Last week, the Conference of State Bank Supervisors (CSBS) and the North American Securities Administrators Association (NASAA) released model consumer guidance that they jointly developed to assist state regulatory agencies in providing consumers with information about virtual currency and factors consumers should consider when transacting with or investing in virtual currency.  Within days of the model guidance release, the Maryland Commissioner of Financial Regulation and the Nevada Department of Business and Industry both issued their own Advisories.  The Maryland advisory notice adds a statement that Maryland does not currently regulate virtual currencies.  Given the breadth of Maryland’s money transmitter statute, Maryland likely has the authority to regulate virtual currencies without any amendments to its laws, but appears to have decided to take a “wait-and-see” approach for now.  The Nevada guidance adopts the CSBS model advisory language verbatim with only insubstantial changes in the introductory language, and does not comment on whether current Nevada law covers virtual currency.

The model guidance, as well as the Maryland and Nevada regulator releases, closely resemble the Bitcoin warnings issued by governments worldwide over the past year.  Similar to the FinCEN virtual currency guidance issued last March, they define virtual currency as “an electronic medium of exchange that does not have all the attributes of real currencies,” but unlike the FinCEN guidance, they do not limit the definitional scope to convertible virtual currencies.  The model guidance cautions consumers and investors to consider:

• the volatility of virtual currencies;
• virtual currencies’ lack of insurance or government backing;
• the use in illicit activities of virtual currencies,
• the irreversibility of virtual currency transactions, and
• the fact that virtual currencies and companies may or may not be regulated.

However, the guidance leaves open the possibility of additional state and federal regulation over virtual currencies and companies that deal in virtual currencies, noting that state and federal regulators are “evaluating and developing approaches” to such regulation.  Finally, the guidance notes that virtual currency transactions may be taxable, citing the IRS virtual currency notice issued earlier this year, and provides a list of resources that consumers can check to see if any virtual currency company is a registered entity.

As with many other government warnings, the guidance leaves consumers free to transact in virtual currency, while disclosing the risks inherent thereto, including the lack of government regulation, and advising consumers to “do your homework.”  However, the guidance’s repeated references to FinCEN regulations remind companies that the decision by Maryland (and any other state) not to regulate virtual currencies for now does not excuse companies from the need to analyze and comply with federal money services business laws, which would require them to, among other things, maintain robust anti-money laundering programs, and to verify customer identities.

Other states are likely to follow Nevada and Maryland in issuing their own versions of the model guidance over the coming weeks.  Any such guidance should be carefully reviewed for any added statements indicating how the individual state views virtual currency under its current law.