Governor Signs Into Law Amendments to Washington’s Uniform Money Services Act

On April 18 the governor of Washington signed into law amendments proposed by the Washington Department of Financial Institutions (“DFI”) in December of last year, to the state’s Uniform Money Services Act, including provisions specific to digital currency.  The changes take effect on July 23, 2017.

Aligning with Washington’s Interim Regulatory Guidance on Virtual Currency Activities, published in December of 2014, the amendments do not broaden the scope of regulated activities relating to digital currency.  However, they provide clarity regarding the regulation of digital currency products that operate within a limited or closed universe.  For example, loyalty points programs and virtual currencies redeemable only on online gaming platforms are explicitly exempted from the licensing requirement, as are tokens issued in connection with a distributed ledger that do not operate as a medium of exchange.

In addition, digital currency exchanges and other companies offering digital currency products are permitted to include like-kind digital currency holdings as capital reserves to the extent obligated to consumers.

Blockchain Week in Review – April 17, 2017

Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.

U.S. Developments

Regulatory Updates

Washington State Legislators Prepare Bill To Regulate Virtual Currencies
In Washington, Senate Bill 5031 was introduced by Senators Jan Angel and Mark Mullet in January. Both legislative chambers have now approved the bill, which was delivered  Thursday to Governor Insleee for approval. The bill provides new rules for companies that deal in digital currency services.

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Dax Hansen and Josh Boehm Speak at Stanford Cyber Initiative About Blockchain Tokens

On March 29, 2017, Perkins Coie partner Dax Hansen and associate Josh Boehm were invited to the Cyber Initiative at Stanford Law School to deliver a presentation on several cutting-edge legal issues relating to blockchain technology.  Their presentation, which focused on blockchain token sales and treatment of bitcoin under property law, is available here.

Blockchain token sales have been a particularly high profile issue in recent months. As explained by Blockchain Capital’s Brock Pierce in an interview with American Banker last week, available here, token sales represent a potential new model for venture capital financing.  Perkins Coie attorneys are monitoring this trend and will provide updates on future developments.

Blockchain Week in Review – April 7, 2017

Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest. Continue Reading

New Whitepaper Published: Treatment of Bitcoin Under U.S. Property Law

In this recently published Perkins Coie whitepaper, the authors analyze the treatment of bitcoin under applicable U.S. property law.  The authors conclude that property interests should exist in bitcoin under such law, and that multiple sources of persuasive authority provide additional support for that conclusion. The paper is divided into 5 parts:

  • Treatment of bitcoin under U.S. state property law — an illustrative analysis using California law
  • Scholarly consideration of bitcoin ownership rights under property law generally
  • Treatment of bitcoin as property under other U.S. legal regimes
  • Possible challenges to treating bitcoin as property
  • Property interest in bitcoins held in custody

Each part offers an in-depth analysis of legal issues.  For example, under the discussion of property interests in bitcoins held in custody, the authors discuss the differences between specific and general deposits and how these concepts could be applied to deposited bitcoin in a custodial arrangement.

Download our whitepaper here.

Dana Syracuse Speaks at The DC Blockchain Summit 2017

Through our longstanding relationship with The Chamber of Digital Commerce, Dana Syracuse presented a blockchain legal and regulatory update at the DC Blockchain Summit held in Washington DC,  March 15-16, 2017. Please find a video of Dana’s presentation here and a copy of the presentation slides here.

The Chamber of Digital Commerce, along with Georgetown University’s Center for Financial Markets and Policy, hosted this second annual gathering featuring the best and brightest in industry and government from around the globe. The program included discussions from the people, companies and government leaders who are driving digital assets, blockchain and distributed ledger technologies forward. Conference highlights can be found here.

As Fintech Platforms Grow Up, Investment Management Firms Face the ‘Problems of Tomorrow’

Read our new article in The Investment Lawyer to learn more about the legal and regulatory implications of emerging technologies, including blockchain and digital ledger technology, investing in fintech companies, robo-advisers and algorithms, and cybersecurity.

SEC Denies Proposed Rule Change

The Securities and Exchange Commission announced today that it would deny a proposed rule change that would have permitted the first exchange traded fund to track digital currency.  If granted it would have permitted the Bats BZX Exchange, Inc. (“Exchange”) to list and trade shares issued by the Winklevoss Bitcoin Trust on the Exchange.  The SEC found that the proposed rule change was inconsistent with the Securities Exchange Act of 1934 as the Exchange would be unable to enter into the necessary surveillance sharing agreements given that many digital currency exchanges are located overseas and largely unregulated.  Notably, the reasons for the disapproval do not appear to be related to the specifics of the filing, but rather to larger concerns about the unregulated nature of bitcoin.  The SEC did indicate that it might consider similar applications in the future stating: “[t]he Commission notes that bitcoin is still in the relatively early stages of its development and that, over time, regulated bitcoin-related markets of significant size may develop.”