Rhode Island has become the latest state to create legislation specifically targeted at cryptocurrencies. According to a new law, the state will begin regulating businesses that accept fees to conduct crypto transmission or have control of crypto coins, January 2020 onwards.
As part of the new law, such businesses will need to comply with anti-money practices and anti-fraud practices. They are also required to keep customer assets in safe custody. Firms will be required to demonstrate the ability to maintain the availability, integrity, and confidentially of any private information that they receive from their clients. The law mirrors existing money transmitter regulation in the state of Rhode Island, meaning companies will have to maintain crypto holdings equal to the amount that clients transmit.
A Broad and Ambiguous Definition
The new crypto bill has a broad definition for cryptocurrencies. It defines them as the digital representation of value, utilized as a store of value, unit of account, medium of exchange. However, crypto will not be accepted as legal tender in Rhode Island per the new law. Household and personal use of cryptocurrencies will not require users to acquire a license. Nor will the use of crypto for escrow services or academic services.
In keeping with the SEC’s ambiguity regarding the status of ICO tokens, the Rhode Island law does not cover the status of tokens on a blockchain. While there has been considerable discussion around ICOs, the agency is yet to clarify guidelines regarding their status. Recently the agency approved Pocketful of Quarters, a gaming startup, to market its in-game currency as utility tokens. At the same time, however, it has taken action against several startups for marketing their tokens as utilities.
Rhode Island has generally been enthusiastic about blockchain and cryptocurrencies. In fact, a short while ago, the state Division of Purchase requested for public input on the use of blockchain technology to deliver government services. The state’s goal was to improve efficiency, transparency, security, as well as become more business-friendly.
Crypto Regulation across US State
For the most part, cryptocurrencies are regulated using money transmitter laws as guidance. While cryptocurrencies are not banned outright in these locations, there is no known legislation targeting them. In general, crypto regulation across the US is a patchwork of rules and regulation with varying degrees of oversight. At the Federal level, the SEC and the IRS have both enacted policies that target the use of crypto.