In late February 2015, a California Assembly member introduced a bill (AB 1326) proposing a licensing framework under which virtual currency companies would be required to operate.
What Is It?
If passed in its current form, the bill would require that certain virtual currency companies doing business in California obtain a license from the Commissioner of Business Oversight.
Who Will It Affect?
The bill would apply to those who are “in the business of virtual currency” in California. “Virtual currency” is defined as “any type of digital unit that is used as a medium of exchange or a form of digitally stored value or that is incorporated into payment system technology.”
Certain entities and individuals would be exempt from the licensing requirement. These include:
- Federal, state and local governmental departments, agencies, etc.
- Banks that comply with certain federal regulations
- Entities licensed under the Money Transmission Act
- Merchants or consumers using virtual currency solely for the purchase of goods and services
This last exemption is important to note. It exempts retailers’ use of virtual currency as a payment option, something many retailers are experimenting with today.
What Are the Licensing Requirements?
Those companies subject to the licensing requirements would be subject to a number of requirements:
- Payment of a nonrefundable fee of $5,000
- Provide certain information in an application, including audited financial statements for the most recent year
- Maintain a minimum level of capital, equal to the value of the virtual currency on deposit, for consumer and operational protection
What Is the Future?
At this point, the bill is not ready to be heard by the California Assembly. A spokesman estimated that it will not be heard until April 2015 and that the bill will likely be updated in the coming months.