960). Indeed, you've identified the provision that proscribes unlicensed money transmitting. But you haven't connected the definition of "currency" to that provision, or even identified why that that definition is relevant. Let's take it step by step and we can get to an answer
