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Financial Services Law Insights and Observations

State Banking Regulators Issue Model Regulatory Framework for Virtual Currency Activities

CSBS Virtual Currency


On September 15, the Conference of State Bank Supervisors (CSBS) issued its Model Regulatory Framework for State Regulation of Certain Virtual Currency Activities (Model Framework). The CSBS Emerging Payments Task Force developed the Model Framework to assist states in licensing and regulating virtual currency activities. The Model Framework includes key components to a regulatory scheme that the CSBS hopes will protect consumers and the larger marketplace while facilitating innovation. It also defines virtual currency and describes specifically covered virtual currency activities, such as those involving third-party controls of virtual currency. Additionally, the Model Framework provides flexibility in denominating permissible investments, tailoring cybersecurity audits to a company’s business model, and includes an addition to the BSA/AML Compliance section that recommends that states require verification of an entity’s service users and account holders. The Model Framework also includes a supervision component that requires the establishment of policies and procedures that protect customer access to funds in the event of an institutional failure.

The Model Regulatory Framework for State Regulation of Certain Virtual Activities can be seen here.

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