After a three year delay, the Pennsylvania Department of Banking and Securities (DoBS) has provided guidance on the applicability of the Money Transmission Business Licensing Law, otherwise known as the Money Transmitter Act (MTA) to digital money currency exchanges. Pennsylvania says cryptocurrency exchanges and service providers do not need a money transmission licence to operate.
Only Fiat Currency Is Real Money
The MTA defines money as “currency or legal tender or any other product that is generally recognized as a medium of exchange.” DoBS state in their document that “only fiat currency or currency issued by the United States government, is ‘money’ in Pennsylvania. Virtual currency, including Bitcoin, is not considered money under the MTA. To date, no jurisdiction in the United States has designated virtual currency as legal tender”.
Under the MTA, parties conducting the business of transmitting money must be licensed if they transfer fiat currency and must charge a fee for the transfer. But because cryptocurrency exchanges do not “directly handle” fiat currency and all transactions are conducted through a bank account, these are not money transmitters and do not require a license.
Companies operating virtual currency kiosks, ATMs, and vending machines have sought direction from the DoBS as to whether they would be classed as money transmitters under the MTA.
There Is No Money Transmission With Digital Currency
“Some Kiosks are one-way systems which, for a transaction fee, dispense virtual currency in exchange for fiat currency, while others are two-way systems which, for a transaction fee, exchange both fiat currency for virtual currency and virtual currency for fiat currency. 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.
Thus, the entities operating the Kiosks would not be money transmitters under the MTA”.
While Pennsylvania says cryptocurrency exchanges aren’t ‘money transmitters’, things may be different for those dealing with initial coin offerings at the federal level. On March 2018. The Financial Crimes Enforcement Network (FinCEN) said: “An exchange that sells ICO tokens, or exchanges them for other virtual currency, fiat currency, or other value that substitutes for currency, would typically be a money transmitter”.