Rhode Island has amended its electronic money transfer law to require state licensing for certain entities providing cryptocurrency or “virtual currency”-related services. Specifically, entities that maintain “control of virtual currency or transactions in virtual currency on behalf of others” will need to become “currency transmission” licensees. An entity controls virtual currency if it has “the power to execute unilaterally or prevent indefinitely a virtual currency transaction.” Without regard to physical location, a virtual currency provider is considered subject to Rhode Island’s licensing regime if it enters into a transaction with a person physically in the state or a resident of the state at the time the transaction is initiated.
The regime includes a number of licensing exemptions, including exemptions for persons:
- Contributing only certain technical services that support the underlying virtual currency network;
- Providing only data storage or security support services to a virtual currency business while not otherwise conducting virtual currency business on behalf of others;
- Providing virtual currency as an enterprise solution “used solely among each other” where “no agreement or relationship with a resident that is an end-user of virtual currency” exists; and
- “[C]reating, investing, buying or selling, or obtaining virtual currency as payment for the purchase or sale of goods or services, solely” for certain limited purposes, such as consumer or academic purposes.
Much like other licensing regimes, licensees will be subject to some operational requirements, such as:
- Maintaining records of various compliance policies and procedures;
- Making various disclosures about the services being provided; and
- Avoiding specifically outlined prohibited acts and practices.
The state will manage the licensing process on the Nationwide Multistate Licensing System, which began as a system for states to manage the licensing process for mortgage loan originators. The licensing change will become effective on January 1, 2020.