North Carolina Eyeballs Virtual Currency Regulation | dinbits



RALEIGH, N.C. -
Legislators in America's second-largest banking center are considering regulations for Bitcoin and other virtual currencies.

 I sometimes wonder how on earth North Carolina, and South Carolina exist together. In South Carolina, Money Transmitters are not even regulated, and then see here what they are doing up north? Why the drastic difference? Are they doing this just to be the opposite of the South?

North Carolina's banking commissioner is seeking legislative authority to require that companies circulating digital IOUs meet consumer protection, anti-money laundering and other standards. Legislation passed the state House earlier this month and is pending in the Senate.

 Perhaps the banking commissioner should be made aware the the Financial Crimes Enforcement Network (FinCEN) already requires this? So the goal here is to require what the Federal Government already requires, in an effort to duplicate effort and make sure they people who are doing what they are suppose to are doing what they are doing what they are supposed to and they people who are not, can operate knowing that they are not, even though they already know this?

Though North Carolina State University's football team won last December's Bitcoin Bowl in St. Petersburg, Florida, the public's understanding of virtual currency is still in catch-up mode.

 Unlike ordinary College Bowl games which teach emerging financial and technological industries in perfect detail so that the patrons walk out with a newfound expert level understanding of these topics. Unfortunately this particular football game wasn't able to do this. 


The online-only money allows users to swap cash for online funds using Internet exchanges, then store it in a wallet program on their computer. The program can transfer payments to a merchant or private party anywhere in the world, eliminating transaction fees and the need to provide bank or credit card information. There are dozens of decentralized currencies based on the bitcoin protocol like Litecoin, Auroracoin and Peercoin.


But the new realm of virtual money has come with problems. The Consumer Financial Protection Bureau last summer warned that the currencies are not backed by the government, have volatile exchanges rates, are targeted by hackers and scammers, and that Bitcoin-based deposits are not federally insured like bank accounts.

 Unlike Credit Cards, or PayPal, oh no ... they  never have problems, or see any fraudulent activity.

The difficulty in tracing the currency has led to its use by drug dealers, child pornographers, identity thieves and other criminals.

✐ Yeah, these folks never bother with something like, you know, cash. Their world was in a frozen state of inability to function until Bitcoin happened... and for the umpteenth time, Bitcoin is EASY to trace, how many times must I say this?


"There's two sides to the Bitcoin. One side is the clear potential value of the innovation, and what that could portent for the payment system. Since we're a business friendly state, we want to facilitate that," said state Banking Commissioner Ray Grace said, who asked for the legislation.


✐ Three actually, the 3rd side wants you to stay out of this.

But regulation was needed to keep bad actors out, he said. "We wanted to mitigate the risk while facilitating the potential benefits down the road."

✐ You mean regulation in addition to the regulation that was already there?


Anonymous opponents of the state law created a website arguing that regulations could restrict financial innovation. A person responding to an Associated Press reporter's email through the website refused to identify a spokesman or answer questions.


Bitcoins and other virtual currencies have been moving into the mainstream with Overstock.com, satellite TV provider Dish Network and travel site Expedia announcing last year they would accept digital money as payment. Legislators in Utah and New Hampshire this year considered whether to accept digital payment for taxes and other payments, but neither state took that step.

State financial regulators started moving after the U.S. Treasury Department's Financial Crimes Enforcement Network said in 2013 its requirements for money services applied to virtual currency exchangers and administrators, requiring that exchanges register.

✐ Actually they clarified what these "roles" meant thus clarifying the law which already had the requirement. They also discussed "Users".

Regulators in New York - home of the country's banking capital, trailed by Charlotte - this year established rules to protect consumers and Bitcoin entrepreneurs and this month issued the first charter for a business that exchanges virtual currency.

State bank regulators in Texas, Washington and Kansas issued guidelines last year outlining their regulation over virtual currency traders.

Texas outlined their non-regulation over virtual currencies, since there is already federal regulation, and followed FinCEN suite provide "guidance". 

The North Carolina legislation would revise regulation of non-bank companies that make a business out of transmitting funds for others. The business is regulated to prevent money laundering, cut off terrorism financing, and to protect consumers from the risk that money-transfer businesses fail to deliver the funds as agreed.

✐ I guess they are just bored, and don't realize that this is already required in the state.


To be licensed in North Carolina, companies must:


- post a surety bond intended to protect customers of at least $150,000 growing to a maximum of $250,000 based on trading volume.

- have a net worth of at least $250,000, which the banking commissioner could increase if deemed necessary.

- conform to a clear set of prohibited practices such as never failing to send money as directed.

✐ I suspect there is more, but this article ended. However after some research, this is all the crap you need.
§ 53-208.7.  License application.
(a)        Each application for a license under this Article shall be made in writing, under oath, and in a form prescribed by the Commissioner. For all applicants, each application shall contain:
(1)        The exact name of the applicant, the applicant's principal address, any assumed or trade name used by the applicant in the conduct of its business, and the location of the applicant's business records.
(2)        The history of the applicant's material civil litigation for a 10-year period prior to the date of the application and a record of any criminal convictions.
(3)        A description of the activities conducted by the applicant and a history of operations.
(4)        A description of the business activities in which the applicant seeks to be engaged in the State.
(5)        A list identifying the applicant's proposed authorized delegates in the State, if any, at the time of the filing of the license application.
(6)        A sample authorized delegate contract, if applicable.
(7)        A sample form of payment instrument, if applicable, which bears the name and address or telephone number of the issuer clearly printed on the payment instrument.
(8)        The location or locations at which the applicant and its authorized delegates, if any, propose to conduct the licensed activities in the State.
(9)        The name and address of the clearing bank or banks on which the applicant's payment instruments will be drawn or through which the payment instruments will be payable.
(b)        If the applicant is a corporation, the applicant shall also provide:
(1)        The date of the applicant's incorporation and state of incorporation.
(2)        A certificate of good standing from the state in which the applicant was incorporated.
(3)        A certificate of authority from the Secretary of State to conduct business in this State, if required by the North Carolina Business Corporations Act, Chapter 55 of the General Statutes.
(4)        A description of the corporate structure of the applicant, including the identity of any parent or subsidiary of the applicant and the disclosure of whether any parent or subsidiary is publicly traded on any stock exchange.
(5)        The name, business and residence address, and employment history for the past five years of the applicant's executive officers and the officers or managers who will be in charge of the applicant's activities to be licensed pursuant to this Article.
(6)        The name, business and residence address, and employment history for the period five years prior to the date of the application of any key shareholder of the applicant.
(7)        The history of material civil litigation for a 10-year period prior to the date of the application and a record of any criminal conviction for every executive officer or key shareholder.
(8)        A copy of the applicant's most recent audited financial statement, including the balance sheet, statement of income or loss, statement of changes in shareholder equity, and statement of changes in financial position and, if available, the applicant's audited financial statements for the immediately preceding two-year period. However, if the applicant is a wholly owned subsidiary of another corporation, the applicant may submit either the parent corporation's consolidated audited financial statements for the current year and for the immediately preceding two-year period or the parent corporation's Form 10K reports filed with the United States Securities and Exchange Commission for the prior three years in lieu of the applicant's financial statements. If the applicant is a wholly owned subsidiary of a corporation having its principal place of business outside the United States, similar documentation filed with the parent corporation's non-United States regulator may be submitted to satisfy this provision.
(9)        Copies of all filings, if any, made by the applicant with the United States Securities and Exchange Commission, or with a similar regulator in a country other than the United States, within the year preceding the date of filing of the application.
(c)        If the applicant is not a corporation, the applicant shall also provide:
(1)        The name, business and residence address, personal financial statement, and employment history, for the past five years, of each principal of the applicant and the name, business and residence address, and employment history for the past five years of any other person or persons who will be in charge of the applicant's activities to be licensed pursuant to this Article.
(2)        The place and date of the applicant's registration or qualification to do business in this State.
(3)        The history of material civil litigation for a 10-year period prior to the date of the application and a record of any criminal conviction for each individual having an ownership interest in the applicant and each individual who exercises supervisory responsibility with respect to the applicant's activities.
(4)        Copies of the applicant's audited financial statements, including the balance sheet, statement of income or loss, and statement of changes in financial position, for the current year and, if available, for the immediately preceding two-year period.
The Commissioner is authorized, for good cause shown, to waive any requirements of this section with respect to any license application or to permit a license applicant to submit substituted information in its license application in lieu of the information required by this section. (2001-443, s. 2.)

§ 53-208.8.  Surety bond.
(a)        Each application shall be accompanied by a surety bond acceptable to the Commissioner in the amount of one hundred fifty thousand dollars ($150,000). If the applicant proposes to engage in business under this Article at more than one location, through authorized delegates or otherwise, then the amount of the security bond will be increased by five thousand dollars ($5,000) per location, up to a maximum of two hundred fifty thousand dollars ($250,000). In the case of an applicant which engages in business under this Article, but has no locations or authorized delegates in this State, the amount of the security bond may be increased at the Commissioner's discretion to a maximum of two hundred fifty thousand dollars ($250,000). The surety bond shall be in a form satisfactory to the Commissioner and shall run to the State for the benefit of any claimants against the licensee to secure the faithful performance of the obligations of the licensee with respect to the receipt, handling, transmission, and payment of money or monetary value in connection with the sale and issuance of payment instruments, stored value, or transmission of money. The aggregate liability of the surety in no event shall exceed the principal sum of the bond. Claimants against the licensee may themselves bring suit directly on the security bond, or the Commissioner may bring suit on behalf of claimants, either in one action or in successive actions.
(b)        In lieu of a surety bond, the licensee may deposit with the Commissioner, or with any bank in this State designated by the licensee and approved by the Commissioner, to an aggregate amount, based upon principal amount or market value, whichever is lower, of not less than the amount of the surety bond or portion thereof, the following:
(1)        Unencumbered cash.
(2)        Unencumbered interest-bearing bonds.
(3)        Unencumbered notes.
(4)        Unencumbered debentures.
(5)        Unencumbered obligations of the United States or any agency or instrumentality thereof, or guaranteed by the United States.
(6)        Unencumbered obligations of this State or of any political subdivision of the State, or guaranteed by this State.
The securities or cash shall be deposited as aforesaid and held to secure the same obligations as would the surety bond, but the depositor shall be entitled to receive all interest and dividends thereon, shall have the right, with the approval of the Commissioner, to substitute other securities for those deposited, and shall be required to do so on written order of the Commissioner made for good cause shown.
(c)        The surety bond shall remain in effect until cancellation, which may occur only after 90 days' written notice to the Commissioner. Cancellation shall not affect any liability incurred or accrued during that period.
(d)       The surety bond shall remain in place for no longer than five years after the licensee ceases money transmission operations in the State. However, notwithstanding this provision, the Commissioner may permit the surety bond to be reduced or eliminated prior to that time to the extent that the amount of the licensee's outstanding payment instruments, stored value obligations, and money transmitted in this State is reduced.
(e)        The surety bond proceeds and any cash or other collateral posted as security by a licensee shall be deemed by operation of law to be held in trust for the benefit of the purchasers and holders of the licensee's outstanding payment instruments, stored value obligations, and money transmissions in the event of the bankruptcy of the licensee. (2001-443, s. 2.)

§ 53-208.9.  Fees.
(a)        Investigation and License Fees. - Each application for a license shall be accompanied by a nonrefundable investigation fee of five hundred dollars ($500.00), together with the initial license fee of one thousand dollars ($1,000) plus ten dollars ($10.00) per location within this State at which a money transmission business is to be conducted by the applicant or an authorized delegate.
(b)        Annual License Fee. - On or before December 31 of each year, each licensee under this Article shall pay to the Commissioner a license fee in the amount of one thousand dollars ($1,000) plus ten dollars ($10.00) per location in this State at which the licensee or an authorized delegate is conducting a money transmitter business.
(c)        Location Fee. - Notwithstanding the number of locations within this State at which a licensee or authorized delegate conducts a money transmitter business, the per location fee provided in subsections (a) and (b) of this section shall not exceed five thousand dollars ($5,000) per licensee per year. The per year location fee shall be based on the number of locations set forth in the annual report required by G.S. 53-208.11. (2001-443, s. 2.)

  In a nutshell, the big fines are being handed down by finCEN (Ripple anyone?), so why do some states have to poke there nose in this and make it even more confusing? That's easy, money. They want their fair share. You don't think they write up all this shit and monitor it for free do you? Hell no. There are application fees, renewal fees, and oh yeah, State Tax (where applicable).

It's fantastic that States are clarifying regulatory requirements for residents, but the requirement of an expensive State license, just to do what you are already required to do by Federal Law, is overkill. 

Texas (and some other states), realize the real wealth is creating new jobs, and other states should follow that example.  They just require you to do, what the Federal Law requires you to do, which is everything North Carolina wants you to do, and you already have to do now anyway. The difference now is that you have to give the State money to do so.








Orignal Article Posted: May 25, 2015 10:18 AM PDT - Updated: May 25, 2015 10:22 AM PDT
by Emery P. Dalesio, Associated Press

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