Rhode Island has become the latest U.S. state to add specific money transmitter guidance for crypto firms.
According to a report published August 5 from Alston and Bird, an international law firm, any business that accepts fees for currency transmissions, or maintains control over virtual currencies for others will fall under the new law beginning January 1, 2020.
Part of Rhode Island’s licensure for crypto firms are strict compliance metrics, anti-money laundering and anti-fraud protocols, and security requirements. Firms must also demonstrate an operational ability to “protect the confidentiality, integrity, and availability of any non-public personal information or currency transmission it receives, maintains, or transmits.”
Many of these requirements are adaptations from the standing money transmission legislation in the state. What’s new is a firm must maintain holdings of cryptocurrencies in kind and quantity equal to amount being transmitter by clients.
In the bill, cryptocurrencies are defined as “a digital representation of value that is used as a medium of exchange, unit of account, or store of value, and is not legal tender, whether or not denominated in legal tender.”
Outside the purview of the law are digital currencies that are not exchangeable for fiat, or that exist solely on a gaming or blockchain platform. This stands in line with U.S. Securities and Exchange Commission’s recent decision that enables an ERC-20 token to be legally sold on a gaming startup’s blockchain.
Additional licensing exemptions exist for “personal, family, or household” uses of virtual currencies, academic purposes, and certain escrow services, among others.
The Rhode Island State House via Shutterstock