North Carolina Embraces Blockchain Technology
Multi-sig, Non-hosted wallets, and Blockchain 2.0 Excluded From Onerous Regulation
In response to the Chamber of Digital Commerce’s efforts in North Carolina, the Commissioner of Banks has provided clarification through Frequently Asked Questions (FAQs) on the applicability of the current Money Transmitters Act (Act) to virtual currency businesses in the State. Perianne Boring, President of the Chamber of Digital Commerce, noted: “North Carolina has taken a leadership role in state-level virtual currency debates and is setting an example to other states to take a more thoughtful and deliberate approach to regulating this nascent industry.” This guidance is relevant to all companies in the virtual currency industry regardless of location because North Carolina requires that entities that engage in money transmission obtain a money transmission license to offer such services in North Carolina.
The recently issued FAQs addresses concerns raised by the Chamber regarding scope and regulatory overreach under the current Act. The FAQs clearly state that virtual currency miners, blockchain 2.0 entities (including smart contracts platforms, colored coins, and smart property), multi-signature software, and non-hosted, non-custodial wallets, fall outside the scope of the Act – further clarifying that these business models will not require a money transmitter license in the State.
The Chamber commends the North Carolina Commissioner of Banks for its leadership in providing clarity to the blockchain and virtual currency industry by excluding certain business models from money transmission regulation and promoting business in the State. As Amy Kim, counsel at BuckleySandler LLP noted, “these FAQs are quite remarkable as they define specific activities as falling outside the scope of the regulation, which very well may serve as a template for other state interpretations.”
Arika Pierce, Principal at Gide, also states, “as virtual currency continues to evolve as an industry it’s great to see North Carolina’s willingness to work with industry stakeholders to ensure that innovative companies can operate in the state. Our hope is that other states will follow North Carolina’s lead in being collaborative and thoughtful in their approach to overseeing this industry.”
As background, the North Carolina legislature is considering a bill, at the request of the Commissioner of Banks, that would update the state’s existing Money Transmitter Act to expressly include virtual currency businesses. The Chamber has been actively involved in this process, expressing concern over the proposed legislation’s broad language that could potentially be interpreted to capture certain virtual currency business models that are clearly not engaged in money transmission and should not be regulated as such. The Chamber believes that taking a broad interpretation of money transmission would subject small businesses, startups, and technology companies to onerous reporting requirements and hundreds of thousands of dollars in fees and bonding requirements.
The Chamber would like to thank Buckley Sandler and Gide for their assistance in the Chamber’s efforts in North Carolina.
About the Chamber of Digital Commerce
The Chamber of Digital Commerce is the world’s leading trade association dedicated to promoting the understanding, acceptance and use of digital assets and blockchain-based technologies. Headquartered in Washington, D.C., the Chamber is the founder of the Smart Contracts Alliance, the Blockchain Alliance, the Global Blockchain Forum and many other key industry initiatives. For more information, please visit DigitalChamber.org or follow us on Twitter: @ChamberDigital.