Coincenter the now de facto policy body of the US have issued a framework for the regulation of digital currency. This covers matters such as providing exemptions for startups, recognising digital currency as a form of capital, avoiding duplication at a state and federal level for reporting suspicious activity. They have also suggested a way to define the scope of what should or not be caught in by ‘digital currency transmission services’.
They establish the idea of an on-ramp exemption for digital currency startups, where the startup would register at a Federal level as an MSB but would not need a state-level licence. The requirement for state-level licensing should kick-in after a $5m threshold.
They suggest that there should be mutual recognition of digital currency licences and state-level MSB licences.
With respect to capital requirements, they suggest that holding digital currencies should be recognised as a contribution to capital requirements.
Coincenter deters States from adopting a dual Suspicious Activity Reporting requirement, which is what is being suggested by the Bitlicense in NY. This is duplicating the work of FinCEN. In contrast with FinCEN that sets a $2k floor before a suspicious activity report is required, in NY there is no such floor and, therefore, goes beyond federal requirements. In addition, Coincenter points out that all transactions above $10k in NY will need to be reported.
An excellent component to the framework is the setting of the substantive scope of licensing i.e. who should be subject to licensing or not.
For Coincenter, the licensable activity is Digital Currency Transmission services and this they define as:
“unilaterally executing or preventing a digital currency transaction on behalf of another.“
Of interest is how Coincenter exclude the scope of regulations by stating that non-financial transactions for nominal values involving digital currencies should be excluded from licensing. This is a take on the fact that digital currency can be used to access, for example, software.