Bitcoin and cryptocurrency are creating a whole set of new questions for financial regulators. Any company dealing with Bitcoin can be labeled as a money transmitter, even though there are exceptions. Mining pools, for example, are not necessarily transmitting money in the traditional sense. The new Money Transmitter Act of North Carolina now includes a Bitcoin reference, which sets an intriguing precedent for other states.
Not Every Bitcoin Company Is A Money Transmitter
When thinking of money transmission services, there are a few enterprises that come to mind. Banks, remittance companies, and digital wallet providers are all transmitters. These companies control user funds and are responsible for keeping money secure. Additionally, they need to adhere to state or national law and keep precise records of all customers.
In the Bitcoin space, things are a bit less obvious. Since most US states do not see Bitcoin as money in the traditional sense, it is difficult to determine which companies could be labeled as money transmitters. Exchanges and wallet providers are two prime examples of potential candidates to be put into the “money transmitter” category.
North Carolina’s Money Transmitter Act may hold the key to solving the strange situation. To be more precise, state officials have recently updated the act, which now includes a reference on virtual currencies. Although this is not unusual, it does set a precedent for what other US states, as well as countries around the world, may do moving forward.
The North Carolina Money Transmitter Act states:
“A digital representation of value that can be digitally traded and functions as a medium of exchange, a unit of account, or a store of value but only to the extent defined as stored value under G.S. 53-208.42(19), but does not have legal tender status as recognized by the United States Government.”
While this may not seem out of the ordinary, it is the first step towards regulating Bitcoin. Unfortunately, this statement also means any bitcoin trader – rather than exchange or wallet service operators – are money transmitters as well. Trading Bitcoin in the state will require a specific license, assuming one will ever be created.
That being said, there is a reference to how obtaining this license would work. The Nationwide Mortgage Licensing System will list the complete procedure, and the license itself is “approved” by the North Carolina Commissioner of Banks. Obtaining this piece of paper will require several documents, which brings forth a fair bit of administration.
Additionally, this license requires holders to have a net worth of at least $250,000. Unlike the BitLicense, which is fairly expensive to obtain, the North Carolina money transmitter license costs “only” $1,500. Anyone who processed less than $1 million of volume per annum will pay a $5,000 assessment fees. Transmitters who surpass the one million mark pay an assessment fee based on their total volume, which is then added to the standard $5,000 sum.
But there is more, as every Bitcoin trader will need to guarantee all user funds is handled according to state laws. Traders will need to post a specific bond amount, depending on how much money they transmit on a yearly basis. Before they can do so traders need to apply for a money transmitter bond.
All things considered, this process is very straightforward and will bring some positive sentiment with regards to the regulation of Bitcoin and cryptocurrency.