“State Summaries” are part of the report provided to Virginia by the Stevens Center for Innovation in Finance, University of Pennsylvania.
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Multistate Settlements
On June 26, 2024, the Conference of State Bank Supervisors (CSBS) announced a multistate settlement involving state financial regulators that took collective action against crypto platform Abra, operated by Plutus Financial, Inc. and certain affiliates, over allegations of operating without receiving required state money services business (MSB) licensing. Under the terms of the settlement, up to $82.1 million will be paid back to customers. The states participating in the settlement are Alabama, Alaska, Arizona, Arkansas, Connecticut, District of Columbia, Georgia, Idaho, Iowa, Maine, Minnesota, Mississippi, Nevada, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Rhode Island, South Carolina, South Dakota, Texas, Vermont, Washington, and West Virginia.
The North American Securities Administrators Association (NASAA) announced in February 2024 that a taskforce of state securities regulators and the United States Securities and Exchange Commission (SEC) have reached a $3 million settlement with TradeStation Crypto, Inc.(TradeStation) concerning its crypto interest-earning program.
From August 2020 to June 2022, TradeStation offered a crypto interest-earning program to United States investors. Under this program, investors could passively earn interest on crypto assets by loaning them to TradeStation.
TradeStation is alleged to have failed to comply with state registration requirements. As a result, investors were sold unregistered securities in violation of state laws and additionally did not receive information and disclosures necessary to understand the potential risks of TradeStation’s crypto interest-earning program.
For each state participating in the settlement, TradeStation will pay a fine of $29,411.76 and cease offering, selling, or renewing its crypto interest-earning program until such activities are compliant with applicable state and federal securities laws. TradeStation has represented that it repaid investors, including interest and earnings. Over 25 states and Washington DC joined the settlement.
Last updated November, 2024
ALABAMA
The Alabama Monetary Transmission Act (Ala. Code §§ 8-7A-1 to 8-7A-27), enacted in 2017, includes “monetary value” within its scope, explicitly covering digital and virtual currencies. This law prescribes that any business involved in the transmission of virtual currency must obtain a license from the Alabama Securities Commission (ASC). This licensing requirement ensures that cryptocurrency transactions in the state are subject to regulatory oversight, enhancing consumer protection. Ala. Code § 8-7A-2(8) defines “monetary value” to include virtual currencies. The act also imposes rigorous record-keeping standards on licensed entities and empowers the ASC to enforce compliance through inspections, fines, and cease-and desist orders for non-compliant entities. Additionally, the Alabama Securities Act, found in Ala. Code §§ 8-6-1 to 8-6-41, governs securities transactions within Alabama and applies to digital assets that may be classified as securities under Alabama law. This statute reinforces Alabama's commitment to overseeing cryptocurrencies that are classified as securities, promoting regulatory transparency and protecting consumers in the fast-evolving financial technology space.
ALASKA
In Alaska, the Money Services Regulations (Alaska Admin. Code tit. 3, § 13.005), which took effect on January 1, 2023, require that businesses engaged in the transmission of virtual currency must be licensed as money services businesses (MSBs). This regulation includes virtual currency within the established regulatory framework for traditional money services businesses, thereby enhancing its regulatory oversight. Alaska Admin. Code tit. 3, § 13.990 specifically defines a ‘virtual currency’ as a “digital representation of value that is used as a medium of exchange, unit of account, or store of value” but does not have legal tender status, in line with the federal definition. This regulation not only establishes licensing requirements for virtual currency transmitters but also sets forth operational standards aimed at consumer protection. The Alaska Securities Act (AS 45.55.010 et seq.) further regulates securities transactions, including those involving digital assets that may qualify as securities. Under this statute, any offerings of digital assets deemed securities must comply with Alaska’s securities registration requirements, unless an exemption is applicable. This provision furthers Alaska's aim to provide consumer protection within the securities market, while recognizing the unique characteristics of blockchain-based digital assets more broadly.
ARIZONA
Arizona has implemented a comprehensive regulatory framework for virtual currencies, starting with the definition of “virtual coin” and “virtual coin offerings” under A.R.S. § 44-1801(31) and (32). This statute classifies virtual coins as any digital representation of value used as a medium of exchange, and virtual coin offerings are defined as the offering for sale of virtual coins. Arizona further specifies exemptions from state securities registration for certain transactions involving virtual coins, provided specific conditions are met (A.R.S. § 44- 1844(A)(22), (D), (G)). This regulatory structure helps streamline compliance for businesses, while safeguarding consumers in Arizona's blockchain market. Additionally, Arizona provides specific tax treatments for non-fungible tokens (NFTs) and cryptocurrency airdrops. Under A.R.S. § 43- 1022(29), individuals who receive cryptocurrency through airdrops are exempt from state income tax on the airdropped value. A.R.S. § 43-1028 allows deductions for fees paid to virtual network operators for the purchase, sale, or exchange of virtual currencies or NFTs, allowing businesses and consumers to benefit from a clearer tax structure related to cryptocurrencies.
ARKANSAS
The Arkansas Uniform Money Services Act, found in Ark. Code Ann. § 23-55-102(22) and (13), defines virtual currency and includes it within the scope of “money transmission” activities requiring a license. Effective August 1, 2023, any business conducting virtual currency transmission in Arkansas must first obtain a license, bringing virtual currency under the same regulatory requirements as traditional money services. This act provides a clear framework for businesses involved in virtual currency transmission, prioritizing transparency and compliance within the state’s financial system. Further supporting blockchain innovation, the Arkansas Data Centers Act, codified as Ark. Code Ann. § 14-1-601 and enacted in April 2023, offers protections to cryptocurrency miners. This law prevents local governments from adopting adverse policies or zoning changes that could negatively impact cryptocurrency mining businesses. By doing so, Arkansas promotes a favorable environment for cryptocurrencies mining, focused on balancing growth within the blockchain sector with protecting operational stability for mining enterprises.
CALIFORNIA
The California Money Transmission Act (Cal. Fin. Code § 2000 et seq.) regulates the transmission of money, including crypto and virtual currencies, by requiring businesses engaging in money transmission to obtain a license from the Department of Financial Protection and Innovation (DFPI). This act provides a foundational legal framework for virtual currency businesses, ensuring that they operate within a regulated and consumer-protective environment. The Digital Financial Assets Law, effective July 1, 2025, under Cal. Fin. Code § 25000 et seq., establishes a licensing requirement for businesses involved in digital financial assets, encompassing various blockchain applications and virtual currency-related operations. This regulatory framework is designed to support the responsible growth of blockchain technology within the state, mandating that cryptocurrency businesses obtain DFPI approval.