In the wake of a slew of inquiries about virtual currency exchanges, the Pennsylvania Department of Banking and Securities (DoBS) published some advice on how to apply the Money Transmission Business Licensing Law, also known as the Money Transmitter Act (MTA), to virtual currency exchanges.
The DoBS first clarifies that "money," as defined under the MTA, does not include virtual currency: "[O]nly fiat currency, or currency issued by the United States government, is 'money' in Pennsylvania."
Next, the advice clarifies that Pennsylvania does not consider virtual currency trading platforms to be money transmitters because these platforms do not directly handle fiat currency. Instead, "fiat currency paid by or to a user is maintained in a bank account in the platform's name." Similarly, virtual currency kiosks, ATMs, and vending machines don't count as money transmitters because there is no transfer of fiat to a third-party.
The DoBS guidelines also highlight that both "one-way" system kiosks and "two-way" system kiosks are included in this definition. One-way systems dispense virtual currency in exchange for fiat; two-way systems exchange fiat for virtual currency and vice versa. Even though these kiosks charge transaction fees, they don't count as money transmitters because there is no transfer of money to a third party.
The need for a third-party's involvement for an act to fit the definition of "money transmission" is one of the more interesting aspects of the DoBS' advice. The DoBS guidelines say that the "business of transmitting" is not defined in the MTA, and so it relies on the "plain meaning" of the word "transmit." Taking its cue from the definition in Black's Law Dictionary, the DoBS says to "transmit" is to "send or transfer from one person or place to another." The DoBS concludes:
"Thus, in order to 'transmit' money under the MTA, fiat currency must be transferred with or on behalf of an individual to a 3rd party, and the money transmitter must charge a fee for the transmission."
By DoBS' interpretation of the MTA, crypto exchanges are not money transmitters both because cryptocurrency is not considered "money" and because any fiat currency involved is not being transmitted via a third party.
Just semantics? Sure. But it's also what's letting Pennsylvania crypto exchanges breathe a little easier.