Notice 24-BB-001-08/09/24 — Updated DISB guidance to Bitcoin ATMs (BTMs) / virtual currency kiosk operators

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NOTICE

                                          24-BB-001-08/09/24

TO:             ENTITIES THAT ENGAGE OR PLAN TO ENGAGE IN MONEY TRANSMISSION
                OF VIRTUAL CURRENCY BUSINESS IN THE DISTRICT OF COLUMBIA (District)

FROM:           KARIMA M. WOODS, COMMISSIONER           KW
DATE:           August 9, 2024

SUBJECT:        UPDATED DISB GUIDANCE TO BITCOIN ATMS (BTMs) OR VIRTUAL CURRENCY KIOSKS
                OPERATORS IN THE DISTRICT

The DC Department of Insurance, Securi�es and Banking (DISB) is issuing this updated no�ce (“Updated
No�ce”) to inform industry par�cipants that a Money Transmission license is required of en��es that are
opera�ng Bitcoin Teller Machines (BTMs) or virtual currency kiosks and that are engaging in, or planning
to engage in, the transfer of money with Bitcoin or other virtual currency used as a medium of exchange,
method of payment or store of value in the District.

The Updated No�ce replaces prior no�ces BULLETIN 22-BB-001-08/04 issued August 4, 2022, and
BULLETIN 23-BB-04-03/16/2023 issued March 16, 2023.

DISB’s Posi�on on En��es Engaging in Bitcoin or Virtual Currency-Related Ac�vity

DISB maintains its posi�on that transac�ons involving Bitcoin and other virtual currencies are considered
money transmission (See United States v. Larry Dean Harmon, 474 F.Supp.3d 76 (D.D.C. 2020)). Such
transac�ons, whether conducted online or via kiosks (BTMs), involving Bitcoin and virtual currency are
considered as engaging in “money transmission” and a money transmiter license is required to conduct
these transac�ons in the District.

To further clarify DISB’s posi�on, a Money Transmiter License is required based on the following key
considera�ons:

        1. Custody and Control: Any retention of virtual currencies, even briefly, would typically
           categorize such operations as money transmission.

        2. Direct Exchange Transactions: Direct exchanges from cash to cryptocurrency, where transfers
           to the customer’s wallet are immediate and without retaining any control post-transaction,
           are considered money transmissions.

        3. Kiosks and Teller Applications: Analogous to ATMs, these platforms facilitate direct crypto or
           virtual currency transactions between the user of the BTM and a third party other than the
            owner/operator of the BTM, even if they operate merely as points for immediate, direct
            transactions without holding cryptocurrencies or virtual currency funds. This activity is
            considered money transmission.

        4. Over-the-Counter Exchange: This service likely involves more complex transactions that
           might hold or may in the future hold cryptocurrencies or virtual currency funds on behalf of
           users, which would be viewed as engaging in money transmission. Given these factors and
           the scope and nature of BTMs frequently used for fraudulent operations, a money transmitter
           license is required.

An en�ty seeking a money transmiter license is required to submit an applica�on along with other
required documents via the Na�onwide Mul�state Licensing System (NMLS). The applica�on process is
fact-driven and the determina�on to approve an applica�on for a money transmiter license to operate in
the District depends on the individual circumstances of each applicant including, but not limited to, the
applicant’s proposed business plan, proposed flow of funds and standing in other jurisdic�ons.

DISB is ac�vely inves�ga�ng and monitoring compliance with licensing requirements for money
transmiters that operate BTMs and virtual currency kiosks in the District.

DISB is commited to monitoring BTM and virtual currency kiosk ac�vi�es and is aware of illegal ac�vity
na�onwide that involves the use of BTM’s to engage in fraudulent ac�vi�es. These fraudulent ac�vi�es
are intended to evade the money laundering laws and regulatory framework surrounding money
transmission. In collabora�on with our federal and state regulatory counterparts, DISB will con�nue to
monitor the financial landscape to prevent such risks to all District residents.

A prospec�ve licensee is encouraged to consult with legal counsel to determine whether its business
ac�vi�es require a money transmiter license. Any en�ty engaged in money transmission in the opera�on
of a BTM and or virtual currency kiosk found not in compliance with the money transmiter law will be
subject to fines and penal�es.

En��es engaged in BTM or virtual currency kiosk ac�vi�es in the District of Columbia without first
obtaining a money transmission license are in viola�on of D.C. Official Code § 26-1002. Such company or
individual will be subject to civil ac�on and regulatory enforcement ac�on for engaging in such viola�ve
conduct, and to criminal prosecu�on of a felony, which could result in a fine of not more than $25,000, or
imprisonment for not more than five years, or both in accordance with D.C. Official Code § 26–1023 (c).
Such violators could also face federal criminal penal�es under 18 U.S.C. § 1960.

Ques�ons or concerns regarding this No�ce or any ques�ons regarding obtaining a money transmiter
license may be directed to the DISB Banking Bureau by email at [email protected].

DISB’s Mission: Our mission is three-fold: (1) cul�vate a regulatory environment that protects consumers
and atracts and retains financial services firms to the District; (2) empower and educate residents on
financial maters; and (3) provide financing for District small businesses.

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