Pennsylvania Clarifies That Crypto Exchanges Are Not Money Transmitters

Pennsylvania's government has clarified that crypto exchanges and providers do not require a money transmission license to operate.

AccessTimeIconJan 23, 2019 at 10:15 a.m. UTC
Updated Sep 13, 2021 at 8:49 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Pennsylvania's Department of Banking and Securities (DoBS) has clarified that crypto exchanges and service providers do not require a money transmission license to operate in the state.

The DoBS published the new guidance for the local crypto industry on Wednesday, following a number of enquiries from businesses, it said.

The department explained that as bitcoin and other cryptocurrencies are not "money," the Money Transmission Business Licensing Law or the Money Transmitter Act of Pennsylvania does not apply to crypto trading platforms.

According to the act, only fiat currency or the U.S. government-issued currency is considered money. “To date, no jurisdiction in the United States has designated virtual currency as legal tender,” the department said.

The act states that parties conducting the business of transmitting money need to be licensed if they transfer fiat currency and must charge a fee for the transfer. However, as crypto exchanges “never directly handle” fiat currency and the transactions are conducted through a bank account, these "are not money transmitters” that require the license, according to the guidance.

Other businesses in the sector, such as cryptocurrency kiosk, ATM and vending machine providers are also not money transmitters.

The DoBS said:

“In both the one-way and two-way Kiosk systems, there is no transfer of money to any third party. The user of the Kiosk merely exchanges fiat currency for virtual currency and vice versa, and there is no money transmission.”

Pennsylvania's clarification on the license arrives after a three-year delay. Back in January 2016, the government was seeking to update the state’s definition of money to cover cryptocurrency businesses, but the initiative stalled at the time due to a budget impasse.

The scenario may be different for firms dealing with initial coin offering (ICO) tokens at the federal level, however. In March 2018, the Financial Crimes Enforcement Network (FinCEN) said: “An exchange that sells ICO coins or tokens, or exchanges them for other virtual currency, fiat currency, or other value that substitutes for currency, would typically also be a money transmitter.”

Pennsylvania State Capitol image via Shutterstock 

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.