There is no consistency when it comes to how states treat businesses that conduct transactions with virtual currency. There is little regulatory guidance on the matter, and states are all over the place. For example, New York enacted a framework that requires virtual currency dealers to obtain a license, similar to other money transmitters which caused many businesses to leave the state. On the other hand, Wyoming passed highly crypto-friendly legislation that exempts virtual currency from money transmitter requirements, including licensing requirements.
California has not yet passed definitive legislation regarding virtual currency licensing. The legislature has seen bills proposing greater regulations and licensing requirements, as well as a current bill recommending exemption for certain virtual currencies from traditional money transmitter license requirements.
As the laws are constantly changing, and the federal government also considers passing nationwide cryptocurrency requirements, it is important for any business dealing in virtual currency to know the rules for any states in which they operate. Learn how the professionals of CorCom, LLC, can assist local San Francisco virtual currency businesses with its licensing requirements.
The California Department of Business Oversight is in charge of regulating money transmitter businesses in accordance with the Money Transmission Act. According to the law, regulated money transmitters include businesses that engage in any of the following:
A recent bill aimed to add “issuing, transferring, or storing a virtual currency on behalf of a consumer” to the list, which would qualify crypto dealers as money transmitters. It would exempt virtual currencies used only for gaming platforms (that cannot be applied outside those platforms), currency that can be used to redeem certain purchases but that cannot be converted into fiat currency, or currency used solely as part of consumer rewards programs. While this bill did not become law, there have been other strides made in California toward greater regulation and potential licensing of virtual currency businesses.
Governor Gavin Newsome did recently sign a bill into law, which is the California Consumer Financial Protection Law (CCFPL). The law effectively transforms the state Department of Business Oversight (DBO) into the California Department of Financial Protection and Innovation as of January 1, 2021.
The newly-named department will have expanded authority to enforce consumer financial protection laws, as well as clarify regulatory requirements for emerging financial products, such as virtual currency. Whether or not the Department of Financial Protection and Innovation will implement licensing requirements remains to be seen, but you can trust that our team is staying on top of any and all new developments.
If regulations requiring licensure or other compliance emerge in California regarding cryptocurrency, the San Francisco virtual currency license professionals at CorCom, LLC can assist your business. Contact us if you are operating with virtual currency in California.
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