New North Carolina Money Transmitter Bill Could Push Out Bitcoin Companies

New North Carolina Money Transmitter Bill Could Push Out Bitcoin Companies

How many Bitcoin companies operate in North Carolina? How many will there be? A new piece of legislation making its way through the North Carolina State Senate is attempting to enact further regulations on companies that handle digital currencies such as bitcoin. Originally sponsored by a state representative that also happens to be a vice president at Wells Fargo, the North Carolina legislature has moved forward with H289. H289 has made it through the North Carolina House of Representatives, and has started making its way through their state Senate. Luckily for us, the new senate bill S680 will not be voted on until Spring 2016. S680 is officially drafted by the North Carolina Banking Commission, which specifically mentioned that the proposed legislation is coming about as a result of requests by certain companies seeking clarity about digital currency regulation. It’s pretty easy to figure out which company that is.

The Politician Forgot to Take Off his Banker Hat

Before delving into the implication of this new update to the North Carolina Money Transmitters Act, we should consider the ridiculousness of how it came to be in the first place. The Representative that forgot to take off his hat was none other than Republican Representative Stephen Ross. Officially, his title is Executive Vice President, and he often votes on and sponsors financial industry related bills. Ross has also voted to protect officials that refuse to perform same-sex ceremonies. Such a bill has thus far only seen success in Utah.
A much better example of how to wear two hats can be found in a Virginia Representative. Mark Keam, a vice president for Verizon Communications has vowed to abstain from voting on issues that might present a conflict of interest with his Verizon job. Why this isn’t a basic requirement is still baffling to me. More importantly, Keam committed to not submitting any telecommunications bills during his time on the job. Representative Stephen Ross, from just a state south of Virginia, is truly only representative of the perceived political corruption and rot that fuels the anarchist movement. In a world where people are wearing more hats, both literally and figuratively, better rules to weed out moral hazard and stymie conflicts of interest are needed. More importantly, people who will follow these rules, and not bend them until they break, are also needed.

Coinbase Supports This Bill

As Bitcoin company BitGo’s engineer Jameson Lopp notes in a Medium article, Coinbase is the only Bitcoin company with lobbyists in North Carolina and it is believed that these lobbyists are actively pushing for more regulation of Bitcoin companies. These regulations would benefit companies such as Coinbase but would damage the efficacy of other smaller companies in North Carolina. In fact, Coinbase published a blog post where they praised the proposed legislation out of North Carolina. Coinbase wrote:
We want to thank the NC Bank Commissioner’s office for engaging with industry while modernizing its MTA and working to make NC a welcoming place for tech innovation. Please join us in thanking both Representative Ross and Senator Gunn, who sponsored the legislation in the NC House and Senate, respectively, and in urging the NC Legislature to move quickly in passing the legislation.

Proposed Changes May Harm Some Bitcoin Companies

Previously, the net worth requirement for receiving a license and being a fully legal Bitcoin company in the state was 100K, now it could be 250K. Depending on the volume your company handles, the surety bond that you need to provide could cost as much as 100K more than the previous $150K amount. The application fee itself has increased from $500 to $1,500 and the annual assessment fee has been raised to $5,000 and also heightens depending on transmission volume.
As Coinbase has settled itself into North Carolina. Other Bitcoin companies, such as Xapo and CoinOutlet, have announced their departure from the state. Jameson Lopp hopes that S680 can suffer a fate similar to AB1326 in the California legislature. He is working with the Chamber of Digital Commerce to create amendments to the bill that would exempt certain types of entities or activities from this legislation, and potentially give some Bitcoin companies some breathing room. However, he notes that the complete defeat of the bill is a preferred outcome.

About the author: Caleb Chen is a cryptocurrency advocate and is a research assistant at the Chamber of Digital Commerce.

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