The Department of Financial Institutions of the State of California issued a cease and desist order warning Bitcoin Foundation for allegedly engaging in money transmission business without authorization or license.
Bitcoin Foundation is a non-profit organization with a mission to standardize, promote and protect the use of Bitcoin cryptographic money for users worldwide.
The letter signed by Paul T. Crayton, senior counsel of the Department of Financial Institutions reads, “You are hereby warned to cease and desist from conducting the business of money transmission in this State. Failure to do so will result in appropriate action taken.”
Bitcoin Foundation Could Pay A Penalty
Bitcoin Foundation could pay a penalty of around $1,000 to $2,500 per day and/or criminal prosecution under the Financial Code of California. Conviction under the law requires a fine and/or imprisonment.
The California financial regulator also said that the Attorney General could also file a lawsuit against Bitcoin Foundation under the Business and Professions code, which imposes a penalty of $2,500 per violation (per day or per transaction) of statutory law.
The Department of Financial Institutions also warned that operating a money transmission business without a license or without registering with U.S. Treasury Department is a federal felony under the United States Code. Violations of the law could result to a $250,000 fine and 5 years imprisonment.
Jon Matonis, a member of the board of directors of Bitcoin Foundation wrote an article on Forbes said that Bitcoin Foundation is not engaged in the “owning, controlling, or conducting of money transmission business.” He also emphasized that such activity is against the original charter of the foundation.
Patrick Murck, general counsel for Bitcoin Foundation is responsible in dealing with the Californian Department of Financial Institution regarding the issue, according to Matonis. He also wrote, “At this stage, it is difficult to tell whether or not it was a general blanket action and if other bitcoin-related entities received cease and desist letters from California. If Bitcoin Foundation was not the only recipient, then expect other companies to come forward in the days and weeks ahead.”
“Harkening back to the saga of FaceCash and Aaron Greenspan, this new far-reaching action from California’s financial regulator apparently now scoops up non-profit scientific and educational organizations. California, the cradle of technological innovation and home to the inspiring Silicon Valley venture capital community, is now focusing its sights on the futuristic Bitcoin,” concluded Matonis.
In May, the Department of Homeland Security (DHS) executed a seizure warrant to shutdown Mt. Gox, the largest Bitcoin exchange worldwide for operating a money transmission business without a license.