{"id":23850,"date":"2017-05-16T01:58:58","date_gmt":"2017-05-16T01:58:58","guid":{"rendered":"http:\/\/ci027cfe78a00a2697"},"modified":"2017-05-16T01:58:58","modified_gmt":"2017-05-16T01:58:58","slug":"how-five-states-are-approaching-bitcoin-regulation","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/business\/how-five-states-are-approaching-bitcoin-regulation","title":{"rendered":"How Five States Are Approaching Bitcoin Regulation"},"content":{"rendered":"
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Cryptocurrency should be regulated. Cryptocurrency should not be regulated. Cryptocurrency can\u2019t be regulated. These are all common refrains emanating from the media these days. Now lawmakers across the United States and around the world are at a crossroads as to what is next in terms of this regulatory space.<\/p>\n

Bitcoin and other forms of cryptocurrency present a monumental challenge for legislators, requiring a broad understanding of blockchain technology, especially in terms of its impact on tech innovation. Amid assertions that the U.S. is falling behind in terms of Bitcoin regulation<\/a>, it could be argued that the regulatory picture is becoming clearer in 2017<\/a>. <\/p>\n

Bitcoin Magazine<\/em> asked Pawel Kuskowski, CEO and co-founder of Coinfirm<\/a>, and Joe Ciccolo, president of the Illinois-based Bitcoin compliance firm BitAML<\/a>, to offer some commentary about the regulatory activity taking place in five U.S. states \u2014 Washington, Illinois, Hawaii, California and Florida \u2014 and what the regulatory landscape may look like in the days ahead. <\/p>\n

Washington <\/strong><\/p>\n

Legislators in Washington state are building momentum around new rules for businesses offering digital currency services. Senate Bill 5013<\/a> provides a definition of virtual currency along with disclosure requirements of certain information to consumers. It also would require online currency exchanges within that state to maintain a surety bond. Finally, it offers definitional and clarifying changes for how money transmitters and currency exchangers are regulated under the Uniform Money Services Act.<\/p>\n

At the time of this writing, this bill, which was introduced in January, had passed both chambers of the state\u2019s legislature, clearing it to be sent to Governor Jay Inslee for signature. While there is no clear indication as to Governor Inslee\u2019s intentions, broad support of the bill seems to suggest that it may pass. <\/p>\n

There has already been a bit of fallout, however, as some cryptocurrency-centric startups are now thinking twice about operating in the state, with several firms having pulled out in the past year, noting the increasingly challenging regulatory environment. These include digital currency exchanges Bitfinex, Bitstamp and Poloniex, the latter of which has exited Washington<\/a>. <\/p>\n

\u201cThe State of Washington also appears to have applied a relatively heavy cybersecurity component, including broad and sweeping audits of data and other systems,\u201d says Ciccolo. \u201cCybersecurity is a hot-button issue that continues to remain in the headlines. Bitcoin companies are wary of a regulatory interpretation of cybersecurity fitness, especially given the nascent stage of Bitcoin and the ongoing knowledge gap as it pertains to the crypto space. For some national players, it seemed the obvious and safe choice was to simply exit the state altogether.\u201d <\/p>\n

Illinois <\/strong><\/p>\n

In November of 2016, Secretary Bryan A. Schneider of the Illinois Department of Financial and Professional Regulation (IDFPR) announced a new initiative with implications for cryptocurrencies in that state. This \u201cDigital Currency Regulatory Guidance\u201d<\/a> is Illinois\u2019s attempt to provide regulatory clarity on digital currencies, such as Bitcoin, Dogecoin, Litecoin, Ethereum and Zcash. The proposed guidance provides IDFPR\u2019s interpretation of Illinois\u2019s Transmitters of Money Act (TOMA) related to various activities tied to digital currencies.<\/p>\n

Says Ciccolo: \u201cThe IDFPR and Secretary Schneider continue to deliver on the state\u2019s promise of encouraging and supporting innovation in FinTech, Bitcoin and blockchain [technology]. What we\u2019re doing in Illinois is quite possibly unprecedented in the area of financial regulation. Our state regulators are listening and thoughtfully engaging with industry while considering the impact of any laws and regulations. I\u2019m very optimistic about the continued growth of financial innovation in the Land of Lincoln, and Chicago as a center for the new era of financial services.\u201d<\/p>\n

Hawaii <\/strong><\/p>\n

In a highly publicized move, prominent Bitcoin and Ethereum exchange Coinbase announced that it was forced to cease supporting customers in the State of Hawaii <\/a>due to what it called \u201cimpractical\u201d and \u201cuntenable\u201d regulatory policies <\/a>surrounding Bitcoin in that state. In September of 2016, Coinbase was first notified of a policy that demanded that they and any other other cryptocurrency operators hold case reserves equivalent to the values being held for customers. <\/p>\n

This development came as Hawaii was exploring a bill that would establish a working group for examining the potential role of digital currencies and blockchain technology in advancing tourism in that state. According to the bill\u2019s text contained in House Bill 1481<\/a>: \u201cDigital currencies such as bitcoin have broad benefits for Hawaii. A large portion of Hawaii\u2019s tourism market comes from Asia where the use of bitcoin as a virtual currency is expanding.\u201d <\/p>\n

Leaders at Coinbase said<\/a> they were \u201cheartened\u201d that the bill had been introduced and that they would look forward to working with regulators. In the meantime, Ciccolo remarked: \u201cGiven its commitment to compliance and strong resources, the exit of Coinbase suggests few if any stand a chance in the Aloha State. Indeed, the case reserve requirement is overly burdensome and quite frankly utterly impractical. Since Coinbase holds a BitLicense, could it be said that Hawaii is more inhospitable to Bitcoin than New York? Let\u2019s hope not.\u201d<\/p>\n

California <\/strong><\/p>\n

California\u2019s Assembly Bill 1123, a version of New York\u2019s infamous BitLicense, has been proposed. It reads<\/a>:<\/p>\n

\u201cThis bill would enact the Virtual Currency Act. The bill would prohibit a person from engaging in any virtual currency business, as defined, in this state unless the person is licensed by the Commissioner of Business Oversight or is exempt from the licensure requirement, as provided.\u201d<\/p>\n

Says Kuskowski, CEO and co-founder of Coinfirm:<\/p>\n

\u201cIn relation to this particular proposed bill in California, any bill with strong similarities to New York\u2019s BitLicense is obviously not the direction to go in, as we saw the effects of that particular regulation result in New York\u2019s loss of prominence as a crypto hub. But with California\u2019s unique position as the technology innovation and startup capital of the world, this would have an even more catastrophic effect than the N.Y. version.\u201d<\/p>\n

Kuskowski goes on to say that the costly fees and bureaucratic administration associated with this legislation would likely hinder innovators and startups from applying or even operating in the state. Moreover, he says it would provide another segmented regulatory structure that limits the national and global growth of companies operating in the space. <\/p>\n

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If there is any place in the world where this could have the largest negative effect it would be California.<\/p>\n<\/blockquote>\n

Florida <\/strong><\/p>\n

Florida House Bill 1379<\/a> recently passed, clarifying what virtual currency is and prohibiting its use in laundering criminal proceeds<\/a>. The term \u201cvirtual currency\u201d was added to the definition of \u201cmonetary instruments\u201d under Florida\u2019s Money Laundering Act. The legislation is currently with Florida\u2019s governor and is expected to be signed soon. Ever since a Miami judge dismissed a criminal case involving Bitcoin, policymakers have been intent on establishing guidelines to curb cryptocurrency use. <\/p>\n

Says Kuskowski: \u201cIn relation to what\u2019s been going on in Florida, a lot of regulators, especially local ones, tend to be more in the crowd profiled earlier that catches headlines, and they go a bit far. But there needs to be a balanced approach from the other side as well. People need to realize that a clear regulatory environment allows companies and creators in the space to make concrete strategic decisions that they [otherwise] can\u2019t when the regulatory environment isn\u2019t clear; it just has to be done properly. Once there is a clear regulation in place, businesses have the confidence to make certain strategic decisions and further grow.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Cryptocurrency should be regulated. Cryptocurrency should not be regulated. Cryptocurrency can\u2019t be regulated. These are all common refrains emanating from the media these days. Now lawmakers across the United States and around the world are at a crossroads as to what is next in terms of this regulatory space. Bitcoin and other forms of cryptocurrency […]<\/p>\n","protected":false},"author":3515,"featured_media":23851,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[2347,1747,1127],"class_list":["post-23850","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-bitlicense","tag-cryptocurrencies","tag-regulations"],"author_data":{"id":3515,"name":"Michael Scott","nicename":"michael-scott","avatar_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/12\/michael-scott-promo-image-96x96.jpg"},"featured_image_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/11\/how-five-states-are-approaching-bitcoin-regulation.jpg","_links":{"self":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/23850","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/users\/3515"}],"replies":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/comments?post=23850"}],"version-history":[{"count":0,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/23850\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media\/23851"}],"wp:attachment":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media?parent=23850"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/categories?post=23850"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/tags?post=23850"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}