Currently, if you sell bitcoins for dollars or buy them for dollars, you are considered a money transmitter by the federal regulators (FinCEN) and potentially state regulators. State regulations of money transmitters cost millions of dollars in compliance, a cost that is prohibitive for most startups. Stating the obvious, no bitcoin exchange has registered as a money transmitter in the more expensive states. Washington, Idaho and California have indicated that they consider bitcoin exchanges to be money transmitters. Most other state laws could be interpreted the same way. In addition, they can even encompass bitcoin to altcoin exchanges, which do not involve dollars at all.
New York took the time to really understand the technology, including inviting discussion via a public question and answer session on Reddit (where many bitcoin users are members). The result was issued yesterday: an order declaring that licenses for bitcoin exchanges are to be issued under the following Banking Law sections:
None of these laws pertain to money transmitters – in fact, the New York money transmitter rules expressly exempt companies licensed under Article 2 like these. The actual regulations on licensed companies haven’t been issued yet, but they will fall generally within the categories created by the laws listed above. They may be just as expensive as money transmitter licenses especially given Section 32. They’ve given themselves another six months to announce the actual content of the license.
The states are limited when regulating companies in this area because the Securities and Exchange Commission has jurisdiction. But this does invite the SEC to join the fray.