California has become the latest US state to begin the process of adopting a Bitlicence regime.
Assembly Bill No. 1326 (the Bill) – “An act … relating to virtual currency” – was filed with California State Assembly by Assembly Member Dababneh on 27 February 2015. It (a) was read for first time on 2 March; (b) refered to the committee on banking and finance on 23 March; and (c) may be heard by that committee on 31 March 2015.
If made in its current form, the Bill will:
- “prohibit a person from engaging … in the business of virtual currency” unless (a) they have a licence from the Commissioner of Business Oversight, or they are exempt;
- Require licence applicants to pay a non-refundable fee; and provide detailed information about (a) themselves; (b) the prior virtual currency services they have offered; (c) a sample form of receipt for virtual currency transactions; and (d) specified financial statements; and
- Require licensees to meet minimum capital requirements, to “ensure the safety and soundness of the licensee, its ongoing operations and maintain consumer protection”.
If made in its current form, the Bill will not apply to consumers using virtual currencies solely for the purpose of buying and selling goods and services.
Unlike New York’s Bitlicence regime, the proposed Californian regime does not include anti-money laundering provisions and suspicious activity reporting obligations.
Our previous blogs about California’s approach to virtual currencies, and the New York Bitlicence are available here and here. Our client alert about virtual, digital and cryprocurrencies is available here.
The Californian bill defines “Virtual currency” as “any type of digital unit that is used as a medium of exchange or a form of digitally stored value or that is incorporated into payment system technology. Virtual currency shall be broadly construed to include digital units of exchange that (1) have a centralized repository or administrator, (2) are decentralized and have no centralized repository or administrator, or (3) may be created or obtained by computing or manufacturing effort. Virtual currency shall not be construed to include digital units that are used solely within online gaming platforms with no market or application outside of those gaming platforms, nor shall virtual currency be construed to include digital units that are used exclusively as part of a customer affinity or rewards program, and can be applied solely as payment for purchases with the issuer or other designated merchants, but cannot be converted into, or redeemed for, fiat currency“.