What Louisiana Companies Need to Know About Cryptocurrency and Digital Transactions | McGlinchy Stafford

McGlinchey Stafford

Greater Baton Rouge Business Report – November 9, 2022

In recent years, talk about bitcoin and cryptocurrencies has been inevitable. What do Louisiana businesses need to understand to play in this new sandbox? First, the American Law Institute (ALI) and the Uniform Law Commission (ULC) have approved amendments to the Uniform Commercial Code (UCC) governing business transactions that will make managing digital assets easier and more intuitive. As a “uniform law,” it must be passed by the state legislatures, so it won’t be in force in Louisiana for a while.

The new Article 12 introduces and defines “Controlled Electronic Records” or CERs, which include cryptocurrencies, non-fungible tokens (NFTs), and general electronic contracts. There are separate categories for intangible assets of electronic payments and electronic bills, and the amendments also define and allow the use of “electronic money” (basically a government-created cryptocurrency).

The amendments expand the definition of “control” (from previous articles of the UCC) that now applies to CERs, electronic money and other electronic records. The concept of control allows systems to be used to transfer exclusive rights to a digital asset to a specific person, such as the benefits of ownership (think ownership of your car).

These systems recognize ownership through control and allow the “owner” to transfer control of a digital asset to a third party (sale) or to a secured creditor (secure right), similar to how a lien is held by holding tangible personal valuables. property.

Second, the Louisiana Financial Institutions Authority (OFI) now requires virtual currency companies to be licensed. OFI expects the proposed rule to be published this fall, with an effective date of July 1, 2023. Current information is available on the OFI website.

The proposed rule, intended for financial institutions, contains some routine administrative matters and adds definitions for previously undefined terms, including “unfair or misleading act or act” and “unsafe or unreasonable act or act”. Failure to provide required information under the new proposed rule would automatically be considered unfair or misleading act or practice for enforcement purposes. However, the proposed rule does not specify the specific disclosures required, except that it should be “appropriate disclosures to persons and persons who use the licensee’s products or services.” In addition, the rule allows the Commissioner to determine the timing and form of such disclosures through policy in the future.

Companies or individuals currently or in the near future doing virtual currency business with Louisiana residents will want to review the proposed rule and prepare to apply once the application process through the National Licensing System begins on January 1, 2023 multi-state (NMLS). The initial application costs are $5,000 for a license and $750 for registration. License applications and registration notices submitted prior to April 1, 2023 will be approved, conditionally approved or denied by OFI by June 30, 2023.

Reprinted with permission Greater Baton Rouge Business Report.

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