US State Wants to Legally Seize Unclaimed Cryptocurrencies Left at Custodians
The U.S. state of Illinois has advanced a bill to consider unclaimed cryptocurrencies at custodians abandoned after five years. The coins will then be liquidated and the proceeds remitted to the State Treasurer. The cryptocurrency owners will have no recourse against the custodians or the state.
Also read: US Lawmaker Introduces Crypto-Currency Act of 2020 While Under Coronavirus Quarantine
Crypto Considered Abandoned if Unclaimed for 5 Years
Illinois House Bill 4573, which amends the state’s Revised Uniform Unclaimed Property Act, was assigned to the state’s Revenue and Finance Committee on Thursday. As if to demonstrate the oft-cited bitcoin maxim “not your keys, not your coins,” the bill introduced by Rep. Michael J. Zalewski states:
[The bill] Provides that virtual currency is presumed abandoned if it is unclaimed by the apparent owner 5 years after the last indication of interest in the property.
The term “virtual currency” is defined in the bill as “any type of digital unit, including cryptocurrency.” A holder “means a person obligated to hold for the account of, or to deliver or pay to, the owner, property subject to this Act” and the term “Apparent owner” means “a person whose name appears on the records of a holder as the owner of property held, issued, or owing by the holder.”
The bill additionally “Provides for the delivery of reportable virtual currency to the State Treasurer,” according to its text. Referring to the State Treasurer as the administrator, the bill proposes:
If property reported to the administrator is virtual currency, the holder shall liquidate the virtual currency and remit the proceeds to the administrator. The liquidation shall occur anytime within 30 days prior to the filing of the report under Section 15-401.
“The owner shall not have recourse against the holder or the administrator to recover any gain in value that occurs after the liquidation of the virtual currency under this subsection,” the bill continues.
Illinois Money Transmitter Licenses for Crypto Companies
Cryptocurrency exchange service providers operating in the state of Illinois may need to obtain a money transmitter license under the Illinois Transmitters of Money Act (TOMA). Early this month, the Illinois Department of Financial and Professional Regulation, Division of Financial Institutions, clarified its position in non-binding statements regarding money transmitter licenses for crypto firms. Its letter to San Diego-based The Crypto Lawyers regarding whether a crypto firm called Cryptoflip was required to obtain a TOMA license explains that “Cryptoflip is not selling or issuing payment instruments because payment instruments must be ‘for the transmission or payment of money,'” adding:
Bitcoin is not money under TOMA.
Cryptoflip claims that it will sell bitcoin from its own supply, will not post orders on third party exchanges, or receive funds for transmission. Since the company is not acting as a third-party exchange or an “escrow-like intermediary,” it is therefore not in the business of receiving money for transmission or transmitting money. Furthermore, Cryptoflip is not engaged in the business of exchanging fiat currency for fiat currency and will only work with TOMA-licensed companies that are also registered with the Financial Crimes Enforcement Network (FinCEN) as Money Services Businesses. Based on the information presented, the Department concluded that Cryptoflip would not require a TOMA license, elaborating:
Each exchange is an exchange of digital currency for money between Cryptoflip and a consumer … Cryptoflip is not engaged in money transmission when it sells its own cryptocurrency for fiat currency.
On the federal level, Rep. Paul Gosar introduced the Crypto-Currency Act of 2020 last week while under self-quarantine. The aim of this bill is to “clarify which federal agencies regulate digital assets, to require those agencies to notify the public of any federal licenses, certifications, or registrations required to create or trade in such assets, and for other purposes.”
Do you think the state of Illinois should be allowed to confiscate people’s cryptocurrencies left inactive at custodians? Let us know in the comments section below.
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