Business

Erik Gibbs

Rhode Island set to regulate crypto using money transmitter laws

In light of a lack of national cryptocurrency regulations, individual states in the US are working to provide oversight for the Bitcoin ecosystem. Rhode Island is the latest to join a growing number of jurisdictions hoping to improve crypto’s position in the country and has reportedly established regulations that will allow digital currencies to be overseen by money transmitter laws. International law firm Alston and Bird reports that the new laws are expected to take effect as of January 1 next year. 

As should be expected by any entity that wants to be involved in crypto, Rhode Island is going to implement strict anti-money-laundering and anti-fraud guidelines. It will also deploy compliance measures and require crypto firms to show that they are able to “protect the confidentiality, integrity, and availability of any non-public personal information or currency transmission it receives, maintains, or transmits.”

The majority of the requirements for the crypto space are virtually identical to current money transmitter laws in Rhode Island. The one difference is a requirement that certain companies keep digital currency holdings to cover what is being transacted by their clients. 

A state bill on the subject of money transmittal services, House Bill 5847, defines digital currencies 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.”

That bill was signed into law on July 15 by Rhode Island Governor Gina Raimondo. It further requires certain entities involved in digital currency operations to collect data from individuals conducting transactions and to create operational security and disaster recovery programs.

Personal use, which also covers digital currency transactions for family or household purposes, is exempt from the reporting guidelines. This is a reference to peer-to-peer exchanges of currency, and not transactions that require the use of commercial entities. 

In addition, the laws don’t apply to certain types of crypto. In particular, those that cannot be converted to fiat or which exist strictly on a blockchain or a gaming platform. This exception follows a recent decision by the US Securities and Exchange Commission that allowed Pocketful of Quarters to offer a token on the Ethereum blockchain and ruled that the tokens were not a form of security.

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