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05.24.17

Digital Currency Roundup: Bitcoin Law Changes in Three States

The first half of May saw significant developments on the digital currency regulation front in a trio of U.S. states.

A new Vermont law allows money transmitter companies to hold digital currency as a permissible investment under state law. Signed by Governor Phil Scott on May 4, the bill amends the state’s money transmitter law to clearly count bitcoin and other digital currencies as permissible investments, which many states require money transmitters to hold on their books to protect customers’ funds. The law defines eligible digital currency as “stored value that can be a medium of exchange, a unit of account or a store of value; has an equivalent value in money or acts as a substitute for money; may be centralized or decentralized; and can be exchanged for money or other convertible [digital] currency.”

Meanwhile, Washington Governor Jay Inslee on April 17 signed a similar measure, formally adding digital currency to that state’s money transmitter law. The legislation—introduced at the request of the Washington Department of Financial Institutions—amends the definition of permissible investments for money transmitters to include digital currency. The law also requires that applicants for a money transmitter license with business models that store digital currency on behalf of others must provide a third-party security audit of all electronic information and data systems.

Finally, criminals who use bitcoin could be convicted of money laundering under a Florida bill passed by the state’s House and Senate on May 5. Lawmakers approved the measure after a Miami judge last year threw out a case against a man accused of selling $1,500 worth of bitcoins to undercover law enforcement agents who told him the currency would be used to purchase stolen credit card numbers online. That decision was considered a major win for proponents of bitcoin and other digital currency, who’d argued that such currency shouldn’t be considered money—and thus should be free of many of the legal restrictions placed on traditional currency.

But the measure just passed by the Florida legislature—if signed into law by Governor Rick Scott—would add digital currency to the list of “monetary instruments” covered under Florida’s Money Laundering Act. Opponents of the bill have argued that it would have a chilling effect on the use of digital currency and could lead to a slippery slope, with more forms of stored value coming under the umbrella of the state’s money laundering laws.

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