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The Uniform Money Services Act (UMSA), a model law promulgated by the Uniform Law Commission and adopted in whole or in part in several states, requires a license to “engage in money transmission activities or to advertise. , [one’s self] as providing the transmission of money. “1 A license is also required to do the same for currency exchange, if the currency exchange business represents” income equal to or greater than [five percent] of the total income ”of a business (although a remittance transmitter does not generally need to obtain a foreign exchange license to provide such services) .2 The remittance of funds is defined as“ the sale or issuance of payment instruments, stored value or receipt of money or monetary value for transmission. 3 Currency exchange means “the receipt of income from the exchange of money from one government for money from another government.” 4 Critically, money is defined for the purposes of UMSA as “a medium of exchange that is authorized or adopted by the United States or a foreign government.” 5 Some states that have not adopted UMSA use similar language.
Due to El Salvador’s adoption of Bitcoin as legal tender, it arguably became a medium of exchange adopted by a foreign government. According to a plain language reading, engaging in money transfer or currency exchange activities with Bitcoin may now come within the scope of laws on money transmission and currency exchange in any state or territory that has adopted the UMSA definition of “money”. Thus, the requirements of these laws could apply even in jurisdictions that have not otherwise affirmatively addressed the virtual currency business in law, regulation or guidance. As a result, companies engaged in the Bitcoin business should carefully assess their business models to determine whether the services they provide would now be considered a money transmission or currency exchange in the U.S. jurisdictions in which they operate. Sidley has a team that assesses these and other indirect effects of treating Bitcoin as legal tender in El Salvador, including on securities and tax laws.
1 Unif. Money Services Act § 201 (a) (amended 2004).
2Id. § 401 (a); see also § 401, cmt. 2.
3Id. § 102 (14).
4Id. § 102 (6).
5Id. § 102 (12).
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