Purchase of Cryptocurrency

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IN REPLY REFER TO: _________

FILE NO: _________

October 25, 2021

VIA EMAIL AND U.S. MAIL

 

Re:       Request for Interpretive Opinion

 

Dear __________:

 

Thank you for your request for an interpretive opinion to the Department of Financial Protection and Innovation (“Department”) received July 9, 2021, and emails dated August 27, 2021 and October 8, 2021. You request an interpretive opinion from the Department confirming that _______________, doing business as _____________________ (“_______”), is not required to obtain a license under the California Money Transmission Act.

Background

In your correspondence, you explain that _______ offers its clients an opportunity to buy Bitcoin, Litecoin, and Ethereum directly from ________ in exchange for fiat currency.[1] If a client wishes to purchase cryptocurrency from _________, it requests a quote for the requested cryptocurrency. If the client accepts the quote, the client will receive an invoice and provide the information of a bank-issued credit or debit card in the customer’s name. Once that payment is authorized, the requested inventory of cryptocurrency is released to the client’s external wallet.

You also explain that because all client transactions are directly with _________, there is no transmission of the Bitcoin, Litecoin, or Ethereum to third parties, and that _____ does not offer money transmission services.

Analysis

The MTA provides that a person shall not engage in the business of money transmission in California unless the person is licensed or exempt from licensure under the MTA, or is an agent of a person licensed or exempt from licensure.[2] 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.

_________ activities are limited to directly selling Bitcoin, Litecoin, and Ethereum to clients. 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.[3]

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. Furthermore, 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,

 

Christopher S. Shultz

Acting Commissioner

Department of Financial Protection and Innovation

 

 

By

_________________

Senior Counsel

_______

cc:        Robert Venchiarutti, Deputy Commissioner, Money Transmitter Division


[1] Your email dated October 8, 2021 states that _______ does not have plans to sell any other cryptocurrency to California residents at this time.

[2] Fin. Code, § 2030, subd. (a).

[3] Fin. Code, § 2003, subds. (s), (x), and (u).

Last updated: Oct 26, 2021 @ 5:05 pm