February 13, 2019

Month-In-Brief: Digital Currency

Stephen T. Middlebrook

DC Gets Council to Study Feasibility of a Regulatory Sandbox

On January 23, 2019, the Mayor of DC Mayor created a 21 member District of Columbia Financial Services Regulatory Sandbox and Innovation Council to study the feasibility of developing a "regulatory sandbox" that would enable businesses to test innovative products for financial services without incurring all the normal regulatory consequences of engaging in the proposed activity.  Regulatory sandboxes are a becoming a popular way for state and local legislatures to show they are supportive of new businesses in the blockchain, digital currency and other spaces.  At this stage, however, it is unclear how useful these sandboxes will prove to be.

Read the Mayor’s Order here.

Money Laundering in Popular Online Game

Fortnite, the massively popular online video game introduced by Epic Games in 2017, reportedly had 200 million players worldwide in 2018.  Some of those players are apparently using the in-game virtual currency to launder money.  Starting with stolen credit cards, these bad guys buy the in-game currency and then sell it at a discount on the black market or use it buy in-game weapons and other items which are then resold on eBay and other marketplaces.

Report Concludes Central Banks Are Intrigued by but Wary of Digital Currency

The Bank of Internal Settlements surveyed 63 central banks serving 80% of the world’s population to find out what they think about issuing digital currencies.   While a majority of banks were investigating digital currencies, most were proceeding cautiously.  Only a limited number were engaging in pilot projects.

Read the survey here.

PA says virtual currency exchanges do not need money transmission licenses

The Pennsylvania Department of Banking and Securities issued guidance that virtual currency exchanges operating in the state do not need money transmitter licenses because virtual currency isn’t money and the exchanges don’t handle fiat currency.  Similarly, virtual currency ATMs which exchange fiat for virtual currency or virtual currency for fiat also do not need licenses because there is not transmission to a third party.  The guidance is a little over a page long and provides very little analysis or explanation, but it is something.