New Hampshire is home to the largest community of freedom advocates in the US, and possibly the largest Bitcoin-using community as well. The New Hampshire State House of Representatives recently passed an important bill for local Bitcoin businesses. The legislation unwinds a bill created two years prior, an ominous-sounding Bill, HB 666, which defined bitcoin and cryptocurrency-using businesses as money transmitter services.
The law forced at least one Bitcoin business from accepting customers in the state, and has kept new businesses from starting up in the otherwise bitcoin-friendly stronghold. The popular bitcoin and altcoin exchange Poloniex, based in Washington DC, discontinued services in October 2016, “due to changes in New Hampshire’s regulatory statute as it applies to cryptocurrency.”
Other Bitcoin exchanges, including Coinbase, CoinEx and Circle registered with the state Banking Department. They also handle US dollars, whereas Poloniex only deals in cryptocurrencies.
“This is a nascent industry; as the regulations around it mature, these types of service disruptions may not be entirely avoidable, but we have been and will continue to be proactive in educating regulators and monitoring both existing laws and upcoming changes to these laws so that we can limit interruptions wherever possible.”
Poloniex’s CEO Michael Demopoulos later testified to a Committee studying Cryptocurrency regulation in New Hampshire, and began discussions with the New Hampshire Banking Department soon thereafter.
LBRY CEO Jeremy Kauffman joined the conversation when the New Hampshire governor appointed him as an industry expert on virtual currencies. “[New Hampshire] already has the highest per-capita Bitcoin usage,” Kauffman said soon after the new bill was approved, “And very soon it is likely to have the most favorable regulatory climate. New Hampshire is passing legislation to completely deregulate cryptocurrencies.”
Ian Freeman has also been working to overturn the legislation. “How did this happen in a state with the largest concentration of bitcoin enthusiasts per capita?” asked Freeman, who worked with a couple of the State Representatives to help clarify cryptocurrency usage. “Honestly, we were caught off-guard, but now that’s all changed.”
Freeman is the Program Director of LRN.FM and hosts the popular libertarian podcast, “Free Talk Live.” He founded the the Free Keene blog in late 2006, after moving to New Hampshire as part of the Free State Project. The activist and talk show host had been attending and recording sessions of the state house committee formed in the wake of the Poloniex withdraw to study cryptocurrency.
“This is essentially the opposite of what New York did with it’s business-killing ‘bitlicense’ regulations.”
- Ian Freeman, Program Director of LRN.FM and host of “Free Talk Live”
“The bill [HB 436] as filed wasn’t quite what we’d hoped for,” Freeman said on the Free Keene blog. “It created a new definition and exemption for ‘virtual currency’ in the statutes, but still left in statutes a definition and regulation for ‘convertible virtual currency’.”
“We explained to them that this was confusing and they should be striking the regulation for ‘convertible virtual currency’ rather than creating the additional terminology,” Freeman continued. “You know what? They listened AND did us one better!”
While the new bill removes cryptocurrencies from the category of money transmitter services, and therefore no longer requires licensing, it still has to pass the State Senate before becoming law. “The commerce committee amended the bill and turned it into the best possible protection for bitcoin businesses in New Hampshire! The amended bill completely exempts from the money transmitter statutes,” Freeman concluded.
New Hampshire’s legislature has had more than its share of run-ins with Bitcoin. In January 2016, the same House of Representatives voted 264 to 74 to kill a separate bill allowing citizens in New Hampshire to pay their taxes and other state fees using bitcoin.
The New Hampshire State Treasurer would have been forced to not only accept the cryptocurrency if the bill had passed, but also to choose a bitcoin payment processing firm to convert the transactions by January 2017. The bill faced serious opposition and has not been re-introduced since.
“It does not appear any state accepts Bitcoin as a form of payment of taxes and fees. As such, sufficient information regarding state acceptance of Bicoin as payment for taxes and fees was not available.”
- New Hampshire Department of Revenue Administration
More and more states have been considering following New Hampshire’s early lead into Bitcoin regulation. Both Hawaii and Washington State recently introduce new rules. Bitfinex has since changed the terms of service on their website to exclude customers from Washington State.
Two weeks ago Coinbase announced that it will cease offering services in Hawaii. The state now requires local Bitcoin businesses to get a license and hold 100% reserves for each customer.
The Hawaii Division of Financial Institutions demanded that customer reserves be held in fiat currency. “Although Coinbase securely maintains 100% of all customer funds on behalf of our customers,” the company said in their announcement, “it is impractical, costly, and inefficient for us to establish a redundant reserve of fiat currency over and above customer digital currency secured on our platform.”