North Carolina Commissioner of Banks (NCCOB) has added more colour on the scope of the application of the Money Transmitter Act to Virtual Currency (VC), blockchain businesses (see FAQ here).
Prior to this FAQ update, they had already made it clear that VC exchanges, whether pure crypto or mixed-crypto-fiat, would need a money transmitter licence. The main exemption, at the time, was for VC issuers who they thought would be exempt from licensing. Since then, apparently as a result of an engagement with stakeholders, they have rolled out a few more exemptions: miners (exempt); they have distinguished between multi-signature (exempt), software based (exempt) and custodian wallets (licensing required) and signalled an exemption for meta-assets and what they are referring to as ‘blockchain 2.0’.
In more detail, NCCOB considers ‘passive’ multi-signature services outside of scope of MTA. This is where an entity holds one of a number of keys and for whom consent is required to move funds but the same entity cannot unilaterally move funds from a VC wallet. Conversely, full control of private keys by a third party would lead to that same party needing to be licensed in NC; this is in line with the thinking in New Jersey where VC custodians are subject to regulation.
The NCCOB also takes a hands-off approach to what NC has dubbed ‘Blockchain 2.0 technologies’, this is certainly a positive sign although somewhat ambiguous. This encompasses, in the words of the website FAQ, using blockchain to verify ownership, by this we assume the hashing files on a blockchain such as the likes of Tieron or Factom. Beyond that, the NCCOB refers to the use of ‘coloured coins’, smart contracts and smart property as generally not being used as a medium of exchange and thereby not being regulated by the Money Transmission Act.
A few provisos before a new DAO is launched from NC are that it does not follow that an exemption from MTA means an exemption from all other regulations such as securities laws. Further, the definitions used by the NCCOB are particularly unconventional and so may have a more limited scope than expected, for instance the NC defines a Coloured Coin as a representation of a ‘non-fiat-money-asset’, which is not how startups typically understand and define Coloured Coins. For example, using the NCCOB’s definition, Tether would not be a Coloured Coin in NC as it is a representation of a fiat asset.
For licensing/ compliance services for VC businesses see diacle.com