The Conference of State Bank Supervisors and the North American Securities Administrators Association Release Guidance Regarding Virtual Currencies


The Conference of State Bank Supervisors (the “CSBS”), through its Emerging Payments Task Force (the “Task Force”), and the North American Securities Administrators Association (the “NASAA”) released Model State Consumer and Investor Guidance on Virtual Currency (the “Guidance”).  The Guidance is designed to assist state regulatory agencies in providing consumers with information about virtual currency as well as factors that consumers should consider when transacting with or investing in virtual currencies.  The Guidance further explains what virtual currency is, provides a list of risks consumers should consider when investing, and reminds consumers to research the sort of regulation, if any, that would apply to virtual currency transactions or investments in their state.  Specifically, the Guidance encourages consumers to “do their homework” and consider the following before investing in virtual currency:

  • Virtual currencies and companies dealing in virtual currencies may or may not be regulated;
  • Virtual currencies can be stolen or otherwise subject to cybercrime;
  • Virtual currencies are volatile in value;
  • Virtual currencies have been connected to criminal activities; and
  • Virtual currency transactions may be taxable.

The Task Force was created to examine changes in the area of legacy payment systems, retail payment innovations and virtual currencies.  Topics to be addressed by the Task Force include establishing the right characterization of virtual currency, consumer protection needs raised by instantly settled payments, the resolution of conflicts between commercial entities in an instantaneous transfer system and whether, and in what manner, states should license entities involved with digital currency.  Massachusetts Commissioner of Banks David Cotney, the chairman of the Task Force, has stated that he expects that the Task Force will eventually draft a framework for oversight of virtual currencies to offer to states for adoption.  The Task Force will hold a public hearing on May 16, 2014 in Chicago to gather comments regarding the potential impact of emerging technologies, products and services on monetary, regulatory and consumer decisions.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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