WASHINGTON — Virtual currency made another significant step Tuesday toward becoming legitimate in the eyes of regulators as the Conference of State Bank Supervisors finalized a model regulatory framework for the nascent industry.
The group's framework will serve as a template for states that regulate money services businesses and bring clarity to what has been a murky regulatory environment.
The framework "recommends the use of a robust licensing system which supports regulators' ability to share information in real time or close to real time and offers the potential of streamlining all technical aspects of licensing, including application processing, background check processing, reporting, and complaint management," the CSBS said.
The CSBS defined virtual currency as "a digital representation of value used as a medium of exchange, a unit of account, or a store of value, but does not have legal tender status as recognized by the United States Government."
But virtual currency companies may be disappointed to find that the framework does not include an "on ramp" which would provide a temporary license while in the early phases of building their business.
The framework applies to entities engaged in third party control where the virtual currency activities include transmission and exchanging, where exchanging includes sovereign currency for virtual currency or vice versa as well as the exchange of virtual currency for virtual currency. The framework also covers services that facilitate third-party exchange such as virtual wallets, kiosks, merchant-acquirers and payment processors.
The model framework follows a draft model framework released late last year and the implementation of the New York BitLicense earlier this year.