IN REPLY REFER TO: _________
FILE NO: _________
April 7, 2020
Re: ____________ – Opinion Request
Dear Mr. ______:
Thank you for your letters dated January 27, 2020 and March 20, 2020 to the Commissioner of the Department of Business Oversight (“Department”). You request confirmation that ____________ (“_________”) is not required to obtain a license under the California Money Transmission Act in connection with its business activities in California.
According to your letter, _________ is registered as a money services business with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”). _________ operates a nationwide network of cryptocurrency kiosks in 20 states including California. Customers can either buy or sell cryptocurrencies at the kiosks which operate in the following manner: A customer physically approaches a kiosk, typically located within a convenience store or gas station. The customer (1) inserts U.S. dollars into the kiosk as payment for cryptocurrencies which are sent to the customer’s digital wallet, or (2) sends cryptocurrencies from their digital wallet to _________, which in turn dispenses U.S. dollars from the kiosk as payment. Cryptocurrency sold to customers at kiosks come from _________’s own inventory and cryptocurrency purchased from customers at kiosks become part of _________’s inventory. _________ does not facilitate third-party transactions or act as a custodian of funds. Currently, _________ supports the exchange of Bitcoin, Bitcoin Cash, Litecoin, and Etherium.
The Department has been studying the cryptocurrency industry closely. Whether Bitcoin and other cryptocurrencies are a viable form of money or a speculative non-money asset is widely debated. Given this ongoing debate, the Department has not concluded whether Bitcoin and other cryptocurrencies constitute a form of money.
Notwithstanding the foregoing, the sale and purchase of Bitcoin, Bitcoin Cash, Litecoin, and Etherium by _________ out of its own inventory through a kiosk, which does not support any other types of transactions, does not meet the definition of “receiving money for transmission.” Therefore, _________’s activities in connection with its kiosks are not subject to licensing under the MTA.
While not the subject of your inquiry, if in the future _________ offers customers the ability to purchase and sell cryptocurrencies other than Bitcoin, Bitcoin Cash, Litecoin, and Etherium, to the extent that any of those other cryptocurrencies are securities, _________ may have obligations under California’s broker-dealer laws. The Department reserves the right to take administrative action against _________ if it is later determined that _________ is trading securities in violation of California law.
The Department’s determination is limited to the activities described herein and does not extend to any other activities in which _________ may engage. Any change in the facts and circumstances or the products or services that _________ provides could lead to a different determination.
Nothing in this letter should be interpreted to relieve _________ from any obligations under the laws administered by FinCEN or any other agency of the federal government.
Please contact me at _____________if you have any questions.
Manuel P. Alvarez
Department of Business Oversight
Pamela F. Hernandez
 Fin. Code, § 2003, subd. (u) (defining “receiving money for transmission” to mean receiving money or monetary value in the United States for transmission within or outside of the United States).
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