To understand the regulatory requirements for cryptocurrency, one must first ask the question what is money. This question is of paramount importance because the federal law definition of “money transmitting” depends in large part on state law definitions and regulator interpretations, and there is no uniform legislation that defines cryptocurrency as money for the purposes of state licensing requirements. Moreover, financial companies regulated by the SEC or the CFTC are generally exempt from money transmitter registration.
If federal courts were to determine that cryptocurrency is a security (not money), there could be much change in the way cryptocurrencies are regulated across the states. We are keeping a close eye on developments here, and look forward to seeing how this all turns out.
Our Ballard Spahr colleagues have published a legal alert that discusses two recent decisions that reached different results on the question of whether cryptocurrency is a security. The decisions show the continuing lack of clarity in the law regarding this question and the need for financial companies involved in crypto-related activity to engage experienced legal counsel to help mitigate litigation and compliance risks. To read the alert, click here.