The Pennsylvania Department of Banking and Securities (DoBS) issued guidance this week declaring that cryptocurrency service providers and exchanges do not qualify as money transmitters. As a result, they are not subject to the licensing provisions of the state’s Money Transmitter Act (MTA).
The Department issued the advisory statement in response to inquiries from multiple industry entities seeking clarification on the applicability of the MTA to their businesses.
According to the DoBS, Pennsylvania law defines money as “lawful money of the United States” - a definition that excludes digital currencies like Bitcoin. In addition, the Department noted that the transmission of money must involve the transfer of fiat currency “with or on behalf of an individual to a 3rd party, and the money transmitter must charge a fee for the transmission.”
After observing that digital currency exchanges “never directly handle fiat currency” and that “fiat currency paid by or to a user is maintained in a bank account in the Platform’s name at a depository institution,” the DoBS concluded:
Under the MTA, these Platforms are not money transmitters. The Platforms, while never directly handling fiat currency, transact virtual currency settlements for the users and facilitate the change in ownership of virtual currencies for the users. There is no transferring money from a user to another user or 3rd party, and the Platform is not engaged in the business of providing payment services or money transfer services.
The Department also extended that finding to include entities like ATMs, kiosk vending machines, and crypto kiosks, which simply exchange “fiat currency for virtual currency and vice versa,” without ever transferring money to third parties.