Cryptocurrency ATM

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IN REPLY REFER TO: ______________
FILE NO: ______________

December 11, 2019

Re:       _______________________ – Opinion Request

 

Dear Mr. ________:
 

Thank you for your letter dated July 20, 2019 to the Department of Business Oversight (“Department”) and your recent letter received on November 26, 2019. Your letter requests confirmation that _____________ (“__________”) is not currently required to obtain a license under the California Money Transmission Act in connection with its proposed business activities in California.

According to your letter, __________ is a Georgia corporation doing business as ­­­­___________. __________ operates kiosks for the purpose of selling cryptocurrency that it holds in its own inventory, to consumers for fiat currency. __________ also purchases cryptocurrency from consumers for its own inventory through the kiosks. Transactions occur in the following manner: To purchase cryptocurrency, a consumer inserts fiat currency into the kiosk, and __________ transfers the appropriate amount of cryptocurrency from its digital wallet to the consumer’s digital wallet. To sell cryptocurrency, a consumer transfers the cryptocurrency from his or her wallet directly to __________’s wallet and receives fiat currency from the kiosk. The cryptocurrency becomes part of __________’s inventory. Currently, __________ supports the exchange of Bitcoin, Ethereum, and Litecoin.

The Department has been studying the cryptocurrency industry closely.  Whether Bitcoin and other cryptocurrencies are a viable form of money or a speculative non-money asset is widely debated.  Given this ongoing debate, the Department has not concluded whether Bitcoin and other cryptocurrencies are a form of money.

Notwithstanding the foregoing, the sale and purchase of Bitcoin, Ethereum, and Litecoin by __________ out of its own inventory through a kiosk, which does not support any other types of transactions, does not meet the definition of “receiving money for transmission.”[1] Therefore, __________’s activities in connection with its kiosks are not subject to licensing under the MTA.

While not the subject of your inquiry, if in the future __________ offers customers the ability to purchase and sell cryptocurrencies other than Bitcoin, Ethereum, and Litecoin, to the extent that any of those other cryptocurrencies are securities, __________ may have obligations under California’s broker-dealer laws.  The Department reserves the right to take administrative action against __________ if it is later determined that __________ is trading securities in violation of California law.

Nothing in this letter should be interpreted to relieve __________ from any obligations under the laws administered by FinCEN or any other agency of the federal government.

Please contact me at __________ if you have any questions.

 

Sincerely,

 

Manuel P. Alvarez

Commissioner

Department of Business Oversight

 

By

__________________

Pamela F. Hernandez

Counsel

 

PFH:ss

 


[1] Fin. Code, § 2003, subd. (u) (defining “receiving money for transmission” to mean receiving money or monetary value in the United States for transmission within or outside of the United States).

 

Last updated: Feb 4, 2020 @ 2:13 pm