California Mistakes BitCoin Foundation For A Currency Exchange
Financial regulators in California send a “Cease and Desist” letter to a non-profit organisation
The Department of Financial Institutions of California has issued a ‘Cease and Desist’ letter to the BitCoin Foundation, demanding it stops conducting money transmissions without an appropriate license.
However, the Foundation claims that it has never engaged in financial operations, since that would go against its original charter.
According to Forbes, a violation of California Financial Code can result in daily fines up to $2,500, prosecution and even imprisonment. If the organisation is found to be breaking federal law, the penalties are even harsher, and can carry a 5 year prison term.
Dazed and confused
BitCoin (BTC) is a digital crypto currency based on an open-source, peer-to-peer Internet protocol. First introduced in 2009 by an anonymous developer known under the alias ‘Satoshi Nakamoto’, it was traditionally used among those interested in keeping their transactions secret. Recently, a number of major online businesses have started to accept BTC as a form of payment, improving its reputation.
The BitCoin Foundation is a non-profit established in 2012 to standardise the software design of the currency, improve the encryption algorithms and promote it as a reliable, convenient way to pay online. However, the California Department of Financial Institutions seems to think the organisation operates as a business.
“It has come to the attention of the Commissioner that BitCoin Foundation may be engaged in the business of money transmission without having obtained the license or proper authorisation required by the California Financial Code,” states the letter. “You are hereby warned to cease and desist from conducting the business of money transmission in this state. Failure to do so will result in appropriate action being taken.”
The Foundation has 20 days to respond to the letter.
“One activity that the foundation does not engage in is the owning, controlling, or conducting of money transmission business,” wrote Jon Matonis, a member of Board of Directors for BitCoin Foundation. He suggested the letter could have been a “general blanket action” against BitCoin-related companies, and more “Cease and Desist” requests will surface in the future.
Mt. Gox, the biggest virtual currency exchange in the world, recently had some of its funds confiscated by the US Department of Homeland Security, which claimed the Tokyo-based business had violated US laws governing currency exchange and transfer. In addition, a recent report by the US Government Accountability Office called for the Inland Revenue Service to start tracking virtual currency transactions and tax them.
All this goes to show that despite its stable price and increased visibility, BitCoin is still a long way from being considered legal tender.
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