State of Regulatory Affairs Webinar: Biggest Takeaways

The State of Regulatory Affairs webinar facilitated by the Chamber of Digital Commerce featured a lively discussion of Bitcoin- and virtual currency-related issues on the state and federal levels. In case you missed it, here are the biggest takeaways from the conference:

California AB-1326 would prohibit any person or business from engaging in virtual currency business activities in the state unless they hold a money transmission license or exemption from the California Division on Business Oversight.

  • There are no department or agency sponsors – it is not seen as a legislative priority.
  • This is uncharted territory for the legislature – there has been a lot of political turnover, particularly in the lower house, because of strict term limits for state legislators. As a result, legislators are not particularly familiar or experienced with the issue.
  • The bill would cover all virtual currency business activities. A $5,000 application fee may be difficult for small businesses but the CDBO has signaled its willingness to allow exceptions.
  • Collateral requirement: the applicant is required to retain a certain amount of high-quality investments – government bonds, government and agency securities, etc. – or fiat currency.
    • Prevents companies from suddenly going under, thereby alleviating the burden that would place on consumers.
  • Consumers’ data must also be secure.

 

New York State Department of Financial Services BitLicense 2.0:

  • Some have expressed concern over BitLicense fees but there is an exemption for startups.
  • It is unclear what companies (startups in particular) would have to do once the license is granted.
  • The public comment period closes Friday, March 27.
  • The Chamber of Digital Commerce State Working Group is drafting comments to be submitted and gathering industry input for consideration.
  • If the BitLicense were to be killed, then it is likely that virtual currency would be regulated under existing “money transmitter” statutes.
  • A bill to clarify that the money transmitter statutes apply to those operating outside the state has been dropped. It is not specific to virtual currency but may come back up should the BitLicense 2.0 fail to be enacted.

 

The Conference of State Bank Supervisors issued a Draft Model Regulatory Framework for virtual currency activities.

  • The Clearing House and Independent Banking Institutions filed joint comments. The Money Services Roundtable also filed a comment.
  • The American Bankers Association proposed a database of bitcoin companies in its own comment.
  • Among the issues that need to be clarified are how exactly the determination is made that a business is a bitcoin company, and how other virtual currencies will be treated.

 

Consumer Financial Protection Bureau:

  • The CFPB released a Notice of Proposed Rule on prepaid access.
    • It included a discussion as to whether bitcoin should be considered a form of prepaid access.
    • The regulators themselves do not seem to think so.
    • BUT it is hard to read the proposed rule and not think it applies to bitcoin because prepaid access is defined as a product that may be purchased and used to gain access to a good or service from a vendor.
    • The public comment period ends Monday.
  • Consumers can file complaints with the CFPB regarding virtual currencies.
    • The Bureau does not need to release rules on virtual currencies prior to bringing action against a company for “unfair, deceptive and abusive practices,” which is the CFPB’s regulatory standard.

 

Securities and Exchange Commission:

  • The Chamber is building a coalition to seek guidance on crowdfunding and virtual currencies in general.

 

Other state and local activity:

  • New Hampshire:
    • HB356 would exempt virtual currency from money transmitter regulations.
      • It is unlikely to be passed this year.
    • HB552 would allow the state to accept bitcoin as payment for taxes and fees.
      • It is supported by the Chamber but has been retained in committee.
    • HB666 would clarify licensing rules for money transmitters and define “cryptocurrency.”
      • It has passed committee and seems most likely to be enacted.
  • New Jersey:
    • A February legislative hearing on virtual currency was mostly just introductory.
    • Some draft legislation is circulating but nothing has been formally introduced.
  •  Utah:
    • HCR6 would begin research into the state’s potential acceptance of bitcoin as a valid form of payment.
  • North Carolina:
    • Legislation introduced on Wednesday to formally rewrite the state’s money transmitter laws and clarify their applicability to virtual currencies.
  • New York City:
    • The City Council has proposed acceptance of bitcoin as payment for fines.

 

Read the full text of California AB-1326 here

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