June 17, 2014

Kansas bank commissioner develops plan for bitcoin transactions

Kansas’ top banking regulator has weighed in on the bitcoin, or virtual currency, phenomenon.

Kansas’ top banking regulator has weighed in on the bitcoin, or virtual currency, phenomenon.

The Office of the State Bank Commissioner this month issued guidance on how it could – and would – handle organizations exchanging or transmitting virtual currencies in Kansas.

“I think a number of state banking departments are struggling with how to handle virtual money transactions,” said Deryl Schuster, Kansas bank commissioner.

The commissioner’s office wants “to make sure that everyone knows we are not trying to regulate the currency, and we’re only concerned with the money transmitter part of it,” said Robin Lobb, who oversees money transmitter licensees for the commissioner.

And even then, only in instances where a third party is involved in facilitating a virtual currency transaction that involves at least one Kansas consumer.

Bitcoins and other virtual currencies are online currencies that allow people to make transactions to each other, or to buy goods and services or exchange money outside of traditional financial systems.

The use of virtual currencies has grown substantially over the past few years, including among speculative investors. Virtual currencies have also gotten the attention of the Internal Revenue Service, which said earlier this year that it would apply the same taxing rules to virtual currencies that it does to other barter transactions.

There are “hundreds” of types of virtual currencies, Lobb said, and they are not legal tender.

“It’s a very complex, convoluted situation,” Schuster added.

Lobb said she thinks it was last spring when she began taking inquiries about Kansas licensing requirements for entities that facilitate virtual currency transactions or exchange them. Today, she said, “the inquiries are coming fast and furious.”

“We decided if we issued the guidance it was a little easier way” of handling the inquiries, Lobb said.

She said that from all the inquiries she’s handled beginning last year, one organization that exchanges virtual currencies has filed an application for a money transmitter license in Kansas. That application was approved.

Lobb is convinced that virtual currencies are here to stay.

“Unfortunately, it’s not going away like most regulators had hoped,” she said.

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