California Cryptocurrency Laws
California Financial Code, Division 1.2, Section 2000
“Money” means a medium of exchange that is authorized or adopted by the United States or a foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more governments.
“Money Transmitter” Definition
“”Money transmission” means any of the following: (1) Selling or issuing payment instruments. (2) Selling or issuing stored value. (3) Receiving money for transmission.”
“”Payment instrument” means a check, draft, money order, traveler’s check, or other instrument for the transmission or payment of money or monetary value, whether or not negotiable. The term does not include a credit card voucher, letter of credit, or any instrument that is redeemable by the issuer for goods or services provided by the issuer or its affiliate.”
“”Stored value” means monetary value representing a claim against the issuer that is stored on an electronic or digital medium and evidenced by an electronic or digital record, and that is intended and accepted for use as a means of redemption for money or monetary value or payment for goods or services. The term does not include a credit card voucher, letter of credit, or any stored value that is only redeemable by the issuer for goods or services provided by the issuer or its affiliate, except to the extent required by applicable law to be redeemable in cash for its cash value.”
“”Receiving money for transmission” or “money received for transmission” means receiving money or monetary value in the United States for transmission within or outside the United States by electronic or other means. The term does not include sale or issuance of payment instruments and stored value.”
“Monetary value” means a medium of exchange, whether or not redeemable in money.”
This division does not apply to the following:
(a) The United States or a department, agency, or instrumentality thereof, including any federal reserve bank and any federal home loan bank.
(b) Money transmission by the United States Postal Service or by a contractor on behalf of the United States Postal Service.
(c) A state, county, city, or any other governmental agency or governmental subdivision of a state.
(d) A commercial bank or industrial bank, the deposits of which are insured by the Federal Deposit Insurance Corporation or its successor, or any foreign (other nation) bank that is licensed under Chapter 20 (commencing with Section 1750) or that is authorized under federal law to maintain a federal agency or federal branch office in this state; a trust company licensed pursuant to Section 1042 or a national association authorized under federal law to engage in a trust banking business; an association or federal association, as defined in Section 5102, the deposits of which are insured by the Federal Deposit Insurance Corporation or its successor; and any federally or state chartered credit union, with an office in California, the member accounts of which are insured or guaranteed as provided in Section 14858.
(e) Electronic funds transfer of governmental benefits for a federal, state, county, or local governmental agency by a contractor on behalf of the United States or a department, agency, or instrumentality thereof, or a state or governmental subdivision, agency, or instrumentality thereof.
(f) A board of trade designated as a contract market under the federal Commodity Exchange Act (7 U.S.C. Sec. 1 et seq.) or a person that, in the ordinary course of business, provides clearance and settlement services for a board of trade to the extent of its operation as or for such a board.
(g) A person that provides clearance or settlement services pursuant to a registration as a clearing agency or an exemption from registration granted under the federal securities laws to the extent of its operation as such a provider.
(h) An operator of a payment system to the extent that it provides processing, clearing, or settlement services, between or among persons excluded by this section, in connection with wire transfers, credit card transactions, debit card transactions, stored value transactions, automated clearing house transfers, or similar funds transfers, to the extent of its operation as such a provider.
(i) A person registered as a securities broker-dealer under federal or state securities laws to the extent of its operation as such a broker-dealer.
(j) A person that delivers wages or salaries on behalf of employers to employees or facilitates the payment of payroll taxes to state and federal agencies, makes payments relating to employee benefit plans, makes distribution of other authorized deductions from employees’ wages or salaries, or transmits other funds on behalf of an employer in connection with transactions related to employees. Notwithstanding this subdivision, a person described herein that offers money transmission services or provides stored value cards directly to individual customers shall comply with this division to the extent of that activity.
(k) A person listed under subdivision (d) is exempted from all the provisions of this division, except Sections 2062 and 2063.
(l) A transaction in which the recipient of the money or other monetary value is an agent of the payee pursuant to a preexisting written contract and delivery of the money or other monetary value to the agent satisfies the payor’s obligation to the payee. (1) For purposes of this subdivision, “agent” has the same meaning as that term is defined in Section 2295 of the Civil Code. (2) For purposes of this subdivision, “payee” means the provider of goods or services, who is owed payment of money or other monetary value from the payor for the goods or services. (3) For purposes of this subdivision, “payor” means the recipient of goods or services, who owes payment of money or monetary value to the payee for the goods or services. Division 1.2; Section 2010.
Non-refundable Filing fee – $5,000.
Division 1.2; Section 2038.
Bond and Insurance Requirements
“(d) A licensee that sells or issues payment instruments or stored value shall maintain securities on deposit or a bond of a surety company in an amount of no less than five hundred housand dollars ($500,000) or 50 percent of the average daily outstanding payment instrument and stored value obligations in California, whichever is greater; provided that such amount shall not be more than two million dollars ($2,000,000).
(e) A licensee that engages in receiving money for transmission shall maintain securities on deposit or a bond of a surety company in an amount greater than the average daily outstanding obligations for money received for transmission in California, provided that such amount shall not be less than two hundred fifty thousanad dollars ($250,000) nor more than seven million dollars ($7,000,000).
(f) The amount of securities on deposit or a bond of a surety company required to be maintained by subdivisions (d) and (e) are cumulative.” Division 1.2; Section 2037.
“(a) An applicant shall possess, and a licensee shall maintain at all times, tangible shareholder’s equity of two hundred fifty thousand dollars ($250,000) to five hundred thousand dollars ($500,000), depending on estimated or actual transaction value, as determined by the commissioner based on the facted described in subdivision (c).
(b) The commissioner may increased the amount of net worth required of an applicant or licensee if the commissioner determines, with respect to the applicant or licensee, that a higher net worth is necessary to achieve the purposes of this division based on the factors described in subdivision (c).
(c) When making a determination pursuant to subdivision (a) or (b), the commissioner shall consider the following factors: (1) The nature and volume of the projected or established business. (2) The number of locations at or through which money transmission is or will be conducted. (3) The amount, nature, quality, and liquidity of its assets. (4) The amount and nature of its liabilities. (5) The history of its operations and prospects for earning and retaining income. (6) The qualiy of its operations. (7) The quality of its management. (8) The nature and quality of its principals. (9) The nature and quality of the persons in control. (10) The history of its compliance with applicable state and federal law. (11) Any other factor the commissioner considers relevant.” Division 1.2; Section 2040.
Money Transmission License Required for Crypto Exchange?
No (State has not decided whether to regulate virtual currency transactions yet)
State Comments or Statements
Acts to regulate virtual currency have been introduced but have died to this point:
California has interpreted on a case by case basis that transactions involving cryptocurrency are not regulated under the states money transmitter laws.
Released previous statement saying that virtual currency exchange was not regulated or licensed by the State and the Department of Business Oversight has not decided whether to regulate virtual currency transactions.
Bill has been introduced on March 14, 2019 which would enact the Uniform Regulation of Virtual Currency Business Act of California, which would define virtual currency and create new licensing requirements for performance of virtual currency business activity (“exchanging, transferring, or storing virtual curency or engaging in virtual currency administration, whether directly or through an agreement with a virtual currency control services vendor, among other things”). No vote on the legislation yet.