Louisiana has become the first state to follow New York’s lead in issuing a crypto-specific license, accepting Louisiana Virtual Currency Business Activity (VCBA) license applications as of January 1, 2023. All entities engaged in “virtual currency business activity” need to obtain licensure by July 1, 2023, to continue operations, including entities that are currently licensed money transmitters in Louisiana.
Louisiana defines “virtual currency business activity” as exchanging, transferring, or storing virtual currency or engaging in virtual currency administration, holding electronic precious metals or electronic certificates representing interests in precious metals on behalf of another person or issuing shares or electronic certificates representing interests in precious metals, and exchanging one or more digital representations of value used within one or more online games, game platforms, or family of games.
Louisiana has stated that all applicants who file a “completed application” by April 1, 2023, will be guaranteed an official decision by June 30, 2023. However, this does not mean that crypto exchanges or other entities can wait until April 1 to file their application. Applications are only deemed “completed” when the application has been officially noted as “Pending – Review” without any outstanding deficiencies.
Additionally, as of July 1, 2023, entities will be unable to continue conducting “virtual currency business activities” in Louisiana if they do not hold a VCBA license or are not otherwise exempt from licensure. Thereafter, entities that continue to conduct “virtual currency business activity” in Louisiana are subject to civil penalties for each individual violation of the VCBA and are further subject to additional “enforcement measures.”
It’s important to note that Louisiana’s VCBA license requirements are similar to New York’s BitLicense, which has been in place since 2015 and applies to companies that engage in virtual currency business activity, such as virtual currency exchanges, and other companies that hold or transmit virtual currency on behalf of others. Here are some similarities between the two licenses, which both:
• apply to companies that engage in virtual currency business activities, such as virtual currency exchanges and other companies that hold or transmit virtual currency on behalf of others.
• apply to entities that are currently licensed money transmitters and engage in virtual currency business activities
• require companies to comply with various regulatory requirements, such as anti-money laundering, cyber security, and capitalization requirements
• require companies to obtain a license in order to continue operations
Entities that are currently licensed money transmitters in Louisiana, and that engage in virtual currency business activities, are also required to obtain a VCBA license. The requirement applies to those who engage in virtual currency business activities, even if they only use virtual currency to facilitate money transmission.
Companies requiring licensure should act now as the process is expected to be similar to the NY BitLicense regime, which starts the clock on when the New York Department of Financial Services must make a decision upon an application that has been deemed officially “complete.”