The global proliferation of Bitcoin and other crypto-currencies has caused many governmental agencies to review their financial code sections that relate to money transmission reporting requirements.
Since the FinCEN advisory was released last year, there has been great concern and confusion in the barter industry. We have reported on some of this confusion in the past.
Some state governments are reviewing their own codes. There is concern that such reviews might result in new code revisions that could be written in a manner so as to restrict, or even eliminate the organized barter business model in multiple jurisdictions.
This spring IRTA became aware of the State of California’s intent to revise their Money Transmission Act, (MTA), Financial Code Section 2000, and initiated contact with the California Department of Business Oversight, (CDBO), submitting its position and explanation on why barter exchanges are not Bitcoin-like crypto-currencies, and as such should not be covered by the California MTA.
On June 26, 2014, CDBO Commissioner, Jan Lynn Owen, and Senior Legal Counsel, Jennifer Rumberger, Esq. wrote IRTA confirming “barter exchanges do not need to be licensed under the CA Money Transmitter Act.”
Commissioner Owen and Senior Counsel Rumberger based their opinion on the following important points: 1) Since barter exchanges act as third party record keepers, they do not “receive money for transmission,” 2) barter exchanges are not an “issuer of stored value,” and 3) barter exchange trade credits are not redeemable for cash.
IRTA President Annette Riggs reiterated the importance of the CBDO’s opinion regarding barter exchanges not falling under the California Money Transmitter Act by saying:
“IRTA was assured from FinCEN last year that their advisory on Money Transmitter reporting requirements was not intended to include the barter industry. The recent reviews by various states required us to pay close attention to how the state codes are being written. The response that IRTA received from the CBDO sets an important precedent and makes a clear distinction between the barter industry and the growing crypto-currency sector that is required to meet reporting requirements as Money Transmitters.
“All member agreements and methodologies that trade/barter exchanges use need to be in accordance with our status as third-party record keepers. The upcoming 35th Annual Convention in Cancun, September 25 – 27 will be a great opportunity to discuss this in detail and review the model contract that IRTA is revising to assure that exchanges do not compromise the legal status obtained in 1982 in the TEFRA Act.”