The Pennsylvania Department of Banking and Securities (DoBS) clarified that the virtual currency exchanges do not fall under the ambit of the Money Transmission Act (MTA). This clarification came amid the rising enquiries from the crypto entrepreneurs concerning the regulatory provisions. This effectively means that the businesses and individuals do not need to apply for an MTA licence before starting their transactions through any cryptocurrency exchange in Pennsylvania.
The DoBS observed that only a legal tender, which is issued by the Central bank of any country with due approval from the government of that country as a medium of exchange for goods and services, is considered as money. According to the Money Transmission Act, money is defined as “currency or legal tender or any other product that is generally recognized as a medium of exchange”. Since the cryptocurrencies have not yet been designated as a legal tender in the United States, they cannot be considered as money under the MTA.
In addition to this, the DoBS also clarified that the transmission of money under the MTA necessarily involves the transfer of legal tender to a third party “with or on behalf of an individual”, after charging the transmitter fees. The crypto exchanges do not handle the legal currency directly rather, the legal tender is maintained in a bank account in the crypto exchanges. Thus, the crypto exchanges merely act as a mediator between two parties and only oversee the conversion of ownership of digital assets. Hence, they do not require a licence under the MTA to conduct their operations. On a similar assumption, the department has also exempted cryptocurrency kiosks, ATMs and vending machines from the list of money transmitters.
The inclusion of cryptos under the MTA has been a matter of debate, all over the United States, for quite some time now. The authorities were least bothered about the crypto industry and its potential until late 2014. However, ever since Bitcoin gained massive popularity all over the globe since late 2014, the authorities have been hastily making new provisions in the existing laws to regulate the cryptocurrency industry. This is where major problems have begun to spring up. The authorities are trying to apply the statutes of the 1970s, which were never meant to address anything more complex than a wire transfer, to the decentralized platform of the blockchain.
This has crippled the progress of the blockchain based payment system in the entire US. The system has the potential to drastically improve the efficiency of the existing business set-up and benefit the end consumers. The cryptocurrency allows an individual or business to invest in prospective start-ups that have the potential to revolutionize the world with their innovative products. This allows the start-ups to unleash their full potential and develop new products and services which is bound to reap rich dividends for everyone in the future.
The status of cryptocurrencies is quite uncertain in the United States as there are many discrepancies between the state and the federal laws.
In March 2018, the Financial Crimes Enforcement Network (FinCEN), which comes under the federal level, mentioned that –
“An exchange that sells ICO coins or tokens, or exchanges them for other virtual currency, fiat currency, or other value that substitutes for currency, would typically also be a money transmitter”.
Hence, firms dealing with ICO tokens at the federal level have to obtain a licence under the MTA whereas those operating at the state level in Pennsylvania need not do so.