Despite Lengthy Process For Establishing Crypto Regulations, New Laws Leave Masses In Further Confusion
The SEC for the United States has been working to establish regulations regarding different aspects of the cryptocurrency community. In a survey by two lawyers at Carlton Fields, Justin Wales and Arnaldo Rego, the twosome polled all 50 states to see if they could find some clarity on the new laws regarding money transmitting. Even though the use and adoption of crypto is continuing, most states have no idea about the laws that they are governed by, which leaves room open to commit cybercrimes as a result.
Based on the information collected, there are 12 states that the survey is saying are “unclear” about the current money laundering laws, especially in regard to the way that they apply to cryptocurrency. Considering that there have been many enthusiasts and investors that have been prosecuted, that number is substantial.
Along with the 12 “unclear” states, there are 11 states that the firm deemed “likely not applicable to cryptocurrencies,” concerning their own laws for money laundering. That means that, collectively, about half of the states in the country are fairly risky for anyone wanting to participate on exchanges.
The examination report said,
“There was a time when it made a lot of sense for states to regulate money transmission or the business of transferring funds, currency, or other substitutes of money. In a pre-digital economy, almost all money transmitter businesses had to be physically located in the state where they offered payment or financial services for its residents, such as facilitating the payment of electric bills or exchanging currencies before a trip.”
Digital currency is beneficial for consumers for their nearly-borderless characteristic. It only takes a smartphone, tablet, or some type of computer with a network connection to send digital assets easily.
In the report, the researchers specifically note how,
“in the crypto era, state-by-state money transmitter rules just make things more complicated. There is no clarity about whether a company issuing a token, operating a wallet, or facilitating crypto to crypto or crypto to fiat transactions needs a license in every state in which it could theoretically operate.”
One prime example is Michigan, which earned an “unclear” classification. There was one report from the SEC included in the research from Carlton Fields, which was due to disciplinary action against a Michigan-based company called Tokenlot. This company called itself an “ICO superstore.”
Based on a report by Steven Peikin of the Enforcement Division, the resolution on the case says,
“Without admitting or denying the SEC’s findings, Tokenlot, Kugel, and Lewitt consented to the SEC’s order and agreed to pay $471,000 in disgorgement plus $7,929 in interest, and they will retain an independent third party to destroy Tokenlot’s remaining inventory of digital assets.”
That is not the only issue that Michigan citizens have had.
In 2017, Bradley Anthony Stetkiw was using Localbitcoins.com when the SEC accused him of,
“buying, selling and brokering ‘deals for hundreds of thousands of dollars in bitcoin while failing to comply with money transmitting business registration requirements set forth in Title 31, United States Code, Section 5330.”
It is no surprise that many people believe that Michigan has decided to be fairly hostile against decentralized digital assets, but that is not the case. They are actually one of the top 10 cryptocurrency-using states in the country.
In fact, in Detroit,
“a bunch of cryptocurrency-based automated teller machines…are popping up in great number in liquor stores, gas stations, and cash-checking locations.”
As if this whole situation was not complicated enough, researchers decided to add on more details about registration and licensing for businesses that want to integrate these same services.
“Today money transmitter businesses often have to apply for separate licenses within the states they operate, in addition to registering as a ‘Money Service Business [with federal regulators]. This has made the cost of offering money transmission services across the country incredibly expensive and time-consuming. Though the cost and difficulty of obtaining a license varies by state, as of August 2018 every state except Montana requires at least some money service businesses to obtain a money transmitter license to lawfully operate,”
the researchers said in the report.
While other countries have created clear regulations for locals to perform transactions under, the US is lagging behind, and it is making the whole concept of using cryptocurrency harder for Americans. Furthermore, it becomes more difficult to know what to abide by.
The researchers said that, for Americans,
“it’s not always clear how decentralized payment networks or the issuance of digital assets implicate existing regulations. Some states, for better (Wyoming) or worse (New York), have explicitly amended legislation to address digital assets, but for every clear piece of legislative guidance, there are many jurisdictions that leave entrepreneurs – and in some cases, digital currency users – in the dark.”