Last month, we explored the area of law surrounding blockchain technology. Last week, we focused on a narrower realm of blockchain technology – i.e., virtual currencies. Today, we delve further into digital currencies that are adding so much value to the modern economy. Because the technology is so innovative and new, its legal landscape remains hazy and nuanced. Today, we explore the legal interplay between virtual currencies and money-transmittal licensure.
At this time, state, federal, and international laws require that individuals and companies obtain licenses to engage in activity that involves the acceptance of funds coupled with the agreement to transfer or pay them to another party. In some circumstances, the law even requires special registration. The only exception to this typically is when the recipient of the funds uses them to pay directly for goods and services offered by someone else. This has a close bearing on virtual currencies because they are often considered to be funds themselves. Depending on the exchange, such currencies may be considered merely placeholders for an asset, rather than assets or funds themselves. This means, however, for exchanges in which virtual currencies are considered funds, licensure laws apply.
Although, the word “funds” is used often in this regulatory sphere, it might not be in the traditional sense. As it is applied in licensure law, funds do not require real cash or money to be involved. Really, most any type of monetary value is covered within the language of these laws. This includes, but is not limited to, electronic value.