US states are caught up in the cryptocurrency legislation craze: Another state government plans to define Bitcoin as a financial instrument

The West Virginia government plans to include Bitcoin and other digital currencies in its anti-money laundering (AML) laws. The state’s recently filed Bill 2585 would add Bitcoin to AML regulations and define virtual currencies as a “financial instrument.”

Defining Cryptocurrencies as Financial Instruments

West Virginia has taken the same path as Florida, with representatives from both states proposing to update anti-money laundering laws to accommodate the regulatory needs of Bitcoin. West Virginia's Bill 2585 still needs to be approved by Governor Jim Justice before it can take effect. In simple terms, this new proposal gives new technologies a legal definition of financial instruments, the most notable of which is Bitcoin, which "operates independently outside the central bank system." Bill 2585 reads:

The purpose of this Act is to combat the criminal conduct resulting from money laundering. The Act details two felonies: laundering proceeds of crime obtained through financial transactions; and transferring, distributing or transmitting proceeds of crime. The Act also provides for the confiscation of funds laundered using Bitcoin.

Waiting for Governor's approval

Traditionally, financial instruments usually include fiat currency and checks. Once the new bill is passed, gift cards, prepaid cards and cryptocurrencies will also be included in this regulatory scope. The bill passed the Legislature with 78 votes in favor and 21 against, and was unanimously approved at the hearing. If approved by the governor, money laundering involving Bitcoin in West Virginia will also be a felony in the future, and the funds involved will be confiscated.

The bill also explains the concept of cryptocurrency:

'Cryptocurrency' is digital money based on encryption technology. This technology is used to manage the production of currency and verify the transfer of funds.

Is Bitcoin dangerous?

This bill is similar to the draft legislation in Florida, both of which suggest defining Bitcoin as a financial instrument. However, Bitcoin supporters in West Virginia are somewhat worried because the opinions of state legislators may influence the governor's decision. For example, a few years ago, state legislator Joe Manchin wrote to regulators, suggesting that the use of Bitcoin be banned in the state. The letter mentioned:

I am concerned about the use of Bitcoin for the exchange of contraband and illegal services or for speculative gambling markets. I recommend that regulators work together to prevent this dangerous currency from harming hard-working Americans.

Bitcoin legislation progress in various US states in 2017

Many states in the United States have begun to regulate Bitcoin and put it under control to prevent its abuse in money laundering activities. Some states simply define cryptocurrencies as financial instruments and impose taxes on them, while states like California have introduced business registration regulations.