Not expanding on reasoning for accusation, California financial authority leads some to think purpose is to “…smoke out some real money transmitters.”
The Bitcoin Foundation, an organization which only promotes awareness of the benefits of Bitcoin but does not act as an exchange for those wanting to trade the crypto-currency, received a cease-and-desist letter from the California Department of Financial Institutions. Postmarked May 30, the letter accuses the foundation of defying the Money Transmission Act, but did not expand on the accusation. The act licenses and regulates money transmitters, which includes issuers of payment instruments (money orders), travelers checks and stored value.
“These communications are confidential (between the regulator and recipient, licensee, representative of the licensee, representative of the recipient, etc.) and regulators do not discuss/comment on C&Ds,” stated Alana Golden, a spokeswoman for the California DFI in a written response to an inquiry into the charges made against the foundation.
The Bitcoin Foundation operates as non-profit organization and provides grants to entrepreneurs behind Bitcoin businesses, and collects their membership fees and donations in bitcoins in addition to traditional currency.
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“The foundation is certainly not a money transmitter,” says Paul Soter, a California attorney focuses on banking regulations and money transfer laws. “So I think they have the wrong entity [or] they are, well, shooting at the bank robber and hitting the guy next to him who is a member of an organization called ‘friends of bank robbers.’”
The Financial Crimes Enforcement Network issued in March a document on virtual currency guidance that stated that those who administrate or trade virtual currencies, including Bitcoin, as money services businesses and stated that they need to register with the state and acquire licensing in California, as well as the states where their clientele reside.
The California law allows the state agency following the letter to file a court order and conduct further research through legal discovery. This leads many, including Mr. Soter to feel that this is more about who works with the foundation, and not the foundation itself: “I don’t know why they pursued the foundation other than to smoke out some real money transmitters.”