UPDATE: 12/09/2015 - There has been some misinterpretation in regards to the title of this article. Due to other published work, we cannot change the title at risk of it being misinterpreted as the original title, however, we have put an alternate title in this article as it would have been changed if it were allowed. You can read more about this in detail and a more in-depth interpretation of 399-G:1 in this subsequent article published on December 8th. Please note that the title is not inaccurate, but it has been misinterpreted by some individuals and for that we offer our apologies and for clarity, this official statement:

For clarity in regards to the title of the article published Monday, December 7th, 2016, the words "sales prohibited" present in the title means that unlicensed sales of bitcoin prohibited, and the definition of unlicensed sales is selling a bitcoin to another resident or legal entity in the State of New Hampshire as defined by the amendment to 399-G:1 going into effect January 1st, 2016. This should not be confused with paying, or accepting payment, for goods and services with bitcoin which remains legal by exclusion of the acceptance of "payment instruments" at RSA § 399-G:1 XVI(a)(b) as defined at 399-G:1. -dinbits.com - 8:43am - December 9th, 2016

Read the more recent article on this topic here NH BITCOIN REGULATION

Unlicensed Bitcoin Sales Now Prohibited In New Hampshire

If you haven't finalized your Christmas list, you might want to add bitcoin as a priority item if you reside in the State of New Hampshire in the United States. Effective January 1st, 2016, it will be illegal to sell bitcoin without a traditional money transmitters license. 

A money transmitters license is what corporations like Western Union, Ria, and MoneyGram are required by many state regulations to obtain for legal transfer of United States currency to and/or from individuals and legal entities residing in that state. Two famous examples of similar regulatory guidance or licensing requirements are those of Texas and New York.

In Texas the sale and purchase of Bitcoin is legal as documented in memorandum 1037 by the Texas Department of Banking. New York took a different approach and regulated the activity to the point of requiring those involved in digital currency transactions to obtain a virtual currency license (aka, a BitLicense) pursuant to 23 NYRCC 200, an overly expensive process that has been criticized for its fiscal compliance and lopsided approach in various excessive requirements in comparison to those of traditional licensing. 

New License Requirements in New Hampshire

New Hampshire has taken the New York approach without bothering to take the New York approach in prohibiting bitcoin and other digital currency transactions without a traditional money transmitters license.

Last month, federally registered money services businesses were notified by the New Hampshire Department of Banking that registered money transmitters, of which anyone in the United States selling or buying bitcoin beyond that of personal use (assumption) or as a business is required to become, needed to submit an application for a money transmitters license. This was commendable given that most states say nothing at all, however, what they failed to include were the regulations that go into effect January 1st, 2016.

Buying and selling bitcoin is perfectly legal at the present time and is not considered money transmission under the current regulations at 399-G:1 of the New Hampshire statutes¹ governing the activity. That is about to change.

Currently 399-G:1 states in VII that  "Monetary value'' means "a medium of exchange, whether or not redeemable in money". This is important because this definition is used to declare the basis of money transmission in addition to Unites States currency. House bill 666 (HB666), which was approved in July, amends this definition effective January, 1st 2016 and under the new definition at 399-G:1(VII)(d) "monetary value" now includes: 

anything that... "...can be exchanged for currency or other convertible virtual currency.

This, by definition, applies to 399-G:1(XVI)(b) which states  "Receiving currency or monetary value for transmission to another location." and applicable to 399-G:1(XVII) which states that ""Money transmitter'' means a person engaged in the business of money transmission.". It goes on to state: 

"Any person not exempt under RSA 399-G:3 that, in its own name or on behalf of other persons, acts as a money transmitter while physically located in New Hampshire, or with, to, or from persons located in New Hampshire, shall obtain a license from the department and shall register its authorized delegates located within this state."

Which pretty much includes the entire planet when conducting transactions with New Hampshire residents.

Money Transmitter License Requirements

Unlike New Yorks Bitlicense requirements, New Hampshire licensing requirements are more than fair and obtainable by small business owners. The application fee is a nonrefundable $500, compared to $5000.00 in New York (also nonrefundable) with a maximum annual fee not to exceed $5000. 

The net worth requirements are also fair in a net worth equal to the annual average of the businesses transmission volume, meaning that if you send and receive $250,000 in bitcoin, you need only maintain a net worth of $250,000 and is further adequately fair in capping that number at $1,000,000 USD. The requirement for New York is a block box of whatever the superintendent of the NYDFS so desires to require, and after the fact of submitting your application along with the $5,000  nonrefundable application fee.

Where New Hampshire really fails is by declaring virtual currency as any type of money or monetary value to begin with and not regulating the activity separately or by allowing the existing federal regulation to govern this activity without the new requirement of an additional license.

There is an apparent pattern of a TX/NY divide in that states are siding with the Texas approach, as evident with Kansas for example, or the New York approach as with New Hampshire. The New York approach smothers digital currency and blockchain technology innovation to the point many companies have had to leave town. 

Persons and legal entities currently conducting transactions involving digital currency should take notice and either cease and desist effective January 1st, 2016, or prepare to submit an application for a money transmitters license in New Hampshire. Affected parties should clarify a course of action with compliance advisors and/or general counsel on the matter if they have not done so already.

The Second Exodus

Given the small size of New Hampshire, it is unlikely we'll see a mass exodus from the state, and it is unlikely smaller digital currency firms are going to do anything further than update KYC policies to avoid any transactions with New Hampshire, assuming of course, that they even currently conduct any at all, which is equally as unlikely.

Update [12/7/2015 6:15an PST]: The original title has been edited to read "bitcoin sales now prohibited" rather than "bitcoin now prohibited" to avoid confusion, whereas the sale of bitcoin which would encompass money transmission is the activity being restricted without a license. Thanks 5tu for noting the previous title. Personal use of bitcoin or purchasing bitcoin has no apparent restriction. Only the sale of bitcoin.

Note, we additionally reached out to the New Hampshire Department of Banking for comment and clarification, and have not received a response.







Story by dinbits staff (collaborated)
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1. New Hampshire Statutes

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Post a Comment

  1. State licensing for people or companies to be able to legally transact with each other is a ludicrous abomination and overreach of power. Whoever pushed to pass the bill through the New Hampshire legislature is disgusting and anti-freedom and must be replaced immediately. Freedom-oriented legislatures will then need to pass laws repealing the regulation as well as declaring no further financial regulation for companies.

    ReplyDelete
    Replies
    1. House Bill 666 was sponsored by New Hampshire Representative Laura Jones [R]

      Delete
  2. I'm beginning to think those not paying taxes and running around without licenses plates are a bit less loony. If more people did it and defended there neighbours more actively for doing so we probably wouldn't have these problems.

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  3. "Live free or die." You're doing it wrong.

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  4. People supporting this bill need to be terminated.

    ReplyDelete

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