State Regulation Roundup Revisited

Bitcoin  •  BitLicense  •  CA DBO  •  Digital Currency  •  Money Transmission  •  NYDFS  •  Regulatory Action  •  State Law

As discussed in a previous post, several states are in various stages of implementing regulations related to digital currency.  Below is an updated summary of the actions currently underway.

New York

Since the final version of New York’s BitLicense was announced in June 2015, surprisingly only a single BitLicense has been issued in the state. As a result, several digital currency companies are operating under BitLicense’s transition period safe harbor which permits companies to continue operating in New York so long as they were operating at the time the BitLicense regulations went into effect and applied for a BitLicense within a specified time period. Such companies are permitted to operate in the state until notified that their BitLicense application has been denied.

California

In February 2015 a California Assembly member introduced a bill (AB 1326) proposing a licensing framework for digital currencies in the state.  As discussed in a previous post, the bill was approved by the California Assembly and awaited review by the California State Senate. Since that time, the Electronic Frontier Foundation (EFF), based in San Francisco, launched a petition to oppose the measure. The EFF opposed the $5,000 license application fee and reporting requirements as threats to digital currency innovation within the state. Coin Center, a Bitcoin group based in Washington, D.C., decided to support the measure after lawmakers added an amendment which would only apply the licensing requirements to those companies with “full custody” of the digital currency. However, the bill was ordered to become an inactive file by state Senator Mitchell in September 2015. While there has been discussion about re-activating it, the legislature has not done so yet.  Although the bill could potentially be re-activated, certain members of the Bitcoin community see this development as a positive for the industry’s ability to innovate within the state.

North Carolina

North Carolina recently exempted certain digital currency and blockchain business categories from the state’s Money Transmitters Act (MTA). These exempted businesses include digital currency miners and non-financial blockchain services.  In addition, North Carolina clarified that it does not require a special license for businesses operating in the state that simply transmit digital currency. The state applies the same standards to digital currency transmitters as it does to traditional money transmitters.

Wyoming

As discussed in a previous post, the existing Wyoming Money Transmitters Act caused some concern among certain digital currency companies due to the requirement that certain licensees hold 100% of the amount being digitally transferred in reserves. That burden will be somewhat alleviated if a bill introduced in January 2016 is approved. It proposes to add digital currencies to the list of assets permitted to be held to satisfy the reserve requirement. If passed, this would permit certain digital currency companies to satisfy the reserve requirement using digital currencies already in their possession, rather than additional cash or securities.

New Hampshire

New Hampshire recently designated as a money transmitter anyone who exchanges a digital currency for another type of currency. In addition, businesses who enter and remove digital currency from circulation are designated as money transmitters. Beginning January 1, 2016, such individuals and companies must be licensed and bonded as money transmitters within the state. Importantly, individuals who only possess digital currency and use it to purchase goods or services are not subject to such money transmitter requirements.

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