Released Today: Updated State Digital Currency Principles and Framework

Our guidelines for digital currency policy now include provisions for micropayment channels and new exemptions for merchant processors.

Coin Center’s State Digital Currency Principles and Framework is our model for digital-currency-specific state-licensing regulation. It is a template with structure, definitions and language for the essential components of any digital currency licensing law. This has become a go-to reference for state policymakers seeking to update their money transmission law or craft new licensing requirements specifically for digital currency.

The framework is a living document – its language is regularly updated to reflect fast paced digital currency innovation. To do this we meet with the companies and individuals building interesting things on the frontier of this technology to understand their ideas and work with them to determine how the law could best give their projects room to grow.

Today we have released the the third iteration of this reference for policymakers. Version 1.3 updates particular language to better take into account promising merchant and scaling solutions built on micropayment channels – such as BitMesh and the Lightning Network.

[B]ecause of n-lock transactions, these microtransaction channels will never engender the sort of solvency or consumer protection risks inherent in traditional money transmission—the provider can never lose or run-off with the funds—and therefore these technologies should be regulated under different regimes such as contract or unfair and deceptive practices law.

Additionally the updated framework proposes an agent of the payee exemption for merchant processors, such as Bitpay and Bitnet, and for a registration-based regime—as has been proposed in New Jersey—rather than a licensing framework.

Legislative efforts are already underway in multiple states, and more will likely begin the process next year. We compare current bills, enacted laws, and finalized regulations here.