With the proliferation of cryptocurrencies in our lives, several States have adopted regulatory mechanisms governing “virtual currency business activity.” States like Washington, California, Hawaii, Arizona, New Mexico and Nebraska have legislation passed or pending which either adopts “The Virtual-Currency Businesses Act (The Act)” in whole or in part. It will not be long before all 50 States have established some regulatory structure for these businesses. With uniformity in mind, it appears the Act is here, and it is here to stay.
The Act was drafted and published in the Summer of 2017 by a commission of legal practitioners, including lawyers, judges, legislators, and law professors. The Commission set out to create a statutory structure for regulating the “virtual currency business activity” of those offering services and products; it does not, however, regulate the cyptocurrency.
What is a “Virtual-currency business activity?” The Act defines it broadly as “exchanging, transferring, or storing virtual currency or engaging in virtual-currency administration . . .” The Act was designed to modernize regulatory laws distinct from those State’s with mechanisms for regulating “money services” and “money transmitters.” Since courts are interpreting cryptocurrency to not be the same as “money,” many of these other regulatory schemes do not arguably apply, for example.
What does the Act do? In addition to licensure requirements, it has a three-tier system for determining which providers may be exempt, or alternatively, subject to greater regulation. It also requires the virtual-currency business to maintain an amount of each type of virtual currency sufficient to satisfy the aggregate entitlements of its customers. These are but a few of the regulations which are now in place or being adopted throughout the United States.