North Carolina is taking a thus-far unique and relatively moderate approach to regulating virtual currencies such as Bitcoin. The NC Commission of Banks (NCCOB), the primary financial regulator in the state, told bitcoin news website COINFinance that “Virtual currency regulation is already within the scope of the NC Money Transmitters Act.”
That Act requires any entity engaged in monetary transmission to obtain a license from the state and have a networth of not less than $100,000 at all times.
An NCCOB spokesperson added, “Because we have some concerns about the ability of existing law to keep pace with changes in cryptocurrencies, further legislation may be necessary.”
New York State has released BitLicense regulation proposals that many in the Bitcoin community find overly restrictive. “I think it’s an over-reach,” says Dan Spuler, who co-founded the recent Cryptolina Bitcoin conference at the Raleigh Convention Center that drew more than 400 people last month.
Spuler speculates that the conference may have helped spark this discussion in North Carolina.
Is it virtual or digital currency?
“I’m not against regulation personally,” Spuler adds, “But we really need further education efforts the part of Bitcoin industry leaders on which of these proposed regulations would be effective and which harmful.”
Spuler notes that he dislikes the term “virtual currency” for these new cryptocurrencies. “Virtual suggests ‘simulated,’ and Bitcoin is very much real.” He prefers to call Bitcoin “digital currency.”
The NCCOB seeks “clarification of existing law” in the NC Money Transmitters Act rather than to create new rules for cryptocurrencies. The clarification would require public hearings and legal debate before becoming official.
The NCCOB said that eventually, it plans to evaluate each application (for a Bitcoin license) on a case-by-case-basis. It’s spokesperson said:
“At a minimum, any entity that receives virtual currency for transmission to a third party or holds funds incidental to the transmission of virtual currency to a third party will be expected to apply for a license. The NC Money Transmitters Act applies to companies that that make their services available to North Carolina residents via the internet, even though the company does not have a physical location in this state. These companies would be expected to file an application for licensure.”
Over-reaching regulation could stifle innovation
Spuler, like others in the Bitcoin community, worries that over-reaching regulation could stifle the development of innovative startups in the space wherever they’re enacted. Should the New York proposed regulations “Could drive Bitcoin businesses out of the state.”
North Carolina, on the other hand, “Has a real chance to be a leader and if you look at it from an economic development standpoint, it’s a tremendous opportunity,” says Spuler.
He also feels that the Bitcoin community is busy self-regulating, coming up with innovative security solutions (such as requiring multiple signatures to open a private Bitcoin key). He says a primary fear in the Bitcoin industry is that regulations will affect some firms or even individuals in the Bitcoin industry unnecessarily.
“Fundamentally these regulations are designed to protect consumers and prevent fraud,” so making them apply to individuals or companies involved in aspects of digital currencies other than transmission (such as storage of Bitcoin private keys) could be troublesome, he suggests.