In a continuing trend across U.S. states, Vermont and Pennsylvania have shown their intent to establish more oversight over the digital currency sector. New legislative amendments to Vermont’s financial services laws include expanding the state’s regulatory oversight over digital currency. Notably, a new subchapter sets forth specific licensing and statutory requirements for entities involved in the virtual currency business. Meanwhile, Pennsylvania recently announced its intent to amend and update its money transmission laws by the Spring of 2025 to clarify definitions surrounding virtual currencies and outline specific licensure requirements.

Key Updates to Vermont’s Money Transmission Laws

Effective as of July 1, 2024, Vermont introduced several amendments to its banking statutes and administrative processes for regulating financial entities. These amendments include the creation of a new Subchapter 10, clarifying and updating the regulation of entities in the virtual currency space, most notably requiring all those engaged in a “virtual-currency business activity” to be licensed. The definition of a “virtual‐currency business activity” is expansive, encompassing virtual currency exchanges, custodians, digital wallet services, sellers of virtual currency to the public, and certain virtual currency issuers.

Along with requiring licensure, certain mandatory disclosures must be provided to customers, including fees, hidden markups, and certain information in transaction receipts. Additionally, virtual currency businesses that hold custody or control of virtual currency on behalf of customers must maintain custody and control of virtual currency in an identical type and amount sufficient to satisfy customer entitlements. Virtual currency kiosk operators are also included within the new amendments, with limitations on cash transactions, caps on the fees that virtual‐currency kiosk operators may charge (the greater of $5 or 15% of the transaction value), and requires disclosures of all fees and markups.

The updated legislation also encompasses broad revisions to the General Provisions of Vermont’s Banking and Insurance Title (Title 8, Chapter 72), impacting all licensed financial entities. The amendments mandate more stringent licensing requirements, enforcement measures, and standard operational protocols to enhance transparency and accountability. Of particular note, money transmitters will now be required to make the Vermont Department of Financial Regulation's contact information and complaint linkage readily accessible on their websites. Furthermore, those offering payroll processing services must ensure the provision of detailed reports to employers and, if not already done by the employer, distribute paystubs directly to employees. Those already licensed prior to July 1, 2024, and their authorized delegates shall not be subject to the provisions of the Chapter that establish new or different requirements from those that existed prior to July 1, 2024, until July 1, 2025.

Pennsylvania Continues to Look at Virtual Currency

On July 20, 2024, the Pennsylvania Governor’s Office publicly released a Regulatory Agenda (the “Agenda”) of the regulations under development or consideration in an effort to provide the regulated community advanced notice of regulatory activity. Within the Agenda, the Pennsylvania Department of Banking and Securities (DoBS) disclosed its intent to amend and update its money transmission laws to clarify definitions around virtual currencies and their requirements for licensure. This forthcoming regulatory change is projected for the spring of 2025, and while it is not yet clear what exactly these amendments will entail, it is clear that the state has its sights set on the digital currency sector. This announcement comes just a few months after the DoBS issued a Statement of Policy reinterpreting the term “money” to be inclusive of virtual currency, reaffirming the state’s change of heart regarding the regulation of virtual currency (in February 2019, the DoBS issued public guidance declaring that “virtual currency, including Bitcoin, should not be considered “money” under the state’s money transmission laws). We will continue to monitor the developments in Pennsylvania, with more information forthcoming as soon as it becomes available.