Cryptocurrency Law US – Bitlicense and others
Before involving in the Cryptocurrency law in the US, it is ideal to have an overview of what cryptocurrency is.
It is important to know that cryptocurrency notably the Bitcoin is a side product of an invention in which the inventor Satoshi Nakamoto‘s intention was not to invent a currency. But he ended up creating what he in his announcement called a “peer to peer to peer electronic cash system.
Cryptocurrency is a decentralized currency devoid of server or central authority whatsoever. It is a digital currency that is impossible to influence politically. Its value protected and with a prospect of increasing with time.
It has recognization to be a fast and convenient means to make payment for goods and services. Also, it has excellent privacy such that no one can reveal your identity. It can also be used to carry out black market transactions and other unlawful economy activities. Bitcoin is the pioneer and most popular cryptocurrency in the world; others include Ripple, Litecoin, Monero and so on.
In the United States, there are laws that guide cryptocurrencies, and that is what this article is all about. We are going to discuss the top cryptocurrency laws in the United States. Read on!
Since it's a long article and your state might be all you care about we add a direct links to each state here:
The Cryptocurrency Law US
Cryptocurrency Law in Florida State
The use of cryptocurrency termed virtual currency is illegal to launder criminal proceeds according to the Bill 1379 passed recently in Florida. The legislation of this Bill now lies with the governor who is expected to sign it very soon.
Cryptocurrency, as defined in the act, is a currency used as electronically or digitally as a means of exchange. It is not a coin or currency of the United States or any country in the world. The cryptocurrency law US allows cryptocurrency users to be tagged criminals. Also, they can be charged with money laundering and the underlying criminal activity.
The sponsor of the bill, a democratic house representative, claimed: “Cybercriminals have taken advantage of our antiquated laws for too long.”
The passing of this bill had put an end to the many years long of court proceedings and indecision involving the arrest of Michell Espinoza who sells Bitcoin. The passing of the bill paves the way to correct the failure of Miami-Dade police to be able to bring Michell Espinoza to book.
Now many other states in the country have passed bills on bitcoin and blockchains as well as other cryptocurrencies. This is because of the court ruling in the case of Espinoza.
The cryptocurrency law US is not adequate for most users. It is due to the ability of cryptocurrency users to transact pseudonymously. This way the parties involved don’t need to know each other. Also, they don't need to have a visual contact to transact.
The cryptocurrency law US may not be effective on most users in Florida state. According to ch. 896 of the money laundering charge, one of the two parties involved in the transaction must have knowledge or intent with evidence.
Without any evidence of the knowledge or intent of at least one of the two parties in a cryptocurrency transaction, no one is subject to persecution by the cryptocurrency law US.
Cryptocurrency Law in California State
Just like banks are, California’s assembly has called for digital currency companies to be regulated by passing a bill to that effect. The bill AB-1326 to regulate cryptocurrencies in California was approved by a vote of 55 to 22 in favor of the bill.
If the bill is passed by the California Senate, there will be a need for cryptocurrency businesses to obtain an annual renewable permit from the department of business oversight unless exempted by the agency.
It will cost an applicant a non-refundable fee of $5,000 and the applicant will also need to complete an application. The application will allow the applicant to reveal the cryptocurrency transaction or services he had been previously involved in.
When the Senate approve the cryptocurrency law US, there’s still a need for the governor to sign it into law. The governor can allow it to be effective as law without a signature or not sign it into law and make it ineffective. Of course, that is how the California legislative process works.
In August 2016, however, the bill was introduced once again and amended and no longer proposes to offer licenses to cryptocurrency businesses but rather to help the state to have a good knowledge of the emerging cryptocurrency technology.
As a cryptocurrency law US, the new amended bill 1123 in California would prevent a user from carrying out any virtual currency transaction in the state except licensed by the commissioner of business oversight. The bill allows an applicant’s application be
rejected for no reason and no administrative appeal for the applicant.
Cryptocurrency Law in Washington State
Some states have passed bills on the use of cryptocurrencies in the United States one of the latest on this list is Washington. So as to protect consumers, the state of Washington has passed a bill to regulate digital currency in the state.
Both criticism and praise has been trailing the bill sequel to its passage prompting some of the bitcoin-associated businesses rather than comply to the cryptocurrency law US, closed down their operation in the state.
Digital exchanges that allow people transact and deposit their cryptocurrency such as bitcoin; Ethereum and so on is the primary aim of the bill. Just like other businesses like western union, the bill will allow all transactions in Washington to be carried out under the money transmitter laws of the state.
Also, it becomes imperative for exchangers to agree to third-party security audits of their systems. Also, to post a surety bond that will stand as deposits security should in case there is a need to compensate customers for. an exchange up to $10,000 and $550,000.
Just after the regulations went effective by law, exchangers like Bitfinix, Bitstamp and so on had to leave the state. No far-fetched reason availabe yet. They cannot comply with the new cryptocurrency law US. These exchanges had to tell their customers in Washington that they are leaving for somewhere else.
Some of the exchanges went as far as taking the issue to Reddit. This is in response to the new regulation and brand the state of having a cryptohating legislature. Meanwhile, one of the participating companies, Coinme, commends the approach of the state. It
also calls them a leader among the other states on regulating digital currencies.
Cryptocurrency Law in Hawaii State
The famous Bitcoin and Ethereum exchange and wallet Coinbase claimed that it had to stop operations in Hawaii due to external forces. It is as a result of it called impractical and untenable regulatory policy. Coinbase had announced the regulatory policy has the reason why they indefinitely suspend business in Hawaii.
The cryptocurrency law US in Hawaii state expects that all digital currency operators must have cash reserves equal in value of the digital currency held for customers. Due to this policy, the operators asked that the Cryptocurrency customers must close their accounts within thirty days.
Customers have two options availabe that either before closing their accounts send their Bitcoin to an alternative wallet or exchange it for fiat.
Most digital currency exchanges lament the decision of the state’s House of representative to introduce the bill they claimed is not practicable but still intends to work with them.
In Hawaii, Bitcoin is illegal as tender. This makes it the most hostile environment for bitcoin next only to New Hampshire.
Hawaii DFI has directly equated cryptocurrency to money which is not. It is one of the factors that forced cryptocurrencies out of Hawaii is that the
The DFI’s regulation has an expectation to be effective for not less than two years. Also, to have an adverse effect most especially on tourism.
Cryptocurrency Law US in Illinois State
The Illinois Department of financial and professional regulation has given a clarification that virtual currency is not a form of money as used in the state’s transmitters of money Act.
All digital currency businesses that involve the exchange of virtual currency for money through a third-party exchanger or automated machine will need to secure a TOMA license. The IDFPR allows industry startups to use digital currency as a permissible investment.
IDFPR also allows applicants to consider cryptocurrency as part of their net worth. But it does not cover those they keep on behalf of others.
The TOMA regulation and licensure involves; transaction in which virtual currency and money are transmitted through a third-party service. Also transactions through Bitcoin automated machines and other automated machines that serve as third-party intercessors between buyers and sellers.
Some economic activities that involve the use of digital currency need not obtain TOMA license. Such businesses include;
- Paying for goods and services using digital essential
- Processing payment with digital vital by a third-party
- Transfer of virtual currency such as the exchange of a digital currency for another.
- Mining of digital currency, as well as transactions with multiple signatures, does not require TOMA license.
The Department conclusively advises that both businesses and individual should obtain a license. The process must complete before carrying out a transaction that involves both virtual currency and money.
Cryptocurrency Law in New York State
Like most states in the United States, businesses in New York who participates in digital currency activities mandated to obtain a license (BitLicense) for their digital currency transactions. Also, an individual with a business place or providing such services to a person in New York must obtain the license.
The New York State Department of Financial Services in 2015 introduced the Bitlicense which requires a non-refundable fee of $5,000 to apply which most people consider too expensive.
Apart from being expensive, the bitlicense seems to be difficult for smaller companies and startups. The reason behind it is due to the several other obligations. This includes the hire of a compliance officer by the applicant, consumer protection, and anti-money laundering. Additionally, the hire of cybersecurity, business continuity, disaster recovery, and capital requirements.
Digital currency businesses such as Ripple and Coinbase have obtained a license in 2016 and 2017 respectively. But others such as ShapeShift, Bitfinex and so on decided to leave New York for somewhere else all because of the obligations.
The regulation requires that all the advertisement of the Bitlicensees must include their names. Also, it should include a statement that proves they have the license to participate in virtual currency business in New York.
Cryptocurrency Law in New Jersey State
The New Jersey legislature is trying so hard to be a leading state in growing the digital currency technology.
Two New Jersey’s lawmakers have proposed a bill to put up a regulatory law for companies and individuals that engage in virtual currency. Also, provide tax breaks to companies that transact and exchange it.
The bill explains that the virtual currency payment is like a transaction between two people without involving any third-party. The central bank stays uninvolved. And there is no need to keep tabs on transactions as it is with western union and Paypal.
The cryptocurrency allows a transaction between two people without an intermediary and also allows anonymous transactions.
The cryptocurrency law US mandates that companies in New Jersey that operate in cryptocurrency should register with the state Department of Banking and Issuance. There is a need that the state’s commissioner shall decide a business plan and payment of registration.
It is also important to provide fingerprints and photographs of the main members of the organization applying for this license.
The legislation has incentives for companies that create more than ten jobs to attract companies that deal in digital currency, in addition to the base tax credit they qualify for. They also qualify for $5,000 for each new job they create.
It is vital for any individual to know that each state in the US has its regulatory license for the use of digital currency. It varies from state to state. Also, it is important to know how important these licenses are. The digital currency is ideally not considerable as money.
You need to know what the State you desire requires of you to transact with the virtual currency. This will avert the risk of charges with money laundering and consequently persecuted.
The digital currency prohibition or restriction bill in some states have only passed. But not yet signed into cryptocurrency law US and are so not effective yet. Hence no charges and no persecution and you are free to make use of cryptocurrencies in such state.
If you wish to understand more about Bitcoin, and less about the cryptocurrency law US, Read here.