Last updated on July 3rd, 2013 at 11:55 am
The Bitcoin Foundation has finally answered to the Department of Financial Institutions of California, after receiving a ‘cease and desist order’ for allegedly engaging in the field of money transmission without a license or proper authorization. In a letter with the date of July 1, the institution explains why “the BitcoinFoundation believes it does not require licensure as a money transmitter under California law”.
“In light of the Foundation’s mission to promote Bitcoin through public education, the Foundation also details below why it believes the sale of Bitcoin is not regulated under the California Money Transmission Act“, the document adds in its introduction, before starts listing the reasons.
First of all, the Bitcoin Foundation remembers the Californian authorities that it’s just an “association dedicated to serving the business, technology,government relations and public affairs needs of the Bitcoin community”. So, how can the institution be noticed to obey money-transmission laws when it’s a “not-for-profit institution”? And if its main goals are “standardize the use of Bitcoin, protect the integrity of the Bitcoin protocol and promote Bitcoin through technological investment in Bitcoin infrastructure, public education and initiatives in law and policy”? Sure, it needs donations to work, but it’s not transmitting or trading cryptocurrency.
“Specifically,California defines money transmission as including any of the following: selling or issuing payment instruments; selling or issuing stored value; and receiving money for transmission”, lists the letter. But, the truth is that, according to the Bitcoin Foundation, the institution “does not engage in any of these regulated activities. Furthermore, even if it did engage in these activities, it does not have any business operations in California that would subject it to the Department of Financial Institution’s jurisdiction”.
And the reasons continue to be spelled for the Californian financial authorities: “the Bitcoin Foundation is not in the business of selling Bitcoin to consumers and does not otherwise operate a Bitcoin exchange. Even if it did sell Bitcoin to consumers, however, the Foundation believes it would not be regulated as a seller or issuer of payment instruments because a Bitcoin is not a payment instrument under California law”.
“The California Money Transmitter Act also requires licensure for entities engaged in the business of ‘receiving money for transmission’. (…) The sale of a Bitcoin or other transactions that involve the receipt of money and the transmission of monetary value do not fit this definition of money transmission”, adds the letter.
And this continues for a few more pages, until the Bitcoin Foundation finally asks for a public statement from the Department of Financial Institutions of California, at the end of the document. Well, it’s starting to look that this is only the beginning of a financial quarrel that will make a lot of ink run in the media and in the court rooms of the state. But that’s just our humble opinion, make up your mind by reading the full letter written by the Bitcoin Foundation here.