Spotlight Article: Work Continues on the Model Regulation of Virtual Currencies Act

Dana-Syracuse-with-captionOn April 2-3, 2016, the third meeting of the Uniform Law Commission (ULC) Drafting Committee on the Regulation of Virtual Currencies (the “Committee”) was held in Chicago, Illinois. Dana Syracuse was in attendance as an official Observer along with Committee members, industry stakeholders, thought leaders, and government representatives. The Committee’s work in Chicago reflects comments received in response to drafts generated in previous meetings in Washington, D.C. last fall and Palo Alto in February. The Committee’s primary goal is to establish a common set of standards regulating certain types of virtual currency companies, including transmitters, custodians, and exchangers of virtual currency.

Subsequent to that meeting the Committee released an updated Draft Model Act reflecting all comments received to date. The current version of the Draft Model Act is divided into eight articles, as summarized below.

Article 1 (General Provisions): This Article includes definitions, which are important for laying out the scope of the Draft Model Act. Of significance is the revised definition of “control,” which states that “control means possession of sufficient virtual currency credentials or authority on a virtual currency network to execute unilaterally or prevent indefinitely virtual currency transactions, but does not control possessing, for a reasonably time-limited period, virtual currency credentials sufficient to prevent virtual currency transactions to provide a service such as an escrow function or transaction management.” This definition is significant because it arguably takes some of the more interesting features of the blockchain, such as escrow functions and some multi signature implementations, outside of licensure. Other significant definitions include custody, storage, transfer, virtual currency, and virtual currency business activity. This Article also contains exemptions for certain categories of institutions including government agencies, banks charted under state law or the jurisdiction of the United States, certain payment systems, those dealing in foreign exchange, those engaged in personal use of virtual currency, miners, and those who fail to meet a minimum threshold of monetary activity. Read more…

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