by Joseph Young
The North Carolina Commissioner of Banks has confirmed the applicability of the current Money Transmitters Act to digital currency-related businesses in the state, exempting selected Bitcoin and blockchain related businesses from regulation.
“North Carolina has taken a leadership role in state-level virtual currency debates and is setting an example to other states to take a more thoughtful and deliberate approach to regulating this nascent industry,” said Perianne Boring, President of the Chamber of Digital Commerce.
The FAQ page supplied by the Commissioner of Banks states that operations including digital currency miners, blockchain 2.0 entities such as smart contracts platforms, colored coins and smart property, multi-signature technology and non-hosted wallets are excluded from the scope of the Money Transmitters Act.
Bitcoin and blockchain companies may continue the abovementioned operations without being restricted by regulatory policies and financial laws which are heavily imposed by other states including New York.
“These FAQs are quite remarkable as they define specific activities as falling outside the scope of the regulation, which very well may serve as a template for other state interpretations,” said BuckleySandler LLP counsel Amy Kim.
Through the development of a startup-friendly digital currency-focused regulatory system, North Carolina has the potential to become a hub of virtual currencies in the future, housing leaders in the blockchain technology and bitcoin.
This also means that Bitcoin startups and miners are not required to submit their transaction and consumer data to enforcement agencies. Furthermore, Bitcoin startups would not need to restrict their daily volume or the amount of bitcoin they hold or trade.
For example, on May 5, 2015, the Internal Revenue Service, Criminal Investigation (IRSCI) and FinCEN opened a criminal investigation against Ripple Labs, stating that the company failed to report to the FinCEN about operating a blockchain-based asset settlement platform and offering altcoins to its clients.
North Carolina’s Money Transmitters Act would overrule such complaints and threats, since “blockchain 2.0 entities” are out of the scope of the state’s regulations.
“As virtual currency continues to evolve as an industry, it’s great to see North Carolina’s willingness to work with industry stakeholders to ensure that innovative companies can operate in the state. Our hope is that other states will follow North Carolina’s lead in being collaborative and thoughtful in their approach to overseeing this industry,” said Gide LLC Principal, Arika Pierce.
The Chamber of Digital Commerce has been deeply involved with the process of submitting the bill to the North Carolina legislature for review. At the request of the Commissioner of Banks, the Chamber of Digital Commerce has proposed that the legislature include virtual currency businesses in the state’s existing Money Transmitter Act.
“As background, the North Carolina legislature is considering a bill, at the request of the Commissioner of Banks, that would update the state’s existing Money Transmitter Act to expressly include virtual currency businesses. The Chamber has been actively involved in this process, expressing concern over the proposed legislation’s broad language that could potentially be interpreted to capture certain virtual currency business models that are clearly not engaged in money transmission and should not be regulated as such,” the North Carolina Commissioner of Banks said.