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Widely Varying Cryptocurrency Laws
The United States is a patchwork quilt regarding state-level regulation of the cryptocurrency business. Some states have clearly stated that businesses operating cryptocurrency exchanges must be licensed as money services businesses (MSBs) or money transmitters. Some states are less definitive on the subject, but it is probable that cryptocurrency businesses operating in them will need to be licensed. Still, other states are unlikely to require licensing of a given cryptocurrency business. And Montana does not require money transmitters to be licensed at all, regardless of the type of currency transmitted, real or virtual.
Bear in mind that state laws are subject to change over time. It’s reasonable to expect that states that have yet to clarify their position on cryptocurrency may do so in the months and years to come, resulting in new or amended regulations in those states.
States Requiring Licensing of Crypto Transmitters
The following states explicitly define businesses that transmit cryptocurrency as money transmitters. That means that under federal law they must be licensed federally. So these states are treating crypto transmitters in the same manner as the federal government does.
- Alabama
- Alaska
- Colorado
- Connecticut
- Idaho
- Louisiana
- Maine
- Michigan
- New Mexico
- New York
- Oregon
- South Dakota
- Vermont
- Washington
- Washington, D.C.
These states maintain a transparent regulatory environment that makes it much easier for crypto transmitters to know what is expected of them to be in compliance with state laws.
States that May Require A Crypto Business to Obtain a License
Some states require some crypto transmitters to be licensed as money transmitters but exclude others from the licensing requirement. For example, Massachusetts only requires a money transmitter license for businesses that facilitate sending funds, cash or cryptocurrency, to a foreign country. Nevada makes crypto licensing decisions on a case-by-case basis and allows businesses to apply for an exemption. Several states, such as Rhode Island, require licensing of businesses that transmit cryptocurrency but allow exemptions for individuals involved in crypto transmission. And in some states, crypto exchanges that don’t accept cash may be exempt from licensing. These states have cryptocurrency regulations that are not applied uniformly, offer exemptions, or are open to interpretation.
- Florida
- Georgia
- Hawaii
- Illinois
- Kansas
- Maryland
- Massachusetts
- Nebraska
- Nevada
- North Carolina
- Rhode Island
- South Carolina
- Tennessee
- Texas
- Utah
- Virginia
- Wisconsin
States In Which A Crypto Business Probably Won’t Need a License
Some states have very narrow definitions of “money.” Even those these states require money transmitters to be licensed, they do not include cryptocurrency exchanges to be money transmitters, as long as they don’t accept cash for transfer to another party. Still, it’s important to check with the state’s Department of Banking whether any licensing requirements apply.
- California
- Indiana
- New Hampshire
- Pennsylvania
- Wyoming
States that Have Not Clarified Their Position on Crypto Business Licensing
When a state does not have explicit cryptocurrency regulations or where there are gaps and loopholes in their crypto regulations, businesses or their attorneys should contact the state’s Department of Banking for guidance. As of this writing, those states are:
- Arizona
- Arkansas
- Delaware
- Iowa
- Kentucky
- Minnesota
- Mississippi
- Missouri
- New Jersey
- Ohio
- Oklahoma
- West Virginia
Bonding of Cryptocurrency Transmitters
When a state cryptocurrency transmitter license is required, it’s nearly certain that a money transmitter surety bond will be required as well. A money transmitter bond protects the state and the public in the event of a financial loss that is the result of the business committing a regulatory violation.
Some states may accept a cash security deposit or letter of credit in lieu of a bond, but most businesses prefer not to tie up thousands of dollars of their capital or credit. Additionally, a money transmitter bond can be purchased for an annual premium that is only a small percentage of the required bond amount. The bond rate typically ranges between 1.5% to 3% for these types of bonds, and may vary depending on the financial capacity and credit of the principal applying for bonding.
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