DFPI Says No MTA License Required To Issue Tokenized U.S. Dollars

"Tell me the first token
That passed between you and me."

Earlier this month, the California Department of Financial Protection & Innovation issued a quasi interpretive opinion regarding whether the unnamed requestor must be licensed under California's Money Transmission Act to offer platform trading services or to issue tokenized versions of the U.S. Dollar or securities.  The MTA requires persons in the business of money transmission in California to be licensed, unless exempt under the act.  Cal. Fin. Code § 2030.  The MTA currently defines "money transmission" as any of the following:

  • Selling or issuing payment instruments;
  • Selling or issuing stored value; or
  •  Receiving money for transmission.

Cal. Fin. Code § 2003(q).  "Stored value" is defined as "monetary value representing a claim against the issuer that is stored on an electronic or digital medium and evidenced by an electronic or digital record, and that is intended and accepted for use as a means of redemption for money or monetary value or payment for goods or services. The term does not include a credit card voucher, letter of credit, or any stored value that is only redeemable by the issuer for goods or services provided by the issuer or its affiliate, except to the extent required by applicable law to be redeemable in cash for its cash value.  Cal. Fin. Code § 2003(x).  

I refer to this as a "quasi interpretive opinion" because the DFPI merely states that it does not currently require the requestor to obtain an MTA license because the Department "has not determined whether the issuance of tokenized versions of the U.S. Dollar or securities, or their use to trade cryptocurrencies, is money transmission".  The DFPI caution that its conclusion is subject to change and does not address whether any of the requestor's activities are subject to registration under other laws such as the Corporate Securities Law of 1968.  

Although the MTA empowers the Commissioner of Financial Protection & Innovation to issue opinions, it does not include a provision providing immunity to persons relying on a written opinion of the Commissioner.  Cf. Cal. Fin. Code §§ 5204(b) (Savings Association Law); 22754 (Financing Law), 23063 (Deferred Deposit Transaction Law), and 31002 (Building and Industrial Development Corporation Law); and Cal. Corp. Code § 25700 (Corporate Securities Law).