By Heather Morton
Since its creation in 2009, the number of Bitcoins—a payment system invented for use in digital transactions—in circulation has risen to 14.6 million, according to CoinDesk, which also reported that almost 60 percent of Bitcoin users are under 35 years old.
Digital and virtual currencies include Amazon Coins, Bitcoin, Dogecoin, Starbuck Stars and Peercoin. Also known as crypto-currencies, digital and virtual currencies are digital representations of value.
Four states in 2015 enacted legislation regarding digital and virtual currencies. These laws come on the heels of California A.B. 129 that in 2014 repealed a statutory prohibition on the issuance or placement into circulation as money, anything other than the lawful money of the U.S.
Connecticut H.B. 6800 requires an applicant for a money transmitter license to indicate whether the business will transmit virtual currency and allows the banking commissioner to deny such a license if the proposed business model poses an undue risk of financial loss to consumers. It also allows the commissioner to place additional requirements on such a license, including requiring different surety bond amounts than for other money transmitters.
New Hampshire H.B. 666 includes a definition of convertible virtual currency in the state’s money transmission law. The enactment defines “convertible virtual currency” to mean a digital representation of value that:
- Can be a medium of exchange, a unit of account, and/or a store of value.
- Has an equivalent value in real currency or acts as a substitute for real currency.
- May be centralized or decentralized.
- Can be exchanged for currency or other convertible virtual currency.
Oregon S.B. 277 authorizes the director of the Department of Consumer and Business Services to license or register, or to renew licenses or registrations for, check-cashing businesses under agreement with the Nationwide Multistate Licensing System. The bill defines that money means a medium of exchange that
- The U.S. or a foreign government authorizes or adopts, or
- Represents value that substitutes for currency but that does not benefit from government regulation requiring acceptance of the medium of exchange as legal tender.
Tennessee S.B. 674 allows a candidate and political campaign committee to accept digital currency as a contribution. It requires an increase in the value of the digital currency to be reported as interest on statements filed with the registry of election finance and requires a candidate to sell the digital currency and deposit proceeds before spending the funds.
In June, the New York Department of Financial Services issued final regulations creating a BitLicense for digital currency firms. And, in September, the Conference of State Bank Supervisors issued a Model Regulatory Framework for State Regulation of Certain Virtual Currency Activities to assist states in licensing and supervising virtual currency activities.
Heather Morton is a program principal in Fiscal Affairs. She covers financial services issues for NCSL.