Purchase of Cryptocurrency

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August 1, 2019

Re:       ____________________

 

Dear _______________:

Thank you for your emails dated June 4, 2019, June 27, and July 16 to the Department of Business Oversight.  Your emails request confirmation that _______________, dba __________ (“__________”) is not currently required to obtain a license under the California Money Transmission Act in connection with its business activities.

You explained that __________ operates ATMs that facilitate cash transactions in exchange for cryptocurrency. Your correspondence states that when a customer wishes to purchase cryptocurrency, the customer inserts cash and immediately receives cryptocurrency that __________ owns. The cryptocurrency is transferred from __________’s own wallet to the customer’s wallet, which is not issued by __________.

If a customer wishes to sell cryptocurrency, the customer sends the cryptocurrency from their own wallet to __________’s wallet. Once the cryptocurrency is successfully received, __________ immediately dispenses cash from the ATM to the customer.

You have stated that these transactions are directly between __________ and the customer and there are no third parties or exchange wallets involved in the transactions. You also verified that customers cannot use one type of cryptocurrency to purchase another type of cryptocurrency. Your correspondence also states that __________ does not promise to make the cryptocurrency available at a later date and does not hold customer accounts.

Financial Code section 2003, subdivision (q) defines “money transmission” as selling or issuing payment instruments; selling or issuing stored value; or receiving money for transmission. Here, __________ is not performing any of these activities. Instead, it is directly selling cryptocurrency that it solely owns to customers in exchange for cash, or purchasing cryptocurrency from a customer in exchange for __________’s cash. As such, __________’s activities do not constitute activity subject to the Money Transmission Act.

This opinion is based solely on the facts presented in your correspondence. Any changes in the facts or circumstances, as we understand them, could lead to a different conclusion. 

You may call me at _______________ with any questions.

 

Sincerely,

 

Manuel P. Alvarez

Commissioner

Department of Business Oversight

 

By

 

_________________________

Senior Counsel

 

 

Last updated: Oct 10, 2019 @ 12:50 pm