Virtual Currency

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On April 20, 2024, the Pennsylvania Department of Banking and Securities (“DoBS”) issued a policy statement (“Policy Statement”) to “clarify” that the Department’s interpretation of the term “money” in the Pennsylvania Money Transmitter Act (“MTA”) includes “virtual currency, such as Bitcoin.”  The MTA provides in part that “[n]o person shall engage in the business of transmitting money by means of a transmittal instrument for a fee or other consideration with or on behalf of an individual without first having obtained a license from the department.’”… Continue Reading

As readers may recall, California previously attempted to enact a “Digital Financial Assets Law” with the introduction of AB 2269 in February 2022. In relevant part, AB 2269 proposed (1) a stringent licensing requirement for entities engaging in or holding themselves out as being able to engage in “digital financial business activity” with or on behalf of California residents and (2) substantial ongoing reporting and operational obligations, both of which California modeled after New York’s “BitLicense” requirements for virtual currency businesses.… Continue Reading

On September 8, 2023, the Financial Crimes Enforcement Network (“FinCEN”) released an alert regarding a notorious virtual currency scam called “pig butchering,” because, unfortunately, it resembles the “fattening a hog before slaughter.” These scams are primarily perpetrated by criminal organizations in Southeast Asia where these scams are also called “Sha Zhu Pan.”… Continue Reading

On April 17, the NYDFS announced the adoption of final regulations intended to shift the cost of supervision and examination of BitLicensees from the NYDFS via the implementation of direct assessments to licensees.  The new regulations will primarily only apply to those entities who hold a  BitLicense, as entities engaging in virtual currency business activities as a limited purpose trust company or a banking organization will continue to be assessed under 23 NYCRR Part 101.… Continue Reading

After reviewing the licensing/chartering/approval structures that DFS uses for entities seeking to engage in virtual currency activities, we discuss the role of guidance in DFS’s regulation and oversight of virtual currency, particularly new DFS guidance on digital asset custody practices and DFS expectations for how entities acting as digital asset custodians can better protect customers in the event of an insolvency or similar proceeding. … Continue Reading

On January 23, 2023, the New York Department of Financial Services released guidance with the stated goal of helping to protect customers of virtual currency businesses in the event of an insolvency or similar proceeding by imposing new custody and disclosure requirements on virtual currency entities that act as custodians.  Specifically, the guidance focuses on four areas for virtual currency entities acting as custodians (or “VCE Custodians”):

  • Segregation of and Separate Accounting for Customer Virtual Currency: A VCE Custodian is expected to (1) separately account for and segregate customer virtual currency from the corporate assets of the VCE Custodian and its affiliated entities, both on-chain and on the VCE Custodian’s internal ledger accounts; (2) avoid comingling customer virtual currency with any of the VCE Custodian’s own virtual currency or with any other non-customer virtual currency; and (3) clearly and prominently disclose the manner in which the VCE Custodian segregates and accounts for customer virtual currency. 
… Continue Reading

On April 28, 2022 the New York Department of Financial Services (“NYDFS”) issued its Guidance on Use of Blockchain Analytics, a document directed to all virtual currency business entities that either have a NYDFS Bitlicense or are chartered as a limited purpose trust company under the New York Banking Law. … Continue Reading

On January 4, 2021, the Office of the Comptroller of the Currency (“OCC”) published an Interpretive Letter clarifying the authority of national banks and federal savings associations to participate in independent node verification networks (“INVN”) and use stablecoins to conduct payment activities and other bank-permissible functions.

A stablecoin is a type of cryptocurrency that is backed by an asset, such as a fiat currency or a commodity, which is designed to have a stable value as compared with other types of cryptocurrency. … Continue Reading

Proposed change would expand BSA definition of “money” to include virtual currency.  The Financial Crimes Enforcement Network (“FinCEN”) and the Federal Reserve Board (“Board”) have requested comment on an important proposed new rule that would amend the “Recordkeeping Rule” and “Travel Rule” under the Bank Secrecy Act (“BSA”) and expand them significantly. … Continue Reading

On August 21, 2019, FinCEN issued an advisory (the “Advisory”) alerting financial institutions to various financial schemes and mechanisms employed by fentanyl and synthetic opioid traffickers to facilitate the illegal fentanyl trade and launder its proceeds.

As defined by the Centers for Disease Control and Prevention (“CDC”), “fentanyl is a synthetic (man-made) opioid 50 times more potent than heroin and 100 times more potent that morphine.”… Continue Reading