Free Minds & Free Markets

New Hampshire Exempts Bitcoin and Other Virtual Currency Businesses from Money Transmitter Regulation

New Hampshire's governor Chris Sununu (R) signed into law this month a bill that exempts "Persons who engage in the business of selling or issuing payment instruments or stored value solely in the form of convertible virtual currency or receive convertible virtual currency for transmission to another location" from the state's existing regulations on money transmitters. (They shall still be subject to the state's general consumer protection law.)

According to one of the bill's co-sponsors, and a participant in the Free State Project, Rep. Keith Ammon (R-Hillsborough Dist. 40), their intention is that the law would cover those who exchange virtual currency for U.S. dollars, since that would constitute an act of selling "convertible virtual convertible currency" since under standard definitions, "selling" means "exchanging for dollars."

Rep. Barbara Biggie (R-Hillsborough Dist. 23), a former Western Union employee and vice chair of the House Commerce and Consumer Affairs Committee, introduced the bill, which passed the New Hampshire House 185-170, and its Senate 13-10.

Ammon admits he's a little surprised it went through so smoothly, and credits the fact that in addition to Biggie. Commerce Committee chair John Hunt (R-Cheshire Dist. 11) supported the bill through committee and beyond. Two different members of the relevant Senate committee admitted publicly to being bitcoin owners.

This new law was necessary, Ammon says, because of some clumsy legislating done previously by a body whose average age is high and tech-savvy is low. That 2015 regulation put cryptocurrency businesses under the thrall of state banking authorities, which Ammon says was not its original intention. That law caused at least one bitcoin company, Poloniex, to stop doing business in the state.

And since "our governor knows we have a lot of cryptocurrency enthusiasts in the state" his signing it followed naturally, Ammon says. "We certainly don't want to put up a signal that we are hostile to a burgeoning industry. We are having issues retaining our younger workforce here because of lack of high-tech jobs."

The fact that many involved in the Free State Project were early adopters of Bitcoin—and thus, if they were cold-blooded enough to not sell most of it early, could well be shockingly wealthy now—could have interesting repercussions for New Hampshire business and politics in the future, Ammon thinks, with their newly boosted ability to "start businesses, buy properties, and donate to political campaigns."

Andrea O'Sullivan, who studies technology policy for the Mercatus Center, says in an email that "the bill is fairly unusual, and a welcome development from the perspective of the cryptocurrency industry."

"Most states that have introduced legislation," she says, "have done so in a way that would increase regulatory discretion over cryptocurrencies, rather than eliminate cryptocurrency from regs."

The Coin Center has put together a dense but informative chart on state regulatory actions affecting cryptocurrencies.

O'Sullivan points out that "states that have not introduced legislation tend to require Bitcoin businesses to follow standard money transmitter regulations. This means that Bitcoin businesses could be required to follow a separate licensing process—with all of the fees, lawyers, and compliance costs that accrue—for dozens of separate states. That adds up!"

Jerry Brito, who runs Coin Center, praises New Hampshire's law as a surprising "great step in the right direction," but points out that it's not really a national game changer since any virtual currency-related business, even if based in New Hampshire, to deal with citizens of other states would have to deal with those states' "bespoke" laws regarding bitcoin and its brethren.

Brito is working with the Uniform Law Commission (an advisory body whose Uniform Commercial Code has been adopted by every state) on what he thinks would be a good model law that other states might adopt. Many of the states that have so far not unduly hobbled bitcoin businesses (such as Texas and Illinois) have done so, he notes, via policy, not codified law.

One of Brito's goals is to get across the idea that people involved in virtual currency actions who aren't acting in a custodial role—never possessing or controlling other people's property—don't need any new regulations at all. He's also working on moving forward a set of federal regulations regarding cryptocurrencies that will pre-empt state attempts to regulate them more harshly. That process is currently embroiled in a lawsuit from the Conference of State Bank Supervisors.

New Hampshire's Northeast neighbor New York has taken a different tack, surrounding the trading of Bitcoin (the market leader virtual currency) with a web of regulations driving some businesses out of state.

However Bitcoin-friendly this new New Hampshire law is, last year New Hampshire's legislature declined to pass a bill allowing state taxes to be paid in the digital currency. The state shot itself in the foot slightly with that choice; had it, say, taken in bitcoin for tax bills on January 1 of this year, the U.S. dollar value of that currency would have increased by around 150 180 percent.

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  • Juice||

    How does someone taking a picture of your street violate your privacy?

  • Diane Reynolds (Paul.)||

    From the comments:

    Germany is very resistant to change sometimes and just terrified of everything sometimes. Things Germans are scared of:
    CCTV cameras
    Cashless society
    Credit cards
    Bank card transactions
    Nuclear power
    Google streetview
    Financial speculation
    Crossing the street on a red when there's no traffic
    GM food
    British beef
    Food grown outside of the EU
    Online transactions
    Paperless contracts
    Beer not made under the Reinheitsgebot
    Being asked about their personal life at work
    Working on a Sunday
    People who don't greet each other in lifts
    Austrians bearing gifts
  • some guy||

    Germans must not do well in major US cities.

  • ||

    The state shot itself in the foot slightly with that choice; had it, say, taken in bitcoin for tax bills on January 1 of this year, the U.S. dollar value of that currency would have increased by around 150 percent.

    This is completely befuddling. Was the article written weeks ago? Jan. 1 to June 13 is way more than 150%. But taxes wouldn't have been collected on Jan. 1, it would've been Apr. 15th (or 17th this year) like normal. However, BTC in January was valued lower than April and April is still well more than 150%.

    Also, part of the point of BTC was to avoid the inflationary/collapse cycles (or at least explore them better) that plague fiat currency. The government holding large sums of cash that is rapidly increasing in value isn't exactly a good thing/or ideal. Either you've got some esoteric portion of taxes paid in BTC before Jan. 1 or I'd say don't quit your day job.

  • Jerryskids||

    Wouldn't the state also run into the problem of whether or not Bitcoin is a currency? If they'll accept Bitcoin as payment, will they also accept goats and pigs and chickens?

    Not that the state isn't perfectly capable of saying for one purpose it's a currency but for another purpose it's not, depending on which one's going to land you in jail or subject you to asset forfeiture.

  • Jerryskids||

    Not that many or most transactions aren't virtual currency these days when your debit card just authorizes the transmission of little bits of data from one account to another. But the feds still have a problem with Bitcoin and the question of what exactly it is, don't they?

  • Libertarian||

    First hair braiding and now this. The Free State Project is really starting to bear fruit.

  • Diane Reynolds (Paul.)||

    It seems so. I was admittedly a little skeptical, feeling the initial efforts were a little pedestrian in nature, but they've been getting some good wins lately.

    I swear I would move there if it were anywhere but New Hampshire.

  • exchef100||

    I'm legitimately looking at it as a potential place to move to but it seems that the best cities to move to (the ones within commuting distance of Boston) also have horrible heroin problems. Second worst in the country horrible.

  • CE||

    Good news, but BitCoin still only has value because it can be converted to USD, and the USD only has value because it's a get out of jail free card for US taxes when the government comes to collect them.

  • Jerryskids||

    For a feel-good story, Jerry Hartfield is free. The wheels of justice may grind slowly, but they grind everything in their path. And then pulverize the grounds.

  • Sevo||

    It IS a feel-good story, but it would be a feel-better story if someone was held accountable.
    I'll take the good and continue to hope for the better.

  • Buy Bitcoin India||


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