Banking Law

State accuses Bitcoin Foundation of being a money transferrer; group says it isn't


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California’s Department of Financial Institutions issued a cease-and-desist order (PDF) last month to the Bitcoin Foundation, a nonprofit that advocates for the virtual currency Bitcoin, warning the group against “conducting the business of money transmission” in the state. The letter threatens fines of $1,000 per day for noncompliance.

The DFI, which regulates the state’s banks, credit unions and other financial organizations, did not accuse the Bitcoin Foundation of violating laws but thinks it “may be engaged” in the transmission of currency without a license, PCWorld reported. The Financial Crimes Enforcement Network said in March companies that allow people to buy and sell virtual currencies are required to register with the U.S. Treasury or California’s Commissioner of Financial Institutions.

Jon Matonis, a member of the Bitcoin Foundation’s board of directors, denied the foundation was transmitting currency in a post at Forbes over the weekend.

“One activity that the foundation does not engage in is the owning, controlling or conducting of money transmission business,” Matonis wrote. “Furthermore, that activity would also be against the original charter of the foundation.”

Bitcoin Foundation general counsel Patrick Murck told Wired that the foundation does accept payments of dues in bitcoins and sometimes converts bitcoins to cash to pay bills. But “if any of that qualifies as money transmission then there are going to be a lot of foundations and nonprofits that are in trouble,” Murck said.

See also:

ABA Journal: “Some basic rules for using ‘bitcoin’ as virtual money”

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