California has dusted off its notion of a “Virtual Currency Act”. The current Money Transmission Act prohibits individuals from engaging in business o
California has dusted off its notion of a “Virtual Currency Act”. The current Money Transmission Act prohibits individuals from engaging in business of traditional money transmission in California. This means that advertising, soliciting, or holding itself out as providing money transmission without a license is not allowed in the state. According to assembly member Dababneh, similar rules should apply to those who wish to transmit virtual currency like Bitcoin.
It would be necessary to apply for a license (and pay an application fee). Also, applicants would need to provide personal information, prior virtual currency services offered, a sample form of receipt for business and specified financial statements. For this reason, the legislation has been compared to New York`s BitLicense.
“This bill would require each licensee to maintain at all times such capital as the commissioner determines, subject to specified factors, is sufficient to ensure the safety and soundness of the licensee, its ongoing operations, and maintain consumer protection”, as the legislation for AB1123 stated.
“The bill would require each licensee to maintain a bond or trust account in United States dollars for the benefit of its consumers in the form and amount as specified by the commissioner”, as it added.
The bill authorizes the state to examine any business and branch office to check, if the company is being run in a lawful manner. Licenses will be required to file annual audits and quarterly financial statements, as the publication explained. The license fee is reported to be $500.
“The commissioner may at any time and from time-to-time examine the business and any branch office, within or outside this state, of any licensee in order to ascertain whether that business is being conducted in a lawful manner and whether all virtual currency held or exchanged is properly accounted for.”, as the document pointed out.
Internet freedom groups like EFF find the bill problematic. The wrote in statements:
“The bill will discourage innovation in a burgeoning industry, and its broad terms, including the definition of ‘digital currency business,’ reach much farther than the bill’s drafters could possibly have intended, regulating not only digital currency users but also businesses that are far removed from digital currency transactions and have absolutely no control or influence over such transactions.”
The organizations elaborated that the bill doesn`t have clear understanding of digital currencies and therefore defines them in vague terms.