Utah Cryptocurrency Updated Laws
Regulation of Digital Currencies: Cryptocurrency, Bitcoins, Blockchain Technology
|This resolution directs a legislative study of blockchain technology. This resolution: recognizes the potential benefits and applications of blockchain technology; and directs the Business and Labor Interim Committee to study and make legislative recommendations regarding the potential benefits and value of blockchain technology, including potential uses in state government.|
Signed by governor 3/26/19, Chapter 353
|This bill enacts provisions related to blockchain technology. This bill: defines and clarifies terms related to blockchain technology; exempts a person who facilitates the creation, exchange, or sale of certain blockchain technology-related products from Title 7, Chapter 25, Money Transmitter Act; and makes technical changes.|
Utah – MTA Amendments and Cryptocurrency
In 2019, Utah’s legislature passed cryptocurrency-specific amendments to the state’s Money Transmitter Act (MTA). The MTA regulates financial institutions operating within the state of Utah. Specifically, the MTA is a subchapter of the Financial Institutions Act (FIA). A non-exhaustive list of the purposes of the FTA includes: (1) regulate entities offering financial services in the state, (2) protect the interests of shareholders and other customers of financial institutions, (3) preserve the competitive equality of state-chartered institutions, and (4) promote the availability, efficiency, and profitability of Utah’s financial services.
The MTA serves the purposes of the FIA by empowering state authorities to make rules that: (1) restrict or prohibit practices that are misleading, unfair, or abusive; (2) promote fair and complete disclosure of the terms and conditions of agreements and communications between money transmitters and consumers; and (3) promote legal uniformity between state and federal regulations. Furthermore, the MTA furthers the intent of the FIA by prohibiting businesses from offering money transmission services without being licensed by the state of Utah.
In 2019, the state legislature amended the MTA to specifically address cryptocurrency-related issues. In particular, the amendments addressed the issue of whether cryptocurrency transactions are money transmissions and therefore under the MTA’s statutory jurisdiction. According to the amendments, cryptocurrency transactions are not considered money transmissions. Accordingly, virtual currency transactions are probably not subject to the MTA’s statutory authority because the statutory definition of cryptocurrency is inconsistent with the statutory definition of “money transmission.”
Section 7-25-102 defines money transmission as: (1) the sale or issuance of a payment instrument, or (2) the business of receiving money for transmission or transmitting money within the United States or to locations abroad by any and all means, including payment instrument, wire, facsimile, or electronic transfer. The amendments define a payment instrument as a check, draft, money order, travelers check, or other instrument or written order for the transmission or payment of money. Under the amendments, payment transfers do not include: (1) credit card vouchers, (2) letters of credit, or (3) instruments that are redeemable by the issuer in goods or services.
In addition, the amendments revise section 7-25-102 to provide cryptocurrency-specific statutory definitions. First, the amendments define “Blockchain” as an electronic method of storing data that is: (1) maintained by a consensus of multiple unaffiliated parties; (2) distributed across multiple locations; and (3) mathematically verified by independent machines. Second, the amendments define “blockchain tokens” as electronic records that are: (1) recorded on a blockchain, and (2) capable of being traded between persons without the need for financial intermediaries. In other words, blockchain tokens are electronic means of payment that are decentralized and can be transferred between parties without the need for banks or other financial institutions. Generally, financial intermediaries are entities that function as middlemen between parties in financial transactions. Examples of financial intermediaries include banks, mutual funds, and pension funds. Accordingly, a blockchain token is an electronic means of payment stored on the blockchain that can be facilitated without banks or other financial institutions.
Finally, the amendments explicitly reiterate that blockchain tokens are not classified as money transmissions under the laws of Utah. Consequently, cryptocurrency transactions are not controlled by the MTA. As a result, cryptocurrency firms are presumed to be exempt from the licensing and operational requirements under the MTA. Arguably, this frustrates the intent of the MTA because allowing cryptocurrency firms to operate in Utah without being licensed does little to protect the interests of financial consumers within the state. Nevertheless, cryptocurrency transmissions will not be subject to the MTA because they are not technically money transmissions under the laws of Utah.
Utah – Revised Uniform Unclaimed Property Act (RUUPA) and Cryptocurrency
In 2021, the state legislature of Utah passed the “Revised Uniform Unclaimed Property Act” (RUUPA). RUUPA was adopted to amend the Uniform Unclaimed Property Act of 1983. Under RUUPA, virtual currency, such as Bitcoin, is classified as property under the state laws of Utah. Despite the lack of tangible assets underlying most cryptocurrencies, RUUPA states that property can be either tangible or intangible. Indeed, the state’s Court of Appeals confirmed that property could be intangible. In Olsen v. State, the court held that money could be defined as intangible property under the state laws of Utah.
According to the text of RUUPA, property includes: (1) all income from or increments to the property, and (2) property evidenced by money or “virtual currency.” Furthermore, RUUPA provides cryptocurrency a statutory definition within the state borders of Utah. Under the Act, virtual currency is defined as (1) a digital representation of value, (2) used as a medium of exchange, a unit of account, or store of value, (3) that does not have legal tender status recognized by the United States. Thus, RUUPA provides cryptocurrency with a statutory definition and categorizes virtual currency as property under RUUPA even though it is intangible.
RUUPA’s statutory definition is consistent with the primary meaning of cryptocurrency. Black’s Law Dictionary defines cryptocurrency as a “digital or virtual currency that is not issued by any central authority, is designed to function as a medium of exchange, and uses encryption technology to regulate the generation of units of currency, to verify fund transfers, and to prevent counterfeiting.” Arguably, the state legislature of Utah Congress intended the terms “cryptocurrency” and “virtual currency” to be interchangeable because both words have virtually identical definitions. Thus, although some may argue that cryptocurrency should be excluded from virtual currency’s definition, that argument is too narrow because it ignores the primary meaning of “virtual currency” and the presumed intent of Utah’s state legislature.
In conclusion, RUUPA legally defines virtual currency and classifies it as property. Consequently, virtual currency is not technically classified as currency or money under the state laws of Utah. Although some may argue that virtual currency does not involve cryptocurrency, such an argument is inconsistent with the text of RUUPA, court precedent, as well as the plain meaning definition of virtual currency. Therefore, cryptocurrency is provided a statutory definition and is classified as property under Utah law.
Blockchain Information & Resources:
- Anti-Collusion | What Is Obfuscation?
- Blockchain Attacks: Is No One Safe in the World of Cryptocurrencies?
- Blockchain Technology Explained: What is Blockchain and How Does It Work?
- Digital Currency Transmission Laws and Regulations by State
- Hard and Soft Forks: A Detailed and Simplified Explanation of How Blockchains Evolved
- Legal Issues around Cryptocurrency
- Merkle Trees
- Permissioned and Permissionless Blockchains
Is cryptocurrency legal in Utah?
Do you have Cryptocurrency or Blockchain Issues or questions?
Freeman Law is dedicated to staying at the forefront as these emerging technologies continue to revolutionize social and economic activities. Contact us to schedule a consultation or call (214) 984-3410 to discuss your cryptocurrency and blockchain technology concerns.