Magazine article American Banker

Bitcoin Group to California: You Have No Jurisdiction over Us

Magazine article American Banker

Bitcoin Group to California: You Have No Jurisdiction over Us

Article excerpt

Byline: Marc Hochstein

A group that promotes the digital currency Bitcoin has thrown down the gauntlet with regulators, telling California officials that selling the digital currency does not require a state money transmitter license.

In a July 1 letter to the California Department of Financial Institutions, lawyers for the Bitcoin Foundation also clarified that the nonprofit does not itself sell bitcoins to consumers or run an exchange. But even if it did, such activity would not be regulated in California, the foundation says, arguing that selling bitcoins does not meet the state law's definition of "money transmission."

The response to California's June 25 "cease and desist" letter thus makes a case for the state to lay off not only the foundation but also its member companies that exchange bitcoins for dollars and other currencies. It comes as federal and state regulators have been cracking down on such businesses, saying they must follow anti-money laundering and know-your-customer regulations, including registration and licensing requirements.

Last month the department accused the Bitcoin Foundation of defying the California Money Transmission Act but did not say how the nonprofit had done so. Many observers surmised that the regulator either sent the warning by mistake as part of a mass mailing to Bitcoin businesses, or that it was trying to pressure the foundation for information on actual transmitters. The regulator did not immediately respond to a request for comment Tuesday. …

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