A law enacted on April 17 by the state of Washington, that among other things, formally made provision for the inclusion of virtual currency to its money transmitter laws. The new law that will officially go into effect in July this year will include virtual currency within the definition of money transmission. According to the new law, virtual currency is defined as “a digital representation of value used as a medium of exchange, a unit of account, or a store of value, but does not have legal tender status as recognized by the United States government.” The new definition does not include “the software or protocols governing the transfer of the digital representation of value or other uses of virtual distributed ledger systems to verify ownership or authenticity in a digital capacity when the virtual currency is not used as a medium of exchange.”
Third party security audits will be required for business models that store virtual currency on behalf of others. Virtual currency companies will also be allowed to hold “Like-kind virtual currencies” to fulfill permissible investment requirements. A schedule of fees and services have to be disclosed to consumers irrespective of whether the products or services are insured, if the transfer is irrevocable, the liability of errors as well as any further disclosures. Additional provisions of the new law include:
- The definition of “Licensee” to apply to any person inside or outside Washington that fails to obtain a required license.
- Exclusion from its definition of “money transmission” the “provision solely of connection services to the internet, telecommunications services, or network access; units of value that are issued in affinity or rewards programs that cannot be redeemed for either money or virtual currencies; and units of value that are used solely within online gaming platforms that have no market or application outside of the gaming platforms.”
- Exemptions to those under federal law pertaining to money transmitters and new exemptions regarding both payroll service providers accountants.
- The burden of proving the applicability of an exclusion or exception placed on the person claiming the exclusion or exception.
- Incorporation of a new section that applies to fiat online currency exchangers.
- Civil penalties of $100 per violation per day incurred for each day the violation is outstanding.
Please click here for the official order.