The customer also authorizes _ to liquidate the necessary amount of cryptocurrency the customer is disposing of into USD to cover the applicable transaction fee.įor each of these transactions, all of the debit and credits of cash and cryptocurrency are noted as journal entries at the time of the transaction. The customer is only transacting with _ for this exchange. If _ verifies there is a sufficient source, _ will credit the customer’s _ Crypto Account with the desired cryptocurrency and debit the balance of the applicable traded-out cryptocurrency. If a matching order from an external source cannot be found, the order will not be executed and will remain open until canceled.Įxchanges of cryptocurrencies are structured in a similar manner: if a customer wishes to exchange one type of cryptocurrency held in its _ Crypto Account for another type of cryptocurrency, _ will ensure that there is a source that can fulfill this order. Once _ verifies there is a source, _ will facilitate the purchase and credit the customer’s _ Crypto Account. The other way is if a customer wishes to purchase cryptocurrency and there isn’t another customer on the platform that will sell that cryptocurrency for that price, _ will find a matching order from an external source, such as another exchange. So, for each of these transactions, there are only two parties involved: the customer and _. One way is that if a customer wishes to purchase cryptocurrency at a stated price and another customer wishes to sell that cryptocurrency at the same price, there will be a respective purchase and sale between each of the customers and _ to complete each such customer’s order. There are two ways that purchases and sales can occur. The customer will have an account with _ (“_ Crypto Account”), which will maintain the customer’s cryptocurrency. The customer will maintain fiat currency in his or her _ account (“_ Account”) to buy cryptocurrencies through _. _ customers will also be online brokerage customers of _. To facilitate this, _ will have an arrangement with an affiliate, _ (“_”). _ plans to operate a platform that allows a customer to purchase and sell decentralized cryptocurrency in exchange for fiat currency or by exchanging one cryptocurrency for another. Your firm requests an opinion of whether _’s proposed activities are subject to the California Money Transmitter Act (“MTA”). As senior counsel for the Legal Division, the Commissioner requested that I respond to this matter. Thank you for your firm’s letters to the former Commissioner of Business Oversight, Jan Lynn Owen, dated January 9 and March 18, 2019, as well as its email correspondence on April 24 and May 22, sent on behalf of your client _(“_”).
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