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The State of Alaska has introduced a bill this week defining digital currency, as well as broadening its definition of money transmission to include it. A wide array of business functions would require money transmission licenses, including buying and selling through a third party, transmitting, controlling, and issuing digital currencies.
Introduced by representatives Zach Fansler and Sam Kito III, Alaska State House Bill No. 180 outlines a large number of amendments to the state’s existing money transmission laws which were enforced on July 1, 2008.
Currently, the Alaskan statutes declare that a person wanting to engage in the business of money transmission in any way, including advertising and soliciting for this service, must hold a money transmission license or become an authorized delegate of a person who holds a money transmission license.
Defining ‘Virtual Currency’
Digital currency is not currently defined or included in the state’s existing money transmission statutes. This new bill adds a definition for digital currency including bitcoin but refers to them as ‘virtual currency’. According to the bill, virtual currency “shall be broadly construed to cover digital units of exchange” that:
1. Have a centralized repository, which it defines as “a single third-party administrating authority that controls the system, issues the currency, establishes the rules for the currency’s use, maintains a central payment ledger, and has authority to redeem the currency or withdraw the currency from circulation”;
2. Are decentralized, distributive, open-source, math-based, peer-to-peer virtual currency with no central administrating authority and no central monitoring or oversight. The term distributive is further defined to mean validated through distribution among a network of participants who run an algorithm to validate the transaction;
3. May be created or obtained by a ”computing or manufacturing effort”.
‘Money Transmission’ Using Virtual Currencies
The bill also updates the existing definition of money transmission with a section pertaining to digital currencies. The term “money transmission” now includes conducting the following types of activity in the state, or involving a resident of the state:
- Receiving virtual currency for transmission,
- Transmitting virtual currency,
- Securing, storing, holding, or maintaining custody or control of virtual currency on behalf of others,
- Buying and selling virtual currency as or through a third party,
- Performing retail conversion services, including the conversion or exchange of fiat currency or other value into virtual currency,
- Controlling, administering, or issuing virtual currency.
Alaska has tried to include ‘virtual currency’ in the definition of ‘money transmission’ before. In House Bill No. 271, introduced last year, the definition of virtual currencies was proposed. However, this bill died in committee. Another bill from Alaskan lawmakers seeking to include virtual currencies was Senate Bill No. 152, introduced last year by the Senate Rules Committee by Request of the Governor. However, this bill did not even get as far as House Bill No. 271 and suffered the same fate in committee.
Alaska’s Interim Solution
Instead of getting a full money transmission license, Alaska currently offers ‘Limited License Agreement Orders‘ for digital currency businesses.
This limited license agreement is for those requesting “approval of a license to provide transmission of virtual currency or does business that incorporates virtual currency in addition to the “traditional” money transmission of fiat currency”, the state’s website explains. Currently, only Coinbase and Circle Internet Financial have this limited license agreement orders and both are listed as having ‘active’ status.
If this latest bill is approved, many digital currency businesses will have to obtain an annual money transmission license from Alaska’s Division of Banking and Securities. Recently, Coinbase pulled out of Hawaii because of the state’s strict money transmission license requirements. A couple of days later, Bitfinex pulled out of Washington State because the state requires the company to have a money transmission license as well.
What do you think of Alaska’s move to license Bitcoin businesses? Let us know in the comments section below.
Images courtesy of Shutterstock, the State of Alaska, and Coinbase