A bill calling for specific regulation of digital currencies such as bitcoin has been approved by the North Carolina House of Representatives and has moved to the state Senate for further deliberation.
House Bill 289 seeks to enact a new Money Transmitters Act (MTA), which would specifically address the transmission of virtual currencies such as bitcoin.
It was submitted by Republican Representative Stephen M. Ross, who outside of his capacity as a state representative serves as a vice president and investment officer at Wells Fargo. He filed the bill on behalf of the North Carolina’s Commissioner of Banks (NCOOB).
Rep. Ross was unavaialble for comment. When asked about the bill, a spokesperson for NCCOB told CoinDesk:
“Like existing law, the bill requires bitcoin transmitters to obtain a license from our office. The Bill, however, clarifies that only virtual currency transmission involving a personal, family or household purpose (as opposed to business-oriented transmission) is subject to the Money Transmitters Act. It also defines virtual currency consistently with federal financial regulation.”
The existing MTA, enacted in 2001, already regulates non-bank companies that engage in the business of transmitting funds on behalf of others in a bid to prevent money laundering and the financing of terrorist activities.
According to a summary redacted by North Carolina’s General Assembly (NCGA), House Bill 289 would replace the current statutory article with a new one, incorporating much of the existing law and shed additional clarity on specific features requested by the NCOOB.
“These [virtual currency] payment systems are currently subject to the act, but industry has requested clarification of the law to take into account the changes that have occurred since the law was written,” the summary states.
It goes on to explain:
“It would exclude certain business-to-business money transmission activity. It would revise the cost structure by replacing the examination fee and the annual renewal fee with an annual assessment based on North Carolina transmission volume. It would convert the annual license into a perpetual license.”
One vote against
The Bill was approved by the House of Representatives on 12th May, with 117 votes in favour and one against.
Representative Mark Brody was the sole legislator to vote against the Bill. Speaking to CoinDesk, Brody outlined why he thought that regulating alternative currencies such as bitcoin would not be a good idea.
Brody said that he had been badly affected by the 2008 market crash, which in turn, made him understand the fragile nature of the economy. In interview, he attributed that weakness to existing federal policies.
He explained:
“The federal government is a political animal and it will hurt the currency for political reasons […] and I oppose the regulation of alternative currencies because […] they may be the only stability that we have, that is why I voted against the regulation of these alternative currencies.”
Brody went on to suggest that he might seek to have that language removed at a later juncture, either through an amended bill or by way of an entirely separate bill.
Growing legislative interest
The bill’s passage through the North Carolina House of Representatives comes amid growing activity among state legislators in the US in regards to digital currency.
State agencies are also looking at the issue closely, most notably in the case of the New York State Department of Financial Services’ BitLicense proposal, which is expected to be released in its final form sometime in the next week.
When asked about the timing of the bill submission, a spokesperson for the NCCOB told CoinDesk that the effort began following FinCEN’s 2014 guidance for money service businesses.
The spokesperson explained:
“In 2014, we began receiving applications for virtual currency licensure under the Money Transmitters Act. At that time, we realised that while virtual currency transmission was subject to the existing MTA, that version of the law left many issues unresolved.”
The spokesperson went on to say that the agency initially began to approach digital currency oversight through rule-making, but ultimately opted to pursue a legislative route.
“Throughout 2014, we held multiple stakeholder meetings, both before and after the bill was drafted,” the spokesperson added. “After incorporating as much stakeholder input as possible, we felt that the bill was ready for introduction in 2015.”
Community debate
As one might imagine, a legislative effort that is perceived to impose additional burdens on companies working in the digital currency sector drew criticism from some quarters of the bitcoin community.
The bill has been labelled an “Anti-Bitcoin Act” by BitcoinRegs.org, a self-supporting group of North Carolina-based bitcoin advocates, which said in a statement:
“House Bill 289 is wrong for the economy of the state of North Carolina, and if passed in other states, would harm the bitcoin ecosystem at large.”
Other startups in the bitcoin space have voiced support for the measure. San-Francisco based Coinbase weighed in to debate via a blog post, which acknowledged:
“As a nascent technology, regulation surrounding bitcoin has been a difficult issue for some regulators and policymakers. Despite these difficulties, North Carolina is a state that is promoting innovation and regulatory efficiency into its regulatory framework via the next generation of its Money Transmitters Act (MTA).”
Stan Higgins contributed reporting.