As cryptocurrencies continue to gain momentum and popularity, governments and regulators around the world are grappling with how to regulate this innovative technology. In the United States, cryptocurrency regulations vary from state to state, creating a complex and confusing patchwork of laws and regulations. This guide provides an in-depth overview of the current cryptocurrency regulations and laws by state, highlighting the differences and similarities between them. Whether you’re a cryptocurrency investor, entrepreneur, or enthusiast, understanding the regulatory landscape is crucial for navigating this rapidly evolving industry. Keep up to date with the latest cryptocurrency regulations and stay compliant with this comprehensive guide to state crypto regulations.
The ever-evolving landscape of cryptocurrency regulations is a multifaceted topic, with governments around the world grappling to oversee this rapidly expanding industry. With no standardized set of global crypto rules and laws currently in place, the sector remains ripe for exploration and growth. However, this lack of uniformity presents both opportunities and obstacles for stakeholders and the public alike.
As of March 2022, there were a staggering 18,142 cryptocurrencies and 460 crypto-exchanges, with a combined market capitalization of a whopping $1.7 trillion. It’s understandable that the sector is under increasing pressure to create regulatory frameworks that can strike a balance between encouraging innovation and protecting customer protection and security given the enormous numbers at stake.
Although there isn’t a single set of crypto regulations that apply to every state and nation, there are many government organizations working to control different facets of the industry worldwide. In order to stay compliant with applicable laws and make wise judgments, it’s crucial for both consumers and players in the industry to keep up with the most recent changes in U.S. crypto regulation priorities, Bitcoin and Ethereum legislation, and worldwide digital currency regulations. After all, in this fascinating and always changing industry, information is power.
Why is cryptocurrency regulated?
Cryptocurrency regulations have become crucial for the protection of consumers in the cryptocurrency industry, as evidenced by the implementation of global crypto regulations, crypto rules, and laws. The original intention of cryptography was to protect individuals’ privacy and security, but as the market has grown to a $1 trillion industry, the need for consumer protection has become apparent. The increasing number of scams, Ponzi schemes, misrepresentations, and flawed token designs has challenged the laissez-faire attitude of early adopters, necessitating the intervention of regulators to establish crypto regulations by state, U.S. crypto regulation priorities, and legislation.
Even virtual currencies like Bitcoin and Ethereum are subject to the regulations governing U.S. digital currency laws. Recent high-profile bankruptcies, including the collapse of FTX, have emphasized the importance of strong crypto regulations to protect consumers in this volatile industry. As a result, regulators have introduced guidelines and legislation aimed at preventing initial coin offering scams and protecting investors from significant financial losses.
The development and enforcement of cryptocurrency regulations are critical to ensuring the protection of consumers, maintaining market stability, and promoting long-term growth and adoption of digital currencies.
How is cryptocurrency regulated?
Cryptocurrency regulations vary across nations and states, with some countries banning cryptocurrencies and others adopting them and developing specific regulatory frameworks. In the United States, federal and state regulations govern the use of digital currencies like Bitcoin and Ethereum. The SEC considers some cryptocurrencies as securities, while the CFTC regulates them as commodities. For taxation purposes, the IRS views cryptocurrencies as property. Some states have enacted specific crypto rules and laws, while others lack any regulations.
Internationally, there is no common regulatory framework for cryptocurrencies. While some nations like Japan and Switzerland have outlined regulations and licensing requirements for cryptocurrency exchanges, others have prohibited their use entirely. The regulatory environment for cryptocurrencies is still evolving as governments and agencies deal with the challenges brought on by this rapidly developing technology.
Protecting investors and preventing financial crimes like money laundering and terrorism financing are top priorities for U.S. crypto regulation, alongside promoting innovation and growth in the sector. Cryptocurrency regulations are essential for the protection of consumers and the establishment of a stable and sustainable crypto market.
Cryptocurrency Laws and Regulations by State:
While many states regulate virtual currency in accordance with the same laws that apply to money transmitters, each state has its own unique cryptocurrency laws and regulations.
State | Definition of Money Transmission | License Required | Notes |
| Alabama | A license is required for selling or issuing payment instruments, stored value, or receiving money or monetary value for transmission. “Monetary value” means a medium of exchange, including virtual or fiat currencies, whether or not redeemable in money. | Yes | |
| Alaska | Selling or issuing payment instruments or stored value, or receiving money or monetary value for transmission. | Yes | Companies dealing with fiat and virtual currencies must apply for a money transmitter license, then enter into a Limited Licensing Agreement (LLA) with the State of Alaska. |
| Arizona | Money transmitter is defined in the Ariz. Rev. Stat. § 6-1201(). While the definition does not specifically apply to digital currency, exchanges Coinbase and Binance interpret it to require them to acquire Arizona money transmitter licenses. | Yes | |
| Arkansas | Money transmission expressly includes virtual currency; A.C.A. § 23-55-102(12)(A), and allows investment in virtual currency by money transmitters; A.C.A. § 23-55-701(b). However, Arkansas has provided “no-action” letters to digital asset-issuing businesses freeing them from money transmission licensing requirements. | No | Examples of businesses freed from licensing requirements include video game internal currency and selling their own reserves of Bitcoin. |
| California | The Department of Financial Protection and Innovation has not decided whether to regulate digital currency transmission under California’s Money Transmission Act. | Not clear | Digital currency ATMs are often exempted, and a peer-to-peer digital currency transaction platform was exempted from money transmission licensing in May 2021. |
| Colorado | Licensing as a money transmitter is required when using digital currency as a payment system. | Yes | |
| Connecticut | A money transmitter license is required when transmitting digital currency. | Yes | Licensees must state that they are dealing in virtual currency. Connecticut may apply additional scrutiny or requirements on virtual currency money transmitters. Money transmitters must hold reserves in the same type and amount of virtual currency as all outstanding transactions. |
| Delaware | License is required for the undefined phrase “engage in the business of receiving money for transmission or transmitting the same.” | Yes | |
| District of Columbia | Dealing in digital currency is money transmission requiring a license under D.C. law. | Yes | |
| Florida | A “money transmitter” receives currency, monetary value, or payment instruments for the purpose of transmitting the same by any means. | Yes | The sale of a digital token tied to the ownership of a gram of gold is considered by Florida to be governed by money transmitter laws. Florida has not yet considered whether money transmitter laws apply to digital tokens tied to less fungible objects of value. The Florida Financial Technology Sandbox allows for the sandbox permission to substitute for a money transmitter license during the license period and relaxes a few other money transmitter requirements. |
| Georgia | A license is required for receiving or transmitting “monetary value,” and “virtual currency” is specifically defined as “a digital representation of monetary value.” | Yes | Georgia regulators have the power to enact virtual currency-specific rules. |
| Hawaii | “Receiving money or monetary value for transmission” (§ 489D-4) | Permission through the Digital Currency Innovation Lab until June 30, 2022, to determine licensing requirements | Digital currency businesses |
| Idaho | Virtual currency exchanges are considered as money transmission and require a license | Yes | No-action letters issued regularly to businesses like digital currency ATMs |
| Illinois | No express mention of digital assets, but the Department of Financial and Professional Regulation issues guidance on when digital currency businesses must register as money transmitters | Yes | “Non-binding statements” issued regularly to virtual currency businesses |
| Indiana | No express mention of virtual assets in the definition of money transmission, but virtual currency exchange does not generally require a license | Generally not required | Virtual assets may be excluded if sold for any purpose other than immediately facilitating payment |
| Iowa | No exclusion for digital currency businesses under Iowa’s Uniform Money Services Act | Yes | Digital currency dealers like Coinbase have obtained money services licenses |
| Kansas | Definition of money transmission is broad enough to include digital currency, but a license may not be required for transmitting decentralized digital currency | May be required for transmission of digital currency involving sovereign currency | Office of the State Bank Commissioner issues guidance on regulatory treatment of virtual currencies |
| Kentucky | Definition of money transmission does not expressly include or exclude digital currency | Yes | Digital currency dealers like Coinbase have obtained money services licenses |
| Louisiana | Louisiana Virtual Currency Businesses Act provides licensing scheme for virtual currency businesses | Yes | Exceptions to licensing in Louisiana statutes, but virtual currency exchangers still require a money transmitter license according to Louisiana’s Office of Financial Institutions’ 2014 guidance |
| Maine | “Virtual currency” is explicitly included in Maine’s definition of money transmission, 32 MRSA §6102(10) | Yes | |
| Maryland | “Money transmission” includes “receiving…other value that substitutes for currency” and transmitting it, according to Md. Code, Fin. Inst. § 12-401(n)(1) | Yes | According to guidance from the Maryland Office of the Commissioner of Financial Regulation, businesses that accept and transmit virtual currency or buy or sell virtual currency are considered money transmitters under federal regulations. |
| Massachusetts | Massachusetts regulates only money transmission to foreign countries. | Yes, for certain transactions only | In a 2020 opinion letter, the Massachusetts Department of Banking found that transactions where fiat currency was exchanged for virtual currency between two parties across international borders, without more, was not money transmission requiring licensure. Additionally, a digital wallet service was also found not to require a license. |
| Michigan | “Money transmission” includes “selling or issuing payment instruments or stored value devices or receiving money or monetary value for transmission,” according to MCL 487.1003(c) | Yes | Michigan’s Department of Insurance and Financial Services states that holding funds in an “e-wallet” is money transmission requiring a license. If federal regulators would require an “administrator or exchanger” to obtain a money transmission license, then a license is required under Michigan law. |
| Minnesota | “Money transmission” is defined as “selling or issuing payment instruments or engaging in the business of receiving money for transmission or transmitting money,” according to Minn. Stat. § 53B.03. | Yes | Licenses are required for businesses that cash checks, transmit money, own and operate ATMs, and provide electronic funds transfers, according to the Minnesota Commerce Department. |
| Mississippi | “Monetary value” is defined as “a medium of exchange, whether or not redeemable in money,” and “money transmission” includes receiving monetary value for transmission, according to Miss. Code § 75-15-3(f) and (g). | Yes | |
| Missouri | “Check” is defined as “any electronic means of transmitting or paying money,” according to Mo. Rev. Stat. § 361.700(2)(1). | Yes | |
| Montana | Money transmitters do not need a license in Montana, according to the Department of Banking and Financial Regulations. | No | |
| Nebraska | “Monetary value” is defined as “a medium of exchange, whether or not redeemable in money,” according to Neb. Rev. Stat. § 8-2715. | Yes | Effective Oct. 1, 2022, state-chartered “digital asset depository institutions” have the same exemption from money transmission registration as other banks, according to Neb. Rev. Stat. § 8-2724. Slot machines and other “mechanical amusement cash devices” may only accept fiat currency or vouchers for the same, as virtual currency is specifically prohibited under 316 NAC 54-102.05B(5). |
| Nevada | “Check” includes any “instrument used for the transmission or payment of money,” and a license is required for “selling or | ||
| North Carolina | Definition of money transmission requiring a license expressly includes virtual currency. | Yes, Money Transmitter | Express agent of the payee is still exempt from licensure even if paid in virtual currency. |
| Ohio | Definition of “money transmission” encompasses nearly every transmission of monetary value. | Yes, Money Transmitter | A dealer in virtual currency is required to provide a third-party audit of the licensee’s computer systems. |
| Oklahoma | The definition of “money transmitter” includes any transmission of funds across an electronic network. | Yes, Money Transmitter | Many virtual currency exchanges maintain Oklahoma money transmission licenses. |
| Oregon | “Money” is a medium of exchange that “represents value that substitutes for currency.” | Yes, Money Transmitter | Oregon licenses digital currency exchanges as money transmitters. |
| Pennsylvania | Only fiat currency is “money” and virtual currency trading platforms are exempt. | No | |
| Rhode Island | Virtual currency transactions are expressly “currency transmission” under Rhode Island law. | Yes, Currency Trans. | A list of mandated disclosures virtual currency businesses must make to their customers. |
| South Carolina | Virtual currency businesses do not need to be licensed. | No | The South Carolina Attorney General’s Money Services Division “views virtual currencies as lacking the characteristics.” |
| South Dakota | The term “monetary value” includes virtual currency. | Yes, Money Transmitter | |
| Tennessee | Tennessee does not consider cryptocurrency itself “money transmission.” | Yes, Money Transmitter | Many acts of converting virtual currency into fiat currency fall under the definition of money transmission and must be licensed. |
| Texas | Exchange or transfer of most virtual currencies, standing alone, is not money transmission requiring a license. | Yes, Money Transmitter | Trade in stablecoins, or use of a third-party exchanger (including virtual currency “ATMs”), must be licensed as money transmission. |
| Utah | “Blockchain tokens” are explicitly excluded from Utah’s money transmitter definition. | No | |
| Virginia | Virtual currencies are not included in the definition of money transmission. | No | Transactions that also involve the transfer of fiat currency may be. |
| Washington | Virtual currency is included in the definition of money transmission. | Yes, Money Transmitter | Virtual currency money transmitters must have a third-party security audit of their computer systems. |
Note: This table is not an exhaustive list of laws and regulations governing cryptocurrency in each state and may be subject to change. It is essential to conduct thorough research or seek legal advice before engaging in cryptocurrency-related activities.
