On February 27, 2015, California Assembly member Matt Dababneh (D – Encino) introduced AB 1326, which would require virtual currency businesses to be licensed by the Department of Business Oversight (DBO). To get licensed, businesses must pay $5,000 to register, provide detailed information (including audited financials for the most recent year) and keep a specified amount of funds (established case by case by the Commissioner of the DBO) in certain types of investment-grade permissible investments, which excludes virtual currencies.
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Conference of State Bank Supervisors Releases Policy Statement and Draft Model Regulatory Framework for Virtual Currency
Yesterday, December 16, 2014, the Conference of State Bank Supervisors (“CSBS”) released a Policy Statement on state virtual currency regulation, and a Draft Model Regulatory Framework (“Draft Framework”) to support its policy and to promote consistent regulation of virtual currency activities. The Draft Framework lists numerous recommendations for state financial regulatory regimes applying to virtual currency activities and requests public comment on an extensive list of related questions.
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NYDFS Publishes BitLicense Comments
Yesterday, the New York Department of Financial Services (NYDFS) published all comments that it received on its “BitLicense” proposal. A total of 3,746 comments were submitted, many of which were written by individuals based on a short form published by the Electronic Frontier Foundation. However, many prominent Bitcoin companies, industry associations and think-tanks also provided
UPDATED – Russia Issues Draft Legislation Prohibiting Virtual Currencies – Translation Available
The Ministry of Finance recently revised its proposed legislation banning virtual currency activity, reducing the applicable fines by approximately 20-50%. However, the activities banned by the proposed legislation remain as described in our previous post on this topic.
FinCEN Issues New Rulings Covering Virtual Currency Exchanges and Payment Processors
On Monday, FinCEN issued two advisory rulings responding to requests for clarification regarding the money transmitter status of two virtual currency companies. While the advisory rulings are technically limited to only the requesting companies, they strongly suggest that FinCEN considers both virtual currency payment processors and virtual currency exchange platforms to be money transmitters. In practical terms, many virtual currency businesses that previously have argued that they are exempt from FinCEN regulations will now have to register as money transmitters, implement an anti-money laundering program, and comply with other reporting and recordkeeping requirements under the Bank Secrecy Act. We summarize the two rulings below, and then lay out some of the key “takeaways” for virtual currency businesses.
Russia Issues Draft Legislation Prohibiting Virtual Currencies – Translation Available
Last week, the Russian Finance Ministry, in conjunction with the Ministries of Economic Development, Communications, Internal Affairs and Financial Monitoring, issued draft legislation amending existing Russian law to prohibit the distribution, creation and use of virtual currencies. The draft law:
- Amends Russian Federal Central Bank law to:
- Allow the Russian Central Bank to determine what
CSBS Model Virtual Currency Advisory: DO YOUR HOMEWORK! Maryland and Nevada Release Their Own Similar Advisories
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.
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Congress Holds Small Business Bitcoin Hearing
On April 2, the Small Business Committee of the House of Representatives held a hearing examining the benefits and risks associated with Bitcoin for small businesses. Surprisingly given the forum, the panel of speakers did not include a single small business. Rather, the speakers were comprised primarily of researchers and academics such as Jerry Brito of the Mercatus Center and Mark Williams of Boston University.
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IRS Clarifies Tax Treatment of Bitcoin and Other Convertible Currencies
The IRS issued Notice 2014-21 yesterday, which describes how the IRS will apply U.S. tax principles to transactions involving virtual currency. The GAO had previously issued a report on virtual economies and currencies, calling for additional IRS guidance on the basic tax reporting requirements applicable to virtual currencies.
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Tracking International Virtual Currency Developments
It seems like almost every day now, executive, legislative, and central banking officials and entities in countries around the world are regulating, restricting, or allowing (either expressly or implicitly) the use of virtual currencies, the operation of virtual currency businesses and exchanges, and the intersection of virtual currencies and more traditional financial institutions. Tracking these international developments has become a part-time, or possibly even full-time, endeavor and today Perkins Coie is hoping make that task a little easier for the readers of this blog by posting its International Virtual Currency Tracker.
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