Virtual Currency Money Transmission FAQs

1. What is virtual currency?

Virtual currency” is, in pertinent part, “any type of digital unit that is used as a medium of exchange or a form of digitally stored value or that is incorporated into payment system technology”.  See C.G.S. Section 36a-596(18).  Virtual currency can be referred to by other terms including, but not limited to “cryptocurrency”, “digital currency” and bitcoin.

2. Is it regulated by Connecticut?

Yes, depending on the activities that are being engaged in, Connecticut General Statutes treats virtual currency similarly to fiat currency (a.k.a. cash) under Connecticut’s money transmission scheme.

3. What is a virtual wallet?

A virtual wallet is a unique electronic wallet that stores virtual currency.  The wallet is owned by a specific person.  A wallet can be hot, which means that the virtual currency is available on the network to be bought, sold, used as currency for purchases or otherwise transferred and transmitted.  The wallet can also be cold, which means it is essentially offline and cannot be used until it is moved to a hot wallet.

4. Are virtual currency ATMs required to be licensed in CT?

Yes.  Pursuant to House Bill No. 5211, Public Act No. 24-146, “On and after October 1, 2024, any person who owns, operates, solicits, markets, advertises or facilitates virtual currency kiosks in this state shall be deemed to be engaged in the business of money transmission in this state and shall be subject to licensure pursuant to sections 36a-595 to 36a-612, inclusive.”  Section 36a-596 of the 2024 Supplement to the General Statutes defines "[v]irtual currency kiosk" as an electronic terminal acting as a mechanical agent of the owner or operator to enable the owner or operator to facilitate the exchange of virtual currency for fiat currency or other virtual currency, including, but not limited to, by (A) connecting directly to a separate virtual currency exchanger that performs the actual virtual currency transmission, or (B) drawing upon the virtual currency in the possession of the owner or operator of the electronic terminal. Therefore, persons who own, operate, solicit, market, advertise or facilitate virtual currency ATMs, also known as “virtual currency kiosks”, are required to be licensed in Connecticut upon the effective date of October 1, 2024. 

5. What is a virtual currency exchange?

A virtual currency exchange is a business that allows customers to trade virtual currency for other assets, such as conventional fiat money or other virtual currency.

6. Do virtual currency exchanges need to be licensed in Connecticut?

Depending on the activities in which the exchange is engaged, the exchange may be required to maintain a money transmission license.  For example, an exchange that simply matches a buyer and seller of virtual currency through its software platform would not need to be licensed.  However, if said exchange holds either party’s currency (virtual or fiat), transmits virtual or fiat currency on behalf of other persons or advertises money transmission services, licensure would be required.  Please review the opinions linked here for more information.

• 1/15/2019 - Digital currency exchanges which hold or transmit fiat or virtual currency on behalf of Connecticut residents are engaging in money transmission in this state and require licensure under the Money Transmission Act.
• 2/21/2019 - Digital currency exchanges which hold or transmit fiat or virtual currency on behalf of Connecticut residents are engaging in money transmission in this state and require licensure under the Money Transmission Act.  The exemptions from licensure under Section 36a-609 do not extend to those entities subject to additional regulation and oversight by virtue of registration as a broker-dealer with the Department and SEC and membership in FINRA.
• 2/22/2019 #1 - New York trust company offering custodial and exchange related services, including holding cash and bitcoin as agent and facilitating the trading of virtual currency and fiat currency on behalf of Connecticut residents, is engaging in money transmission in this state and requires licensure under the Money Transmission Act even if it does not have a physical presence in this state.  Connecticut does not recognize an exemption from licensure for trust companies.
• 2/22/2019 #2 - Company offering custody and related transaction services for institutional clients, which holds or transmits virtual currency on behalf of Connecticut residents, is engaging in money transmission in this state and requires licensure under the Money Transmission Act.  The exemptions from licensure under Section 36a-609 do not extend to those entities subject to additional regulation and oversight by virtue of registration as a broker-dealer with the Department and SEC and membership in FINRA.