DFPI: Virtual Currency Platform Is Not Money Transmitter – Technology & More News Here – Upjobsnews

On March 23, the California Department of Financial Protection
and Innovation (DFPI) responded to a request for an
interpretative legal opinion as to whether the virtual currency
services offered by a company require it to obtain a license under
the California Money Transmission Act (MTA).

The company’s software platform allows US customers to
access the platform and buy and sell digital assets, including
cryptocurrency, and access related services, within the platform.
Each customer must fund an account prior to buying cryptocurrency
on the platform with either fiat currency (US dollars) or
cryptocurrency. The company offers three services that they asked
the DFPI to examine. First, a customer may purchase cryptocurrency
on the platform by sending fiat currency to the customer’s
account on the platform. Second, a customer may sell cryptocurrency
on the platform by transferring crypto onto its account. Third, a
customer can buy crypto on the platform with another crypto in
their wallet. After execution of a purchase, sale, or exchange
transaction, a customer may choose to withdraw all, part, or none
of their fiat or cryptocurrency from the platform account.

The DFPI found that the company’s activities do not require
licensure for several reasons, including the following:

• The company’s activities do not facilitate the exchange of
  the fiat currency or cryptocurrency with a third party and do not
  meet the definition of money transmission because it does not
  involve the sale or issuance of a payment instrument, the sale or
  issuance of stored value, or receiving money for transmission.




• The exchange of one cryptocurrency for another directly between
  two parties does not meet the definition of money
  transmission.




• The transactions are “closed-loop” – meaning
  that customers can only redeem the monetary value stored in their
  accounts for digital currency sold on the company’s platform
  – which are excluded from the definition of money
  transmission under the MTA.




• Finally, the DFPI stated that it “has not concluded
  whether a wallet storing cryptocurrency constitutes a form of
  monetary value representing a claim against the issuer and accepted
  for use as a means of redemption for money or monetary value or
  payment for goods or services.” Therefore, the DFPI will not
  require license the company to provide customers with an account to
  transfer and store cryptocurrency in order to exchange it directly
  with company

Putting It Into Practice: While the DFPI is not
requiring an MTL license in this scenario, this decision is based
entirely on the facts presented to the DFPI. It may be the case in
the future that a virtual currency business with similar but not
identical facts may need to register pursuant to California’s
MTA law.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.