In February 2019, the Pennsylvania Department of Banking and Securities (DoBS) issued public guidance on the applicability of the Money Transmitter Act (MTA) to virtual currency exchanges by means of a link entitled "Money Transmitter Guidance on Virtual Currency" on its Money Transmitter licensing page under the "Resources" heading.
The MTA defines "money" as "currency or legal tender or any other product that is generally recognized as a medium of exchange." See Pa. Const. Stat. tit. 7 § 6101. Within that public guidance, the DoBS declared that "virtual currency, including Bitcoin, is not considered 'money' under the MTA," and the platforms engaged in web-based virtual currency exchanges were not "money transmitters" or regulated by Pennsylvania's money transmission laws.
Reversal of Virtual Currency Interpretation
Recently, the DoBS, without a triggering law change or promulgated regulation, quietly issued a statement of policy that reverses the previous interpretation of the term "money" to be inclusive of virtual currency. Although the statement of policy does not substantively amend the definition of "money" under the MTA, the DoBS reasoned that its change in position is a result of the increasingly and widely accepted use of virtual currency as a method of payment to purchase goods and services in thousands of physical locations throughout the U.S. and online.
Licensing Requirements
In recognition of the industry's reliance on its prior statement and the time it takes to prepare, submit, and obtain licensure, the DoBS did establish a future date by which companies engaged in virtual currency activity must hold a license. To that end, the DoBS expects that all persons engaged in the business of transmitting virtual currency by means of a transmittal instrument for a fee or other consideration will have obtained a license through the Nationwide Multistate Licensing System and Registry in the same manner as all other money transmitter licenses by October 15, 2024.
Timeline and Preparation for Licensing Compliance
As of the original date of this article, the DoBS has not yet updated its new application checklists to incorporate this additional business activity licensing trigger. We would recommend that persons engaged in the transmission of virtual currency prepare to submit an application to become licensed in Pennsylvania as soon as possible so that the DoBS has ample time to review and approve the license prior to the current October 15, 2024, policy effective date.
* Updated 5/14/24 to clarify that the issued statement of policy is a new section added to Title 10 of the Pennsylvania Code as new Money Transmitter Regulation, 10 PA ADC § 19.1a.
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