Purchase and Sale of Cryptocurrency
IN REPLY REFER TO: _________
FILE NO: _________
February 9, 2021
VIA EMAIL ONLY
Re: Request for Interpretive Opinion
Dear Ms. ________:
Thank you for your emails to the Department of Financial Protection and Innovation[1] of December 10, 2020 and January 13, 2021. As Senior Counsel for the Legal Division, I have been assigned to respond to this matter. In your emails, you seek confirmation that your client, _______________ (“________”), is not required to obtain a license pursuant to the Money Transmission Act (“MTA”). [2]
Background
As explained in your email of January 13, ________ offers its clients an opportunity to buy or sell cryptocurrency directly with ________ in exchange for fiat currency. If a client wishes to purchase cryptocurrency from ________, it submits a buy order. To effect the sale, ________ requests a fiat currency transfer from the client via ACH or wire transfer. Upon receipt of the fiat currency, ________ will deliver the cryptocurrency from its inventory to the client’s wallet.
For sales of cryptocurrency, the client places a sell order with ________ for a specified cryptocurrency. ________ requests a transfer of that cryptocurrency from the client’s wallet to ________’s wallet. Upon receipt of the cryptocurrency, ________ will transmit fiat currency payment to the client’s bank account.
You also explain that because all client transactions are directly with ________, there are no transmissions of client funds or cryptocurrency to third parties.
Analysis
Under the MTA, a person may not engage in the business of money transmission in California unless the person is licensed, exempt from licensure, or an agent of a person licensed or exempt from licensure.[3] Financial Code section 2003, subdivision (q), defines “money transmission” as: (1) selling or issuing payment instruments, (2) selling or issuing stored value, or (3) receiving money for transmission.
________’s activities are limited to buying and selling virtual currency. This does not require an MTA license because it does not involve the sale or issuance of a payment instrument, the sale or issuance of stored value, or receiving money for transmission. [4]
This opinion is based solely on the facts presented in your correspondence. Any changes in the facts or circumstances, as we understand them, could lead to a different conclusion. 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.
If you have any questions, please feel free to contact me at ____________or ________________.
Sincerely,
Manuel P. Alvarez
Commissioner
Department of Financial Protection & Innovation
By
Senior Counsel
_______
cc: Robert Venchiarutti, Deputy Commissioner, Money Transmitter Division
[1] The Department of Financial Protection and Innovation was previously the Department of Business Oversight.
[2] Fin. Code, § 2000 et seq.
[3] Fin. Code, § 2030, subd. (a).
[4] Fin. Code, § 2003, subds. (s), (x), and (u).