On January 30, 2019, a Florida appellate court reversed the trial court’s dismissal of State v. Espinoza, instead holding that a Bitcoin business was both a money transmitter and a payment instrument seller, subject to Florida’s statutes governing money services businesses. The decision contrasts with recent guidance in Texas and Pennsylvania regarding cryptocurrencies, where virtual currencies in those states were not deemed money under applicable state statutes and businesses that conduct transactions exchanging virtual and sovereign currencies do not generally require a currency exchange license.
Not only do operators of virtual currency businesses face a growing body of overlapping federal regulations, but they must also contend with a patchwork of state laws as well. Compliance with state money transmitter laws, which typically provide for licensure and supervision of various non-bank financial services companies that handle cash on behalf of consumers, has become a hot-button issue for members of the crypto community. A few states, such as New York with its BitLicense regime, have developed very specific regulations for cryptocurrency businesses. Other states are silent on the issue and have not issued any specific regulations or interpretive guidance, leaving the industry to speculate as to the proper interpretation of the law in those states. Texas falls into a third category of states that have issued interpretive guidance (but not formal regulations) to apply their existing money transmitter statutes to operators of virtual currencies. Recent guidance from the Texas Department of Banking provides a thoughtful discussion of the virtual currency industry and interprets the Texas Money Services Act (the “Act”) for operators of virtual currency businesses doing business in the state.
On July 11, 2018, in an emergency cease and desist order, the Texas securities commissioner took action against several individuals and affiliated companies based in Utah to halt the offering of unregistered cryptocurrency mining investments to Texas residents. The order alleges numerous violations of the registration and antifraud provisions of the Texas Securities Act. Continue Reading Texas Shuts Down Offering of Interests in Cryptocurrency Mining Businesses