Though a number US states have recently introduced measures that would allow bitcoin to become accepted as payment, Vermont came into the spotlight this week for a different reason – its decision to abruptly shut down the state’s only bitcoin ATM.
While the machines operators, New York-based PYC, have tried to paint the state as out of touch with innovation, the state’s Department of Financial Regulation is seeking to set the record straight that it’s anything but.
In a new interview, Commissioner Susan Donegan described digital currencies as “not a new issue” for the small New England state, which she contends has met with “a handful” of such businesses in recent years that have received licenses, or have pending licenses, to operate.
Donegan told CoinDesk:
“We’re open and having those conversations and if going through that process is either too daunting or doesn’t fit into someone’s philosophy, they should rethink being in this business. This is money. We don’t allow folks to go without some sort of oversight.”
Perhaps most notably, Donegan suggested that, unlike regulators in New York and California, Vermont already has existing laws under which digital currency businesses can be regulated.
Donegan pointed to Title 8, Chapter 79 or the Vermont Statutes, dealing with money services. Particularly, she emphasized a passage that covers “monetary value evidenced by digital record”, a definition the state strongly believes captures bitcoin services.
“I believe that bitcoin fits within the definition of stored value. Bitcoin is a medium of exchange, but it’s evidenced by electronic record. Without that electronic record there’s no tangible record, so it does exist on that record,” Donegan said, adding:
”We’re pretty clearly within the statute of a money transmitter.”
Rules of the road
Donegan went on to describe herself as supportive of innovation, noting her belief that PYC and the media have dragged some more prominent digital currency startups into the controversy surrounding the ATM shutdown.
“The concern is that a different company – I think the company was named Coinbase – that they were not licensed or should be licensed,” she said. “I know that Coinbase is licensed in quite a few states. It’s not something that I think a serious company is going to put up a fuss, they know the rules of the road.”
Vermont, Donegan said, isn’t the only state that has taken an approach that emphasizes face-to-face interaction. She described the licensing process as one where digital currency businesses sit down with the state to discuss their business plan.
Factors that are considered for determination include whether the company executives have past criminal convictions, whether the business is audited or whether other states have licensed the entity. Should the business satisfy all requirements, Donegan said a license is granted.
“We make sure companies have a say, and if there’s a public good, then they’re free to start work. It’s not a particularly onerous process, but it’s one that we feel satisfies the kind of oversight we want to see for any money transmission operation,” she added.
Bitcoin as monetary value
At issue in the interpretation by PYC may have been that bitcoin is not defined as money under Vermont state law, and that, due to the fact that bitcoins never leave the blockchain, no funds are sent in a traditional sense.
However, Donegan clarified that she believes it is captured under the definition of monetary value, even if it’s not a currency or money.
“I like to think that when this statue was written it was a little ahead of its time, all of those definitions are already baked into the statues,” Donegan said.
Still, she stressed that Vermont doesn’t intend to send a hostile message, even if it’s been forced on the defensive by its relative lack of public statements on the issue.
Rather, Donegan indicated that the licenses and regulation are important for the industry, especially given that it continues to struggle with fraud and theft.
“The message that has been out there is come talk to us, let us know what your plans are and we can talk you through the process,” Donegan concluded.
Susan Donegan image via YouTube