Bitcoin Receives Cease and Desist Order Evidencing Increased Regulatory Scrutiny of Virtual Currency

On May 30, 2013, the California Department of Financial Institutions (“CADFI”) issued a cease and desist letter to Bitcoin Foundation, a not-for-profit organization established to standardize, protect, and promote the use and adoption of Bitcoin. CADFI stated in its letter that Bitcoin Foundation “may be engaged in the business of money transmission without having obtained the license or proper authorization required by” California’s Money Transmission Act. CADFI’s issuance of the letter, the Financial Crimes Enforcement Network’s (“FinCEN”) recent guidance regarding virtual currencies, and the subsequent asset seizures of prominent Bitcoin exchanges all reflect increased scrutiny of the use of virtual currencies.

CALIFORNIA DEPARTMENT OF FINANCIAL INSTITUTIONS’ CEASE AND DESIST ORDER -

CADFI’s letter notes that Bitcoin Foundation may be in violation of California’s money transmitter licensing law (Cal. Fin. Code § 2030), as well as federal statutes that impose penalties for the failure to have a required state money transmission license and the failure to register as a money transmission business. (18 U.S.C. § 1960, 31 U.S.C. § 5330.)

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Topics:  Bitcoins, Business Assets, Cease and Desist, Financial Actvities, FinCEN, Virtual Currency

Published In: Criminal Law Updates, Finance & Banking Updates, Science, Computers & Technology Updates

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