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Illinois Money Transmitter Licenses for Crypto Companies

Cryptocurrency exchange service providers operating in the state of Illinois may need to obtain a money transmitter license under the Illinois Transmitters of Money Act (TOMA). Early this month, the Illinois Department of Financial and Professional Regulation, Division of Financial Institutions, clarified its position in non-binding statements regarding money transmitter licenses for crypto firms. Its letter to San Diego-based The Crypto Lawyers regarding whether a crypto firm called Cryptoflip was required to obtain a TOMA license explains that “Cryptoflip is not selling or issuing payment instruments because payment instruments must be ‘for the transmission or payment of money,'” adding:

Bitcoin is not money under TOMA.

Some crypto businesses will be required to obtain a license under the Illinois Transmitters of Money Act (TOMA). However, in the case of Cryptoflip, the Illinois Division of Financial Institutions revealed in non-binding statements that it does not need the license.

Cryptoflip claims that it will sell bitcoin from its own supply, will not post orders on third party exchanges, or receive funds for transmission. Since the company is not acting as a third-party exchange or an “escrow-like intermediary,” it is therefore not in the business of receiving money for transmission or transmitting money. Furthermore, Cryptoflip is not engaged in the business of exchanging fiat currency for fiat currency and will only work with TOMA-licensed companies that are also registered with the Financial Crimes Enforcement Network (FinCEN) as Money Services Businesses. Based on the information presented, the Department concluded that Cryptoflip would not require a TOMA license, elaborating:

Each exchange is an exchange of digital currency for money between Cryptoflip and a consumer … Cryptoflip is not engaged in money transmission when it sells its own cryptocurrency for fiat currency.

On the federal level, Rep. Paul Gosar introduced the Crypto-Currency Act of 2020 last week while under self-quarantine. The aim of this bill is to “clarify which federal agencies regulate digital assets, to require those agencies to notify the public of any federal licenses, certifications, or registrations required to create or trade in such assets, and for other purposes.”