California’s Department of Financial Institutions has sent a letter to the Bitcoin Foundation warning that financial transactions within the state are required to be fully licensed and authorized.
The letter follows the Bitcoin 2013 conference held last month in San Jose, CA. The Bitcoin Foundation operates as a non-profit corporation that aims to promote the use of Bitcoin as a digital currency worldwide. While the organization is registered in the U.S. capitol of Washington, D.C., members also come from international jurisdictions.
“It has come to the attention of the Commissioner that Bitcoin Foundation may be engaged in the business of money transmission without having obtained the license or proper authorization required by the California Financial Code,” the two-page letter states.
In full capitalization, the letter goes on to say, “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 being taken.”
As pointed out by Jon Matonis in a Forbes article, the foundation itself does not transmit Bitcoin funds. Matonis happens to sit on the board of directors of the Bitcoin Foundation.
Penalties for transmitting funds in California without proper state licensing can reach $2,500 per day and criminal prosecution that can result in hard time. On the federal level, failure to register with the U.S. Department of Treasury can lead to fines up to $250,000 and five years in a federal penitentiary.
Several online poker operators have been considering Bitcoin as a payment processing alternative. Less than a handful are using Bitcoin as an option at this time. One such site, Seals With Clubs, is U.S.-friendly. However, that poker site sits toward the bottom of U.S.-facing sites with a seven-day average of only 70 players, according to PokerScout rankings.
The letter asks the Bitcoin Foundation to respond within 20 days, advising the steps “taken to comply with” the order.