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Financial Services Law Insights and Observations

Rhode Island requires virtual currency business activity to be licensed

Licensing State Issues State Legislation Virtual Currency Fintech

On July 15, the Rhode Island governor signed HB 5847, which adds virtual currency to the existing electronic money transmission and sale of check license law and adds additional provisions clarifying the licensing process. Specifically, the bill renames Chapter 19-14.3 of Rhode Island’s General Laws titled, “Sale of Checks and Electronic Money Transfers” to “Currency Transmission” and includes within the definition of currency transmission, virtual currency. The bill defines virtual currency as a, “digital representation of value that: (A) [i]s used as a medium of exchange, unit of account, or store of value; and (B) [i]s not legal tender, whether or not denominated in legal tender.” Among other things, the bill excludes from the definition of virtual currency a “[n]ative digital token used in a proprietary blockchain service platform.” Subject to certain exceptions, the bill requires a person engaging in currency transmission business activity to be licensed with the state. Additionally, the bill, among other things, (i) requires virtual currency licensees to provide resident users of their services specified disclosures; (ii) subjects applicants and licensees to mandatory compliance programs and monitoring; and (iii) prohibits licensees from engaging in unfair, deceptive, or fraudulent practices. The act is effective January 1, 2020.

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