New Hampshire Money Exchange Regulations May Include Bitcoin Exchanges

As early as January 1776, New Hampshire became the first colony to recognize a provisional constitution and government and became independent from Britain. With a spirit of liberal rebellion, New Hampshire was recently chosen as the camp of the Freedom States Project (FSP) in 2003. The FSP has influenced many liberals to this day.

As a result, Bitcoin usage is increasing in the “Give Me Liberty or Give Me Death” state, with the annual Porcfest event attracting a large number of Bitcoin merchants.

Many great Bitcoin businesses have come out of New Hampshire, including the original Bitcoin Lamassu ATM company. Erik Voorhees’ Satoshi Dice was the largest source of Bitcoin transactions for many years before shutting down.

Unfortunately, New Hampshire Statute 399-g:1 provides that, beginning January 1, 2016, the “currency exchange license” requirement was changed to include “virtual” currency.

The old regulation defined “monetary value” only as a “medium of exchange, whether or not redeemable.” The new version adds the definition of monetary value as “redeemable virtual currency,” which has a different meaning for those who use it in a commercial setting.

The decree states:

“Money of value means a medium of exchange, whether redeemable or not, and includes exchangeable virtual currencies.”

The new rules define the term “exchangeable virtual currency” as a digital representation of value that meets four criteria: it can be a medium of exchange, a unit of account or a store of value, it has an equivalent currency or serves as a substitute for real currency, it can be centralized or decentralized, and it can be exchanged for real currency or other freely convertible virtual currencies.

There are several exemptions to the statute, such as government agencies and retailers issuing stored value credit or gift cards. None of these exceptions apply to digital currencies, and the state’s regulations on digital currencies are becoming more and more similar to those in the nation’s federal statutes.

In 2013, FENSA enacted the Money Exchange Rule for virtual currencies, though it has never been enforced. The most high-profile example was the $700,000 fine against Ripple Labs earlier this year.

According to an August CERN ruling, there are three types of virtual currency activity. A virtual currency entity can be an “exchanger,” an “administrator,” or a “user.”

“User” is a person who uses Virtual Currency to purchase goods and services.

“Trader” means a person who engages in the exchange of Virtual Currency, or uses Virtual Currency to exchange for real money, funds or other types of Virtual Currency.

An “administrator” is a person who issues virtual currency (puts it into circulation) and has the right to redeem virtual currency (withdraw it from circulation).

Under the FinCEN guidance, both traders and administrators are considered money transmitters. The guidance does recognize that a trader can act as an agent or dealer, but both are considered money transmitters.

Assuming that New Hampshire closely follows these federal definitions, this statute could affect anyone in New Hampshire who profits from trade in bitcoin. The bitcoin users most likely to be affected are localbitcoins and paxful sales. Their platforms may need to address compliance with any other bitcoin exchange in the United States.

It should be noted that this does not mean that these activities are illegal, but that those affected areas need to go through the proper channels to register and become official Money Transmitters (MSBs).

Unfortunately, this is not an option for most businesses. Becoming a legal MSB in New Hampshire is a difficult and time-consuming application process that includes record-keeping and reporting procedures. Of course, there is also a $500 application fee to the Main Office and additional fees for each authorization registration.

These compliance crises are compounded by the requirement to register an act. A registered money services business must file Form 107, which must be followed by a state registration application, so that it does not become ineligible.

To obtain a Money Trading Institution Certificate under the law enforcement network, various requirements must be met, such as minimum registered capital between $50,000 and $1 million, background checks, proof of holding 100% of "permitted investments" equivalent to consumer funds, regular reporting, annual renewal filings, hiring a full-time compliance officer and sufficient audit requests.

Then there are the fees. The fees of the law enforcement network are far higher than many startups can afford. Cumulatively, the fees for being a money transmitter in 53 states and U.S. territories total about $200,000, according to research by Ashley Grimes of Grimes Law Firm. Not only that, but companies often need to spend more than two years to process these procedures. In this case, entrepreneurs complain that such a high barrier to entry actually protects the competitiveness of existing money transmitters.

Fortunately, bitcoin miners are not generally considered dealers for law enforcement purposes. Users who receive convertible virtual currency and use it to purchase real or virtual goods or services are not subject to regulation.

There is a fine line here, however, and if miners turn around and sell their Bitcoin Cash or other currencies, they would again be classified as a currency exchange. Despite this, there has been no enforcement to date to prevent Bitcoin miners.

All states could take this stance on Bitcoin, but New Hampshire seems to be the odd one out, as one of the goals of the Liberate the State project is to have that libertarian as a representative in the state legislature to write these laws. State Senator Mark Warden is a member of the Liberate the State project.

“I will do my utmost to create a society in which the greatest function of civil government is to protect life, liberty, and property.”

While it's unclear what extent New Hampshire residents will face legal action, one thing is clear: It will be interesting to see how American liberals respond.

Original article: http://bravenewcoin.com/news/new-hampshire-money-transmitter-rule-change-will-include-bitcoin-businesses/
By Luke Parker
Translator: slieta
Editor: printemps
Source (translation): Babbitt Information (http://www.8btc.com/new-law)