Source: https://www.klgates.com/Newly-Released-Virtual-Currency-Businesses-Act-Augurs-Increased-State-Regulation-of-Bitcoin-Ether-and-other-Digital-and-Crypto-Currencies-11-07-2017
Timestamp: 2020-08-15 16:26:17
Document Index: 43938226

Matched Legal Cases: ['§ 201', '§ 102', '§ 102', '§ 102', '§ 102', '§ 102', '§ 102', '§ 102', '§ 102', '§ 102', '§ 102', '§ 102', '§ 102', '§ 204', '§ 204', '§ 204', '§ 204', '§ 103', '§ 103', '§ 103', '§ 103', '§ 103', '§ 703', '§ 203', '§ 203', '§ 203', '§ 207', '§ 207', '§ 207', '§ 207', '§ 207', '§ 103', '§ 207', '§ 601', '§ 402', '§ 402', '§ 402', '§ 303']

Newly Released Virtual-Currency Businesses Act Augurs Increased State Regulation of Bitcoin, Ether, and other Digital and Crypto Currencies | HUB | K&L Gates
By: Jeremy M. McLaughlin, Daniel S. Cohen, Eric A. Love
K&L Gates will be tracking the extent to which states decide to adopt the Act with respect to virtual, digital, or crypto currency companies doing business in their state. Reach out to members of the Fintech and Payments teams to discuss how the Act could possibly affect your business.
[1] Although many prefer to use the term “crypto” or “digital” currencies, since the ULC’s Act has adopted the term “virtual currency,” we will use that term.
[2] VCBA, Prefatory Note.
[3] Id. § 201.
[4] Id. § 102(25). Other activities that qualify as “virtual-currency business activity” relate to interests in precious metal and exchanging digital representations of value within an online game or gaming platform. Id. Those activities are outside the scope of this alert.
[5] Id. § 102, Comment 2.
[6] Id. § 102(23)(A).
[7] Id. § 102(23)(B)(i).
[8] Although the ULC states the Act “may lead to [U.S. Securities and Exchange Commission] approval of virtual-currency offerings,” the Act does not discuss Initial Coin Offerings (“ICO”), so there is no clear guidance on whether the Act applies to tokens offered in an ICO. The answer will likely depend on the particular facts. On the one hand, virtual currency is defined to include a “store of value.” However, the specific characteristics of the token would have to be analyzed to determine, for example, if it could be converted to fiat currency or other virtual currency, whether it can only be used on the platform, and whether it can be sold in the secondary market.
[9] Id. § 102(3)(A).
[10] Id. Prefatory Note.
[11] Id. § 102(5).
[12] Id. § 102, Comment 5.
[13] Id. § 102(21).
[14] Id. § 102, Comment 10.
[15] Id. § 102(20).
[16] Id. § 102(24).
[17] Id. § 102, Comment 2.
[18] Id. § 204.
[19] Id. § 204, Comments 1, 5.
[20] Id. § 204(b).
[21] Id. § 204(c).
[22] Id. §§ 103(1), (2), (4), (7).
[23] Id. § 103(b).
[24] Id. § 103(b)(8).
[25] Id. § 103(b)(6).
[26] Id. § 103(b)(3). Other exemptions exist for dealers in foreign exchange, attorneys, and title insurance companies providing escrow services, securities, or commodities intermediaries, secured creditors, virtual-currency control-services vendors, and persons that provide virtual-currency business activities free of charge.
[27] Id. § 703(b).
[28] Id. § 203, Alternative A.
[29] Id. § 203, Alternative B, (a)(2).
[30] Id. §§ 203, Alternative B, (a)(3), (4).
[31] The Act’s $35,000 annual limit is per state; it is not an aggregate limit across all states. Id. § 207, Comment 4.
[32] Id. § 207(a).
[33] Id. §§ 207(a)(6)-(8).
[34] Id. § 207(d)(4).
[35] Id. § 207, Comment 2.
[36] Id. § 103, Comment 2.
[37] Id. § 207, Comment 3.
[38] Id. § § 601–602.
[39] Id. § 402(a)(1). According to Comment 1 to Section 402, the department determines what actions constitute a material violation of the act. Moreover, “patterns and practices of same minor violation” can be considered material. Id.
[40] Id. § 402(a)(3).
[41] Id. § 402, Comment 1.
[42] Id. § 303(b).
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