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The state of Illinois considers that decentralized digital currencies can function as a medium of exchange but are not exactly considered money.
While several proposals are currently at play at the state level in the US, the state of Illinois has begun accepting comments from the public with regards to its published guidance aimed at establishing the regulatory treatment of digital currencies as it currently exists under the state’s Transmitters of Money Act - or TOMA.
Comments will be accepted until January 18, 2017, according to the release for comments by the state’s Department of Financial and Professional Regulation.
The Department proposed the “Digital Currency Regulatory Guidance” on decentralized digital currencies, such as Bitcoin, Dogecoin, Litecoin, Ethereum, and Zcash announced by Secretary Bryan A. Schneider.
“We plan to study digital currencies carefully as the technology develops, however, at this point in time digital currencies like Bitcoin, given their low transaction volume and relatively niche use, are best viewed as a speculative investment or possibly even a new type of asset class, not as money.”
It is focused on money transmission activities involving decentralized digital currencies - those not created or issued by a particular person or entity, have no administrator, and have no central repository.
The guidance also seeks to determine whether or not an Illinois money transmitter license is required for an entity to engage in the transmission of decentralized digital currencies as this turns on the question of whether a decentralized digital currency is considered "money" as defined in TOMA.
In section 5 of TOMA, money is defined as a medium of exchange that is authorized or adopted by a domestic or foreign government as a part of its currency and that is customarily used and accepted as a medium of exchange in the country of issuance.
However, despite the definition, the guidance notes that decentralized digital currencies are a representation of value that can function as a medium of exchange but they are not considered as “money” for the purposes of TOMA because they have not been “authorized or adopted by a domestic or foreign government as a part of its currency.”
“As innovative payment technologies grow in popularity, it is vital that we provide a succinct regulatory framework that gives businesses operating in this space necessary clarity,” says Schneider.
Aside from California’s AB 1326 bill, which has a very well tailored definition of virtual currency businesses, New York has its digital currency-specific state regulation, the BitLicense. According to Coin Centre, New Jersey’s and North Carolina’s bills are promising, while Connecticut’s is very troubling.
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