Colorado Cryptocurrency Laws
Colorado Revised Statutes
title 11, Article 110
“Money Transmitter” Definition
“Money transmission” means the sale or issuance of exchange or engaging in the business of receiving money for transmission or transmitting money within the United States or to locations abroad by any and all means including but not limited to payment instrument, wire, facsimile, or electronic transfer.
“Exchange” means any check, draft, money order, or other instrument for the transmission or payment of money or credit. It does not mean money or currency of any nation.
Nothing in this article 110 shall apply to: Departments or agencies of the United States of America, or to any state or municipal government, or to corporations organized under the general banking, savings and loan, or credit union laws of this state or of the United States, or to the receipt of money by an incorporated telegraph or cable company at any office or agency thereof for immediate transmission by telegraph or cable.
$7,500 License Fee for January 1 – June 30
$3,750 License Fee for July 1 – December 31
Bond and Insurance Requirements
(1) (a) Each approved applicant shall furnish a corporate surety bond in the principal sum of one million dollars, except as otherwise provided in this subsection (1), by a bonding company or insurance company authorized to do
business in this state, in which the applicant is named as obligor, to be approved by the banking board, that shall run to the state of Colorado for the use and benefit of the state and of any creditor of the licensee for any liability incurred on any exchange issued by the licensee. The bond shall be conditioned that the obligor will faithfully conform to and abide by the provisions of this article 110 and will honestly and faithfully apply all funds received for the performance of all obligations and undertakings for exchange issued and sold under this article 110 and will pay to the state and to any person all money that becomes due and owing to the state or to the person under the provisions of this article 110 because of any exchange sold or issued by the licensee. The bond shall remain in force and effect until the surety is released from liability by the banking board or until the bond is cancelled by the surety, which cancellation may be had only upon ninety days’ written notice to the banking board. The cancellation shall not affect any liability incurred or accrued prior to the termination of the ninety-day period. If the banking board finds, at any time, any bond to be exhausted, a replacement bond in an equal amount shall be filed by the licensee within thirty days after written demand therefor.
(b) The banking board shall by rule establish financial standards by which to evaluate the financial condition or solvency of licensees and for the bond amount set under subsection (1)(a) of this section to be decreased to not less than two hundred fifty thousand dollars, following application by the licensee and an opportunity for hearing before the banking board, in such amounts as necessary up to the amount provided in subsection (1)(a) of this section to protect purchasers of exchange.
(c) The banking board shall by rule establish financial standards by which to evaluate the financial condition or solvency of licensees and for the bond amount to be increased above the amount provided in subsection (1)(a) of this section if the banking board determines, following notice to the licensee and an opportunity for hearing before the banking board, that the
customers of the licensees are at undue risks, but in no case shall the total bond required of a licensee be greater than two million dollars. In promulgating the rules, the banking board shall utilize and adopt generally accepted accounting principles for the evaluation and determination of the financial condition of licensees.
Bond Alternatives and Additional Insurance Requirements
(2) (a) In lieu of the surety bond required by subsection (1) of this section, the licensee may deposit with the board securities with a par value equal to the amount of the surety bond.
(b) Securities under this subsection (2) must be rated in one of the three highest grades as defined by a nationally recognized organization that rates securities and must consist of:
(I) General obligations of, or securities fully guaranteed by, the United States of America or any agency or instrumentality of or corporation wholly owned by the United States of America directly or indirectly; or
(II) Direct general obligations of the state of Colorado, or of any county, town, city, village, school district, or other political subdivision or municipal corporation of the state of Colorado.
(c) The board shall hold the securities to secure the same obligations as would any surety bond required by this article 110. The licensee may exchange the securities so deposited from time to time for other securities that qualify under this subsection (2) upon written notification to, and written approval by, the commissioner. All of the securities are subject to sale and transfer, and the board may dispose of the proceeds only on the order of a court of competent jurisdiction. The licensee is entitled to receive the interest or dividends on the securities unless prohibited by a court of competent jurisdiction. The board may provide for custody of the securities by any qualified trust company or bank located in the state of Colorado. The depositing licensee shall pay the compensation of any person acting as custodian under this section.
(3) In addition to the bond required under subsection (1) of this section, the commissioner, pursuant to rules promulgated by the banking board, may require a licensee to possess investments having an aggregate market value at least equal to the amount of outstanding payment instruments issued or sold by the licensee. For the purposes of this subsection (3), permissible investments shall be:
(a) Cash; (b) Certificates of deposit or other debt obligations of a financial institution, either domestic or foreign; (c) Bills of exchange or time drafts drawn on and accepted by federally insured financial depository institutions; (d) Any investment bearing a rating of one of the three highest grades as defined by a nationally recognized organization that rates such securities; (e) Investment securities that are obligations of the United States, its agencies or instrumentalities, or obligations that are guaranteed fully as to principal and interest of the United States, or any obligations of any state, municipality, or any political subdivision thereof; (f) Shares in a money market mutual fund, interest-bearing bills or notes or bonds, debentures, or stock traded on any national securities exchange or on a national over-the-counter market; (g) Such other investments as may be approved by the banking board.
State Comments or Statements
Colorado released interim regulatory guidance on September 20, 2018 which states that the Colorado Money Transmitters Act “aims to regulate the transmision of money, meaning legal tender, and as noted, cryptocurrencies are not recognized as legal tender. The direct transmission of cryptocurrency between two consumers is not subject to licensure under the Act. With respect to transactions that involve a third party, the complete absense of fiat currency from a transmission from one consumer to another is not a money transmission. Conversely, the presence of fiat currency during a transmission may be subject to licensure under the Act.
State licensure would be required when: (1) A person is engaged in the business of selling and buying cryptocurrencies for fiat currency; and (2)
A colorado customer can transfer cryptocurrency to another customer within the exchange; and (3)The exchange has the ability to transfer fiat currency throug the medium of cryptocurrency.”
*See next column for link to interim guidance*
Colorado has introduced multiple bills, including HB18-1220 which would require persons dealing in cryptocurrency to be regulated under the laws regulating money transmitters. The Bill status is “Lost”.
Conflicting bill exemtping virtual currency from the money transmitters act, HB 1426, also under “Lost” status.