Pennsylvania’s Department of Banking and Securities (DoBS) recently clarified that the crypto exchanges and service providers will not require any money transmission license to operate in their state.
The DoBS published new guidance for their local crypto industry which was followed due to a number of inquiries from the businesses.
The department explained that bitcoin and other cryptocurrencies are not “real money,” and hence, the Money Transmission Business Licensing Law or the Money Transmitter Act of Pennsylvania can’t be applied on such crypto trading platforms.
The act says that only fiat currency or the U.S. government-issued currency could be considered money. The department added- “To date, no jurisdiction in the United States has designated any kind of virtual currency as legal tender,”
The guidance act stated that the parties who conduct these businesses of transmitting money will have to be licensed if they transfer fiat currency and will have to charge a fee for such transfers. But crypto exchanges “never directly handle” fiat currency and the transactions are usually conducted through a bank account, which “are not money transmitters” and these will require the license.
Other businesses in the sector, which include cryptocurrency kiosk, ATM and vending machine providers have also not been money transmitters.
The DoBS said: “In both the one-way and two-way Kiosk systems, there would be no transfer of money to any third party apps or users. The user of the Kiosk will just exchange his fiat currency for the virtual currency and vice versa, and no involvement of money transmission would be witnessed.”
Pennsylvania’s clarification on the license arrived after a three-year delay. In January 2016, the government had been seeking to update their state’s definition of money in order to cover for cryptocurrency businesses, but this initiative had been stalled at that time because of a budget impasse.
The scenario might be different for firms which have been dealing with initial coin offering (ICO) tokens at the federal level. In the month of March, in 2018, the Financial Crimes Enforcement Network (FinCEN) said- “An exchange which sells ICO coins or tokens, or exchanges them for other virtual currencies, such as fiat currency, or other value which can be substituted for currency, will typically also be considered as a money transmitter.”