Crypto Exchanges in the US are generally regulated as Money Service Businesses. There are some exceptions with more intricate regulations in New York (BitLicense) and Washington. This would likely be the reason why the Crypto Exchange giant KRAKEN offers services in all US states except NY and WA. There are also other potential regulations to consider depending on the nature of the crypto activities in question.
Money Transmission Laws: At the federal level, cryptocurrency exchanges have to register as money services businesses (MSBs) with the Financial Crimes Enforcement Network (FINCEN), a bureau of the U.S. Department of the Treasury. MSBs must adhere to anti-money laundering (AML) and know-your-customer (KYC) regulations. Our MSB packages comply with these requirements.
Securities Regulation: If an exchange lists tokens or coins that are deemed to be securities, then the exchange must be registered with the SEC and follow SEC guidelines.
Commodities Regulation: The CFTC has classified Bitcoin and other major cryptocurrencies as commodities. Exchanges that offer derivatives or futures contracts based on cryptocurrencies are subject to CFTC regulations.
Money Transmitter/MSB Licenses/: Many states require cryptocurrency exchanges to obtain a money transmitter license to operate. All US states except Montana have state level license requirements of varying complexity applying to MSBs.
Crypto Friendly Montana
Montana is generally considered very crypto friendly and as recently as mid 2023 a new bill was passed protecting the right to mine Bitcoin “without being subjected to undue discrimination or requirements”. The proposed law would also ban unequal utility rates for digital asset mining, restrict the authority of local governments over digital asset mining, and disallow targeted taxes on using cryptocurrency for payments. Furthermore, the legislation classifies digital assets as personal property. It stipulates that the Montana Public Service Commission is prohibited from setting up a rate category for digital asset mining, commercial digital asset mining operations, or residential digital asset mining that results in unfairly biased rates. The bill also asserts that the use of digital assets for payment cannot be subjected to extra taxes or fees by either the state or local authorities.