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The Fifty U.S. States and Cryptocurrency Regulations

Article is provided by Jennifer L. Moffitt, a privately practicing attorney. Contacts can be found at the end of the post.

In the United States, virtual currency, such as Bitcoin and other similar coins, and virtual currency exchanges have been subject to federal regulations, with taxation and financial crimes the most prominent regulatory issues.[1]  However, it is at the state level that regulation of virtual currency has been most contradictory.  The U.S. states have mixed responses to the emergence of cryptocurrency.  Some of the states have ignored cryptocurrency by not implementing or amending any laws that address virtual currency.  However, other states have taken action with some states somewhat hostile towards virtual currency while other states are more welcoming.  In a number of states, the response towards cryptocurrency is currently ambiguous with no actual position taken.  This discussion will attempt to categorize regulations by restrictions placed on virtual currency and identify states by category of regulation.  In addition, the implications and effects of widely divergent state level legislation and regulations will be examined.

State Level Cryptocurrency Regulatory Tools

There are several regulatory tools used by states to regulate and control virtual currency.  These include money transmission laws, licensing requirements and regulatory guidance.  A brief summary of these tools is provided below.

Money Transmission Laws

Forty-nine of the fifty American states enact their own version of a Money Transmitters Act.  A money transmitter is a business entity that provides money transfer services or payment instruments, such as Western Union.[2]  The original purpose of state level money transmissions laws was to prevent money laundering and other illegal acts.  However, several states have used money transmissions laws to regulate the exchange of virtual currency.  In these situations, transactions which are defined as an exchange of virtual currency for fiat money or other virtual currencies, rather than for goods and services, are considered to fall under the definition of money transmission and thus are subject to that state’s money transmission law.  If Bitcoin transactions, for example, fall under the state law, then the transmitter must fulfill certain criteria such as applications, fees, and a security that is often a surety bond.  A transmitter would find that it would take time and money to comply, thus discouraging smaller such businesses from operating in the state.

Several states have enacted slightly different variations of this tactic.  New Mexico has interpreted its 2016 legislation to require a money transmitters license with bonding for virtual currency activity.  Washington state also specifically includes virtual currency in the definition of money transmission, thus requiring bonding and other compliance measures.  In these and other states with similar laws, virtual currency is specifically treated as money and regulated through fairly stringent money transmission legislation.

Other, more virtual currency friendly states, have passed legislation so that the state money transmission law doesn’t apply to virtual currency.  The state of Montana currently is one of the most friendly states because it does not have a money transmission law so virtual currency in general is not subject to any restrictions imposed by money transmission regulations.  New Hampshire enacted legislation in 2017 that specifically protected virtual currency businesses from being registered as money transmitters.  Wyoming very recently enacted 2018 legislation that exempts virtual currency like Bitcoin from money transmission laws and regulation within the state. Wyoming also enacted in 2018 other legislation favorable to blockchain and virtual currency including legislation exempting virtual currency from state property tax.[3]


In addition to money transmission laws, the states have the option to enact separate laws that require virtual currency purveyors to license in the state.  Connecticut, for example, has enacted 2017 legislation forbidding third parties to sell virtual currency or store virtual currency for others without a license.  Connecticut also decreed that virtual currency licensees must pay a surety bond, determined by the state banking commissioner on a situational basis.  The commissioner calculates the amount of the bond based on the expected amount of profit.

Georgia took a similar stance as Connecticut by restricting the transmission of virtual currency within the state without a license.  In addition, Georgia permitted its Department of Banking and Finance to authorize future rules and regulations involving the transmission of virtual currency.

New York has followed the licensing model rather than modifying existing money transmission legislation.  New York, like Connecticut and Georgia, requires licensing for virtual currency through its BitLicense, created by the New York State Department of Financial Services. The requirements to obtain such a license are stringent.  New York also requires virtual currency businesses to post a surety bond whose amount was decided on a case by case basis.  A bill introduced in the New York State Senate would create a legislative alternative to such regulatory licensing.

Regulatory Guidance

States can choose to issue regulatory guidance through state agencies such as banking authorities on the treatment of cryptocurrency.  Regulatory guidance does not have the same strength as regulations based on enacted laws, but they are often easier to enact than legislation. Hawaii, for example, does not currently officially recognize virtual currency as monetary transfers through legislation, but the state has required licensing of certain types of virtual currency businesses, including the requirement that fiat currency reserves must be held in addition to virtual currency.  Current bills pending in the 2018 Hawaii legislature may clarify the state’s position on virtual currency as money transmission if enacted.[4]  Kansas has a money transmission law, but the office of the state Bank Commissioner issued a memorandum to the effect that a money transmitter’s license is not necessary for the sale of virtual currency as it is not money.  Texas does not consider most cryptocurrency transactions money transmission unless a third party is involved.  Tennessee guidance is similar to that of Texas.

State Level Virtual Currency Regulatory Rankings

The rapidly changing state regulatory environment with respect to virtual currency, coupled with a lack of uniformity among the states with respect to regulations and guidance, makes it difficult to fit state actions into distinct categories.  However, based on current information from enacted legislation and state regulatory guidance, both formal and informal, all fifty states have been analyzed and where possible have been divided into separate categories based on their friendliness towards virtual currency.  Category One is the most welcoming towards virtual currency while Category Four has explicitly included virtual currency in legislation regulating money transmission.  Most states cannot be currently classified under such a scale due to ambiguities in current state regulations. The table below summarizes the state rankings.

Categories of State Virtual Currency Regulations*

Category 1 Category 2 Category 3 Category 4
Legislatively Exempt Favorable Guidance Restrictive Guidance Regulated Through Regulations
New Hampshire Illinois Idaho Alabama
Montana Kansas Hawaii** Connecticut
Wyoming Massachusetts New Mexico Georgia
Tennessee New York North Carolina
Texas Vermont

*As of date of publication

**Proposed legislation may change categorization

Category One States

Category One states are those that have created laws with the effect that virtual currency is excluded from money transmission statutes.  The state of New Hampshire has amended its money transmitter statute to specifically exclude “persons who engage in the business of selling or issuing payment instruments or stored value solely in the form of convertible virtual currency or receive convertible virtual currency for transactions to another location” from the state’s money transmission regulation.

Wyoming is also a Category One state because of five bills enacted in March 2018 legislation.  As a result, there is now an exemption for virtual currency used within the state from Wyoming money transmission laws and regulation and virtual currency is now exempt from property taxation.  Also, blockchain tokens or “utility tokens,” which are tokens that can be traded for goods and services, are specifically exempted from securities and money transmitters laws.  Other legislation allows corporate records to be maintained in blockchain.[5]

Montana might also fall under Category One, even though it did not amend its money transmitter statute to exclude cryptocurrency, for the simple fact that Montana is now the only state in the Union that does not have a money transmission law.  Therefore, there is no possibility of including cryptocurrency in money transmission regulations in Montana at the current time.

Category Two States

Category Two states are still relatively friendly towards virtual currency, but are a step-down from Category One.  Category Two states have not enacted laws stating that money transmission does not apply to virtual currency, but rather various state agencies have issued rulings or regulations to the same effect.  The regulations should be followed just like laws, but a regulation is weaker than a law.  Illinois is a Category Two state because its Department of Financial and Professional Regulation issued guidance to the effect that virtual currency does not fall under the definition of money and thus does not fall under the money transmission law as well.[6]  Other Category Two states with specific guidance include: Kansas, Tennessee, and Texas.  Massachusetts has issued guidance that Bitcoin ATMs are not financial institutions nor do they fall under rules governing foreign currency. However, even within these states, there is still variation.  Kansas has stated that cryptocurrency cannot be used for campaign contributions in either state or local elections.  Massachusetts has urged citizens to avoid Bitcoin and seeks aggressive policing for ICOs.

Category Three States

Category Three states take a large step away from a Category Two State by being distinctly less friendly to virtual currency.  These states have developed regulations and guidance that state that Bitcoin and other virtual currencies are money and fall under the state’s money transmission legislation or licensing requirements.  For example, Idaho’s Department of Finance issued a statement that a customer that exchanges a third party’s virtual currency is subjected to the Idaho Money Transmitters Act.[7]  Other states that currently conclude that virtual currency should fall under money transmission regulations include Hawaii and New Mexico.  New York state through its BitLicense would also fall into this category.

Category Four States

Category Four states have implemented laws that explicitly state that virtual currencies fall under the guidance of money transmission legislation.  Alabama recently amended its Monetary Transmission Act to define “monetary value” as “[a] medium of exchange, including virtual or fiat currencies, whether or not redeemable in money.” As a result, virtual currency is subject to the Act and must obtain a license from the state.  Other states that have amended their monetary transmission legislation or enacted separate licensing laws to specifically regulate virtual currency include Connecticut, Georgia, North Carolina, and Washington.  Vermont has also amended its money transmission law to make virtual currency a permissible investment, a potentially friendly development.

Other States

The majority of U.S. states do not fall in the above categories.  This includes states that issue no guidance and do not currently regulate such as California and Colorado.  It also includes states that issue informal guidance when contacted and decide on a case by case basis whether state regulations and money transmission regulations apply.  For example, a state such as South Dakota, may state that cryptocurrency is money, but ask to see a business plan for a final decision.  Even states with virtual currency legislation may provide for exemptions from the law either within the law or on a case by case basis.  Other states may have enacted legislation related to virtual currency, such as anti money laundering statutes, or taxation issues, or in the case of California, raffle ticket restrictions, but do not yet weigh in on money transmission requirements. State regulatory bodies may have issued consumer warnings on virtual currency but no specific guidelines as to money transmission. Finally, some states have enacted favorable blockchain legislation, such as Nevada or Delaware, but have not directly addressed virtual currency money transmission.


In conclusion, given the widely divergent state positions on virtual currency, economic theory suggests that over time businesses involving cryptocurrency will move away from the heavily regulated states to more welcoming and friendly ones.  It will be interesting to monitor trends over time to see if this is true. However, cryptocurrency legislation and regulations in the states are constantly evolving so firm conclusions about the status of a particular state are difficult.  Wyoming, for example, was until very recently not a welcoming virtual currency state. Given the ambiguity and contradictions in the state regulations, there could be a movement to see virtual currency laws standardized for all fifty states.  A draft of a uniform regulation of virtual currency businesses act has been developed, but only time will tell if standardization is in the future for state level virtual currency laws.[8]  In the meantime, cryptocurrency businesses will need to closely monitor developments at the state level to ensure compliance.

Jennifer L. Moffitt ( is a privately practicing attorney located in Cheyenne, Wyoming specializing in regulation and compliance with respect to virtual currency.  She can be contacted at [email protected]. She has a Bachelor’s Degree in Economics from the University of California, Berkeley, a Master in International Studies from the University of Otago in New Zealand, and a J. D. from the University of San Diego. She is licensed in Colorado, Montana, and Wyoming.

This report should not be construed as legal advice for a specific situation or circumstance. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation.

[1] Although the terms digital currency, cryptocurrency and virtual currency are often used interchangeably, the term “virtual currency” is increasingly used in legislation and legal language.  The term is usually defined as a digital representation of value that is neither issued by a central bank or legal authority nor pegged to a fiat currency, but can be used as a means of legal payment and transferred, stored, and traded electronically.  This paper will use the term virtual currency or cryptocurrency.

[2] Wilson, Wistar, “A Call to Clarify the Regulatory Scope of Money Transmitter Laws,” The Regulatory Review,

[3] Wilmoth, Josiah, “Wyoming House Unanimously Passes Bill Exempting Utility Tokens from Securities Laws,” CCN,

[4]Testimony on Hawaii House Bill No. 2257, Relating to Virtual Currency, January 31, 2018,

[5] Schmidt, Gustav L., “Wyoming leads the way on facilitating blockchain technology,” The Securities Edge,

[6] “IDFPR Requests Comment on “Digital Currency Regulatory Guidance,” IDFPR, I

[7] “Idaho Money Transmitters Section,” Idaho Department of Finance,

[8] “Regulation of Virtual Currency Businesses Act,” Uniform Law Commission,

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