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Bitcoin Foundation Fires Back to California

A few weeks back, the California Department of Financial Institutions sent a cease and desist letter to the Bitcoin Foundation for engaging in the “business of money transmission without having obtained the license or proper authorization required by the California Financial Code.”

Attorneys for the Bitcoin Foundation have responded with a 7-page letter outlining why they believe the Bitcoin Foundation is not subject to regulation under the California Money Transmission Act.

Here are the key points:

• The Bitcoin Foundation does not engage in money transmission in California
• The Bitcoin Foundation does not maintain business operations in California
• The Bitcoin Foundation does not sell or issue payment instruments
• The Bitcoin Foundation does not sell or issue stored value
• The Bitcoin Foundation does not receive money for transmission

In other words, California, respectfully, you’re wrong.

The wrap up the letter with a request for the cease and desist letter to be withdrawn and ask that an opinion be issued that officially states that Bitcoin is not regulated under the California Money Tranmission Act

For the foregoing reasons, the Bitcoin Foundation has concluded that it does not engage inactivities for which a California money transmitter license is required. Furthermore, the Bitcoin Foundation respectfully submits that the sale of bitcoin is not a regulated activity generally speaking. The Bitcoin Foundation therefore respectfully requests that your office issue an official opinion or administrative letter ruling confirming that the Bitcoin Foundation is not required to obtain a license for the reasons explained above and affirming that the May 30, 2013 warning letter has been withdrawn. Further, the Bitcoin Foundation requests that your office issue an opinion that, for the reasons explained above, the sale of a bitcoin is not regulated under the California Money Transmitter Act.

Read the full letter below.

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California Goes After Bitcoin Foundation with Cease and Desist Letter

The State of California has concerns about Bitcoin.

The California Department of Financial Institutions has sent a cease and desist letter to the Bitcoin Foundation for engaging in the “business of money transmission without having obtained the license or proper authorization required by the California Financial Code.”

The penalties are severe, according to Forbes who first broke this story:

If found to be in violation of California Financial Code, penalties can be severe ranging from $1,000 to $2,500 per violation per day plus criminal prosecution which could result in fines and/or imprisonment. Additionally, it is a felony violation of federal law to engage in the business of money transmission without the appropriate state license or failure to register with the U.S. Treasury Department. Convictions under the federal statute are punishable by up to 5 years in prison and a $250,000 fine.

Below is a copy of the actual cease and desist letter. The Bitcoin Foundation has 20 days to respond in writing.

Via Forbes.

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