Cryptocurrency exchanges in the United States must comply with expensive multi-state money transmitter licensing requirements, and must have anti-money laundering compliance programs in place. Cryptocurrency exchanges in the United States that provide custodial cryptocurrency accounts include Bittrex (based in Seattle), Circle (based in New York City), Coinbase (based in San Francisco), Gemini (based in New York City), itBit (based in New York City), Kraken (based in San Francisco), and Poloniex (based in Boston). Shapeshift (based in Denver) permits users to trade one cryptocurrency for another from the customer's own non-custodial cryptocurrency wallet.
Currently, in most states, a cryptocurrency exchange is deemed to be a money transmitter that is subject to the same state licensing and regulation requirements as other money transmitters. In certain states (such as Colorado, Kansas, Pennsylvania and Texas), businesses engaging in certain types of cryptocurrency sales are exempt from state licensing requirements. Montana is currently the sole state that has no licensing requirements for money transmitters.
Most states require money transmitters to submit to their money transmitter licensing and reporting through an account on the NMLS website. A summary of the state licensing procedures and requirements for the states that have adopted the NMLS system for money transmitter licensing is set forth here. The NMLS web site permits public access at nmlsconsumeraccesss.org. to the state license information of money transmitters. The NMLS website includes public information about the licensing of such cryptocurrency exchanges as Bittrex, Circle, Coinbase, Gemini, and Poloniex.
A cryptocurrency exchange that desires to be licensed in all 50 states is subject to the following expensive licensing requirements: (i) minimum surety bond requirements that range from $1,000 to $500,000 per state, (ii) application fees that range from $0 to $5,000 per state, (iii) licensing fees that range from $0 to $3,750 per state, and (iv) minimum net worth requirements that range from $5,000 to $2,000,000. In addition, a money transmitter is required to comply with the financial disclosure and consumer compliance requirements of each state in which it does business.
New York currently has the most onerous money transmitter licensing and compliance requirements for a cryptocurrency exchange. On April 10, 2019, the New York Department of Financial Services rejected the money transmitter license application of Bittrex, a cryptocurrency exchange with a headquarters in Seattle. Bittrex subsequently issued a statement that disputed some of the assertions made in the NYDFS rejection letter.
On October 9, 2017 Uniform Law Commission — a non-profit entity that consists of approximately 350 commissioners appointed by all 50 states and the District of Columbia — published a proposed "Uniform Regulation of Virtual Currency Businesses Act." On February 6, 2018, the American Bar Association announced its endorsement of the uniform act. Information about the status of state adoption of the uniform act proposed by the Uniform Law Commission is set forth on this website.
The New York State Department of Financial Services currently permits the formation of New York limited purpose trust companies to engage in cryptocurrency exchange, escrow and custody services. This type of trust company charter provides the advantages of (i) being exempt from the money transmission licensing requirements of a significant number of states in the United States, (ii) being able to conduct a broad range of custody and fiduciary services related to cryptocurrency assets, and (iii) providing reassurance to customers that data security, operations and personnel are subject to bank-grade supervisory and examination standards. This trust company charter has the disadvantages of having higher minimum capital requirements and a significantly higher level of compliance costs related to more stringent regulatory oversight and examination.
Two limited purpose trust companies that engage in the virtual currency business have been chartered: Gemini Trust Company, LLC and itBit Trust Company, LLC.
On September 10, 2018, the New York State Department of Financial Institutions approved two New York limited purpose trust companies to sell ethereum-based ERC-20 tokens that have a pegged value of $1.00 per token and are fully collateralized by FDIC-insured deposits.
Set forth below is a list of the money transmitter licensing authorities of each state and the District of Columbia, along with links to their web sites.
|State||State Money Transmitter Licensing Authority|
|Alabama||Alabama Securities Commission|
|Alaska||Alaska Division of Banking and Securities|
|Arizona||Arizona Department of Financial Institutions|
|Arkansas||Arkansas Securities Department|
|California||California Department of Business Oversight|
|Colorado||Colorado Division of Banking|
|Connecticut||Connecticut Department of Banking|
|Delaware||Delaware Office of the State Bank Commissioner|
|District of Columbia||District of Columbia Department of Insurance, Securities and Banking|
|Florida||Florida Office of Financial Regulation|
|Georgia||Georgia Department of Banking and Finance|
|Hawaii||Hawaii Department of Commerce and Consumer Affairs|
|Idaho||Idaho Department of Finance|
|Illinois||Illinois Department of Financial & Professional Regulation|
|Indiana||Indiana Department of Financial Institutions|
|Iowa||Iowa Division of Banking|
|Kansas||Kansas Office of the State Bank Commissioner|
|Kentucky||Kentucky Department of Financial Institutions|
|Louisiana||Louisiana Office of Financial Institutions|
|Maine||Maine Office of Consumer Credit Protection|
|Maryland||Maryland Department of Labor, Licensing & Regulation|
|Massachusetts||Massachusetts Office of Consumer Affairs and Business Regulation|
|Michigan||Michigan Department of Insurance and Financial Services|
|Minnesota||Minnesota Department of Commerce|
|Mississippi||Mississippi Department of Banking and Consumer Finance|
|MIssouri||MIssouri Division of Finance|
|Montana||Montana Division of Banking & Financial Institutions|
|Nebraska||Nebraska Department of Banking and Finance|
|Nevada||Nevada Department of Business & Industry|
|New Hampshire||New Hampshire Banking Department|
|New Jersey||New Jersey Department of Banking & Finance|
|New Mexico||New Mexico Regulation and Licensing Department|
|New York||New York Department of Financial Services|
|North Carolina||North Carolina Commissioner of Banks|
|North Dakota||North Dakota Department of Financial Institutions|
|Ohio||Ohio Department of Commerce|
|Oklahoma||Oklahoma Banking Department|
|Oregon||Oregon Division of Financial Regulation|
|Pennsylvania||Pennsyvlania Department of Banking and Securities|
|Rhode Island||Rhode Island Department of Business Regulation|
|South Carolina||South Carolina Attorney General|
|South Dakota||South Dakota Division of Banking|
|Tennessee||Tennessee Department of Financial Institutions|
|Texas||Texas Department of Banking|
|Utah||Utah Department of Financial Institutions|
|Vermont||Vermont Department of Financial Regulation|
|Virginia||Virginia State Corporation Commission|
|Washington||Washington State Department of Financial Institutions|
|West Virgnia||West Virginia Division of Financial Institutions|
|Wisconsin||Wisconsin Department of Financial Institutions|
|Wyoming||Wyoming Division of Banking|
This website provides general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to retain an attorney for advice on specific legal issues.