In Pennsylvania, crypto exchanges do not require money transmission license

The U.S. state of Pennsylvania has confirmed that cryptocurrency exchanges are not money transmitters, and therefore do not require a money …

The U.S. state of Pennsylvania has confirmed that cryptocurrency exchanges are not money transmitters, and therefore do not require a money transmission license to do business in the state.

The state Department of Banking and Securities (DoBS) said it had issued clarifications following a spate of enquiries from crypto businesses in the state. Confirming cryptocurrencies were not ‘money,’ those companies involved in crypto exchange were exempt from the provisions of the Money Transmitter Act and the Money Transmission Business Licensing Law.

As a result, the department stated, crypto exchanges do not need to be licensed in the same way as money transmission businesses.

The act restricts the definition of money to apply only to U.S. government issued fiat currency, and thus far “no jurisdiction in the United States has designated virtual currency as legal tender.”

Businesses transmitting money between parties are obliged by law to charge a fee for the service, and require a license from the DoBS. However, because crypto exchanges are not transferring fiat, and transactions are conducted indirectly between bank accounts, the guidance says they fall outside the scope of the legislation.

According to the clarified guidance, the same rules apply to other crypto businesses, such as ATMs, vending machines and kiosks.

The department noted, “In both the one-way and two-way Kiosk systems, there is no transfer of money to any third party. The user of the Kiosk merely exchanges fiat currency for virtual currency and vice versa, and there is no money transmission.”

The clarification comes three years after the Pennsylvania government said it was looking to update the definition of money to include cryptocurrencies, in an ultimately ill-fated attempt to revise the law which fell with the unsuccessful government budget of the day.

At a federal level, however, firms engaging in ICOs would likely still fall within the scope of the money transmission regulations.

Back in March last year, the position for ICOs and token sales was confirmed by the Financial Crimes Enforcement Network.

“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,” it stated.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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Pennsylvania Says Crypto Exchanges Don’t Need A Money Transmitter License

The jury is in: Cryptocurrency exchanges don’t need a money transmitter license because virtual currency doesn’t count as “money” under …
Rebekah DevineJanuary 23, 2019 11:34 PM
January 23, 2019 11:34 PM
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The jury is in: Cryptocurrency exchanges don’t need a money transmitter license because virtual currency doesn’t count as “money” under Pennsylvania’s Money Transmitter Act.

In the wake of a slew of inquiries about virtual currency exchanges, the Pennsylvania Department of Banking and Securities (DoBS) published some advice on how to apply the Money Transmission Business Licensing Law, also known as the Money Transmitter Act (MTA), to virtual currency exchanges.

The DoBS first clarifies that “money,” as defined under the MTA, does not include virtual currency: “[O]nly fiat currency, or currency issued by the United States government, is ‘money’ in Pennsylvania.”

Next, the advice clarifies that Pennsylvania does not consider virtual currency trading platforms to be money transmitters because these platforms do not directly handle fiat currency. Instead, “fiat currency paid by or to a user is maintained in a bank account in the platform’s name.” Similarly, virtual currency kiosks, ATMs, and vending machines don’t count as money transmitters because there is no transfer of fiat to a third-party.

The DoBS guidelines also highlight that both “one-way” system kiosks and “two-way” system kiosks are included in this definition. One-way systems dispense virtual currency in exchange for fiat; two-way systems exchange fiat for virtual currency and vice versa. Even though these kiosks charge transaction fees, they don’t count as money transmitters because there is no transfer of money to a third party.

The need for a third-party’s involvement for an act to fit the definition of “money transmission” is one of the more interesting aspects of the DoBS’ advice. The DoBS guidelines say that the “business of transmitting” is not defined in the MTA, and so it relies on the “plain meaning” of the word “transmit.” Taking its cue from the definition in Black’s Law Dictionary, the DoBS says to “transmit” is to “send or transfer from one person or place to another.” The DoBS concludes:

“Thus, in order to ‘transmit’ money under the MTA, fiat currency must be transferred with or on behalf of an individual to a 3rd party, and the money transmitter must charge a fee for the transmission.”

By DoBS’ interpretation of the MTA, crypto exchanges are not money transmitters both because cryptocurrency is not considered “money” and because any fiat currency involved is not being transmitted via a third party.

Just semantics? Sure. But it’s also what’s letting Pennsylvania crypto exchanges breathe a little easier.

Rebekah Devine

Rebekah is a copy editor for ETHNews. She holds an M.Litt from the University of St Andrews. She likes to read and think about the development of writing and currency in ancient Mesopotamia.

ETHNews is committed to its Editorial Policy

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Azran Financial APC San Francisco Offers Expertise In Cryptocurrency Taxation

From there, it can be gleaned that the federal government considers virtual currency as property and therefore, those who don’t correctly report their …

Azran Financial APC San Francisco, an accounting and advisory firm based in San Francisco, CA, is offering the expertise of its CPAs with regards to cryptocurrency taxation. With cryptocurrency being fairly new, there are only a few experts when it comes to cryptocurrency taxation. Cryptocurrencies are not taxed immediately at the time of acquisition or transaction. What this means is that the IRS expects the investors to report and pay taxes at a later date. With the dramatic increase in the value of the Bitcoin in 2017, the IRS has now taken interest in the tax revenue that can be gained from cryptocurrency. Azran Financial APC has CPAs who have the expertise in the tax laws governing cryptocurrency.

Joshua V. Azran, CPA/ABV/CFF, CMA, CGMA, CFE, the founder of Azran Financial APC San Francisco, says, “We’re happy to announce that we can offer assistance to people who are engaged with cryptocurrency investments, particularly with regards to taxation. We are especially proud to have some of the most highly credentialed and experienced professionals as part of our team. By combining the knowledge, experience, and dedication of our staff, each client receives close personal and professional attention.”

In 2018, the IRS had issued a press release with regards to Bitcoin tax and other cryptocurrency taxes. From there, it can be gleaned that the federal government considers virtual currency as property and therefore, those who don’t correctly report their virtual currency transactions can be held liable for interest and penalties. This means that those who engage in this kind of investments may want to find a crypto CPA in San Francisco to help them straighten out their tax payments.

That Joshua V. Azran and his team of CPAs are experts in cryptocurrency taxation can be gleaned from the positive reviews they have received. For instance, Vinay P., an active cryptocurrency investor, says, “Josh has been a godsend for me. I was really struggling to find a competent CPA in the Crypto space that knew all the rules and regulations. I was calling CPAs across the entire country and all of them were pretty much clueless. I found Josh’s info on a tip from a crypto info site and gave him a call expecting the same runaround and cluelessness from every other accountant. Much to my surprise, he knew everything that was necessary to help me move forward and protect myself in regards to my capital gains and how to manage my assets. Every time we speak he is constantly up to date with all the new rules and regulations that I have questions on and it’s a great help. I don’t see myself using anyone else in the future thanks to Josh. Found my CPA for the next 30+ years. Thanks again to Josh and everyone at Azran for being there for me every step of the way!”

Some of the activities that may need to be reported to the IRS, according to Azran Financial, include: when people bought Bitcoin or other cryptocurrencies; when people paid for a service with cryptocurrency; when people were paid in cryptocurrency; when people received a gift of cryptocurrency; and when people have made a donation of cryptocurrency.

Joshua Azran also wants to point out that when Bitcoin is transferred as payment for goods and services, it will have to be subjected to Bitcoin income tax. When an employer pays an employee with e-currency, the employee must report those earnings in the W-2 forms. Also, the value of the cryptocurrency is to be reported as the equivalent US dollar amount at the time of the transfer. Cryptocurrency earnings may also be subject to wage withholdings.

It is also important to know that e-currency is regarded as a capital asset and should, therefore, be taxed as property. In addition, cryptocurrency is also considered by the government as an investment.

Those who need more information about crypto tax enforcement or want to book an appointment with Azran Financial can visit the company website or call them by phone.

###

For more information about Azran Financial APC San Francisco, contact the company here:

Azran Financial APC San Francisco

Joshua V. Azran

(415) 653-0080

info@azranfinancial.com

2 Embarcadero Center 8th Floor, San Francisco, CA 94111

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A US state exempts virtual currency exchanges from the money transmission laws

A U.S state has quoted its own laws to make it clear that virtual currency exchanges are not bound by the money laws governing other businesses …

A U.S state has quoted its own laws to make it clear that virtual currency exchanges are not bound by the money laws governing other businesses offering money transfer services involving fiat.

The State of Pennsylvania published a document with details on why virtual currency exchanges are not guided by the Money Transmitter Act.

According to the document,virtual currency exchanges:

Never directly handle fiat currency; any fiat currency paid by or to a user is maintained in a bank account in the Platforms’ [virtual currency exchanges] name at a depository institution.

Although the Money TransmitterAct and the state’s Department of Banking and Securities (DoBS) requires alicense when “transmitting money by means of a transmittal instrument”, thedocument clarified that:

Under the MTA, these platforms [virtual currency exchanges] are not money transmitters. The platforms, while never directly handling fiat currency, transact virtual currency settlements for users and facilitate the change in ownership of virtual currencies for the users. There is no transferring money from a user to another user or 3rd party.

More than virtual currency exchanges,the document continued to note that other cryptocurrency-focused businesseslike operating a crypto ATM or a crypto kiosk are also not required to seek amoney transmitting license for the same reason that they do not directly handlefiat.

Under Pennsylvania’s MTA,money is defined as legal tender, lawful money of the U.S, or a medium ofexchange. Seeing that the state has not defined crypto in any of thesebrackets, then offering crypto-related services donot attract adherence to the MTA.

The document did not make anyreference to initial coin offerings (ICOs)

Do you think virtual currency exchanges across the United States should be exempted from money transmission laws since no state has recognized crypto as legal tender?

Let us know your thoughts inthe comments section below.

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Banking Department in Pennsylvania Declares Cryptocurrency Businesses Don’t Need a Money …

The DoBS also stated that operators of virtual currency kiosks, automated … Virtual currency businesses in the state of New York have to apply for a …
Money Transmitter License Not Required for Crypto Businesses in Pennsylvania
Economy & Regulation
9 hours ago

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By

Jamie Redman

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On Wednesday, Jan. 23, the Pennsylvania Department of Banking and Securities (DoBS) published guidance for virtual currency businesses operating in the state. The state’s financial agency has decided a money transmission license for cryptocurrency operations is not required.

Also Read: Former Mt Gox CEO Reflects on Incarceration in Japan While Facing More Prison Time

Banking Department in Pennsylvania Declares Cryptocurrency Businesses Don’t Need a Money Transmitter License

Banking officials from the state of Pennsylvania have revealed that cryptocurrency business operators are not required to apply for a money transmission license. The DoBS has issued a statement concerning the state’s Money Transmitter Act (MTA) and guidance for virtual currency businesses explaining that bitcoin and other digital assets are not considered legal tender in the U.S. In fact, the Pennsylvania guidelines emphasize that thus far, there is no state in the country that has “designated virtual currency as legal tender.” Furthermore, the DoBS explains that it has received “multiple inquiries from entities” who were looking for further guidance toward money transmission laws and setting up a cryptocurrency operation.

“The DoBS will not be responding to these requests for guidance on a case-by-case basis, the DoBS is providing the following guidance on the applicability of the Money Transmission Business Licensing Law,” reads the banking department’s announcement.

Money Transmitter License Not Required for Crypto Businesses in Pennsylvania

Cryptocurrency Kiosks, ATMs, and Vending Machines Don’t Need a License

If the platform does not directly deal with handling fiat currency then a money transmission license is not needed. When a business operating in Pennsylvania solely transacts in virtual currency settlements then ultimately the platform is not engaged in the business of providing payment services or money transfer services. The DoBS also stated that operators of virtual currency kiosks, automated teller machines (ATMs), and vending machines have all attempted to contact the agency.

“In both the one-way and two-way Kiosk systems, there is no transfer of money to any third party — The user of the Kiosk merely exchanges fiat currency for virtual currency and vice versa, and there is no money transmission,” the DoBS MTA guidelines explain.

Thus, the entities operating the Kiosks would not be money transmitters under the MTA.

Regulatory Inconsistencies Across Several States and the Federal Government

Over the course of the past few years, U.S. officials have had a hard time reaching consensus when it comes to classifying bitcoin and other digital currencies. For instance, on Sept. 19, 2016, Federal Judge Alison Nathan from Manhattan ruled that “bitcoin is money.” Nathan detailed during the legal proceedings against Coin.mx exchange operator Anthony Murgio that “Bitcoins are funds within the plain meaning of that term — They, therefore, function as pecuniary resources and are used as a medium of exchange and a means of payment.” Virtual currency businesses in the state of New York have to apply for a money transmission license (Bitlicense) that is issued by the state’s financial regulators.

Money Transmitter License Not Required for Crypto Businesses in Pennsylvania
Pennsylvania’s Department of Banking and Securities (DoBS) guidelines section 1.

However, Miami-Dade’s Circuit Judge Teresa Mary Pooler tossed out anti-money-laundering charges against website designer Michell Espinoza and declared that “bitcoin was not money.” “It is very clear, even to someone with limited knowledge in the area, that Bitcoin has a long way to go before it [becomes] the equivalent of money,” Judge Pooler declared. Although the state of Florida’s prosecution agency filed an appeal against the decision to dismiss charges, the case took went on for years after Pooler’s verdict and the charges were eventually dropped.

So far the state of Pennsylvania seems to be in the same regulatory boat as Florida once was in 2016 but the sunshine state has since changed the regulatory guidelines since Judge Pooler’s decision. Back in May of 2017, House Bill 1379 passed in Florida, defining virtual currencies as a money transmission instrument and prohibiting money laundering by using virtual currency as a vehicle. Pennsylvania’s new rules may also run into issues with the federal government’s laws and how the Financial Crimes Enforcement Network (FinCEN) classifies virtual currency operations as money transmitters. The DoBS money transmission laws in regard to cryptocurrency businesses have been discussed by Pennsylvania since 2016.

What do you think about Pennsylvania’s Department of Banking and Securities ruling on virtual currencies and the state’s money transmission laws? Let us know what you think about this subject in the comments section below.


Images via Shutterstock, and the DoBS of Pennsylvania.


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