House votes to keep bitcoins unregulated in New Hampshire
The New Hampshire house of representatives recently passed a bill exempting bitcoin transactions from state legislation. The bill added an exemption for virtual currency transactions, meaning that bitcoin transactions will not be subject to state registrations, and virtual currency users will not require a state license to perform virtual currency transactions.
Details of the Bill
The bill amends section 339-G:3, the chapter covering the licensing of money transmitters. Under the list of those exempt from these state requirements, it adds: “Persons who engage in the business of selling or issuing payment instruments or stored value solely in the form of convertible virtual currency or receive convertible virtual currency for transmission to another location.”
The bill also adds: “Such persons shall be subject to the provisions of RSA 358-A,” clarifying that virtual currency transactions are still covered under the Consumer Protection Act.
Prior to this change in New Hampshire’s legislation, the Cryptocurrency exchange Poloniex had to suspend all accounts in New Hampshire. Previous law defined virtual currency as: a “digital representation of value that can be digitally traded and functions as a medium of exchange, a unit of account, or a store of value but does not have legal tender status as recognized by the United States Government.” Previously, the inclusion of virtual currency in the state legislature required those making transactions using virtual currency to register as money transmitters, a difficult and arduous process.
Opposing opinions to the bill included those of Representative Kermit Williams. He argued that the legislation wouldn’t affect peer-to-peer transactions, but would only oversee third-parties. The legislation, he maintained, was “for people who can’t figure it out”. He stated: “If you know what you are doing, you don’t need any help, but those who don’t understand virtual currency should be treated fairly.”
Representative Timothy Smith added to these concerns, stating that people sometimes cannot choice whether to use Bitcoins. For example, he said that he had received a “frantic phone call” from one of his constituents. The constituent had been the victim of a ransomware scheme, installing a virus on their computer that they refused to remove until receiving $5,000 worth of virtual currency. Turning to a third party, he was scammed out of $5,000 American dollars. Congressman Smith argued that the bill protects people like this unfortunate ransomware victim.
The Chair of the House Commerce Committee, John Hunt, was not persuaded by these arguments. He quipped that “This is the 21st century, not the 19th century.” He stated: “Nobody is saying, ‘Please give us this protection. They are saying, ‘Please don’t give us this protection.”
In June, Governer Christopher Sununu signed the bill into law. Bill 436 will take affect on August 1, 2017.
The legislation hopes to open the state of New Hampshire back up to blockchain-based businesses. New Hampshire already has a large Bitcoin population, people that moved to the state because of its attractive tax measures for Bitcoin users. Overstock.com, after switching to Bitcoins in 2014, reported that people in New Hampshire did more Bitcoin transactions per capita than any other state.
Because of New Hampshire’s lax tax code, many cryptocurrency-based businesses had turned to the state in order to operate outside outside of government oversight and regulation. These decentralized businesses use various virtual currencies to circumvent government supervision. A surprising number of industries have begun accepting the decentralized currency, including everything from farms, to gas stations, to restaurants and pubs. These also include community markets, many of which are clandestine. In an interview with CoinTelegraph, Jessica Love, founder of New Hampshire’s Community Day Marketplace, stated: “there are lots of products and services that you can pay for with Bitcoin,” she said, referring to Community Day Market events, She went on to list some of the things you can buy at these markets: “Farm meats, eggs, produce, honey, and such raised by friends and neighbors. Organic soaps, candles, coffee and tea, jewelry, crochet goods, household items, crafts, and more. Services too – massage, chiropractic care, and even hypnotherapy.” She went on to state her confidence in virtual currency, stating: “I believe that anything that can be brought to this market model and traded for Bitcoin should be. We are living the ultimate agorist experiment of an off the grid economy and beginning to implement the currency.”
For many of the people flocking to New Hampshire, the decentralized currency represents greater freedom. Critics maintain, however, that these self-described “anarchists” and “libertarians” are simply business owners trying to evade their taxes, while at the same time benefiting from public infrastructure.
Local Newspapers picked up on the Bitcoin sensation, with local newspaper The Monadnock Shopper News running a front page article on the crypto-currency during the week of July 4th. The paper featured a statement from Chris Rietmann of 101 Local Goods, a local food store that has started accepting Bitcoin. He stated: “While the dollar is worth less than a year ago, the Bitcoin is worth seven times what is was a year ago!”
Actually the dollar has risen in the past year. Fortune magazine predicts that the US dollar will reach a one to one parity with the Euro by next year.
Bitcoin, by contrast, has climbed to about five times as much as last year, due to a recent spike in value last May. By July, however, this brief Bitcoin bubble took a turn for the worse, taking a giant dive this month.
What does the future hold for New Hampshire? For those looking to use Bitcoin to eschew state regulations, the Bill represents a great victory. For those looking to protect the interests of consumers working with third-party Bitcoin dealers, the law may result in a loss.
By contrast, the New York State Department of Financial Services introduced a regulation called BitLicense. This legislation required that businesses receive a BitLicense if they engage in the following activities:
- Receiving or transmitting virtual currency, except for non-financial purposes or a nominal amount of money.
- Storing or maintaining custody of virtual currency for another person.
- Buying or selling virtual currency to customers as a business.
- Virtual currency Exchanging Services for customers as a business.
- Running or administrating a virtual currency.
The New York provisions also exempted:
- people who develop or disseminate software
- merchants or consumers who only use virtual currency for the sale of goods or for investment.
The New York legislation resulted in ten or more Bitcoin businesses leaving the state of New York?
Why was this Bitcoin legislation ineffective? If places like New Hampshire allows for Bitcoin financial organizations to operate without regulation or oversight, they will relocate their businesses to these areas to avoid the cost of expensive regulations. This means that, for the regulation of digital currency trading to be effected, regulation must happen at the federal level. Can we expect such legislation in the future? Will the federal government finally crack down on Bitcoin? Until they do, third-party companies in New Hampshire will continue to operate free of oversight and without regulation.