As we approach the end of a very active year in the emergence of virtual currency regulation, we developed a heat map of the regulatory climate faced by virtual currency wallet providers and exchanges – entities who maintain control over a consumer’s virtual currency assets as part of their services.* The compliance obligations of such companies under the federal Bank Secrecy Act have been clarified over the past twelve months. But at the state level, a patchwork of conflicting regulations, statutory interpretations, and regulatory delays await start-ups as they seek to roll out their services nationwide (or to expand their services to U.S. consumers). In an effort to ameliorate the situation, the Emerging Payments Task Force of the Conference of State Bank Supervisors issued a policy statement containing a model framework for virtual currency regulation this week.

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For example, several states, such as Washington, have stated that virtual currency activity falls within the scope of their money transmission statutes and have required that companies engaged in such activity obtain a license. Others, such as Texas and Kansas, have issued written guidance on where virtual currency activity fits in their regulatory regimes. Still other states have taken a “wait-and-see” approach in order to give lawmakers time to study the industry and to come up with new rules to accommodate cryptocurrency-related services. Many of these states are accepting money transmitter license applications, but have given no indication when those applications will be processed (in some states, such as Hawaii, the backlog for processing traditional money transmitter license applications is more than a year). At least one state (Illinois) has publicly stated that it is not accepting money transmitter license applications from companies that offer virtual currency-related money transmission services, but has quietly granted at least one such license. To date, no state has declared that offering cryptocurrency-related services to consumers is prohibited, despite stern warnings from both state and federal regulators about the risks of investing in and securing cryptocurrencies.