Legal Crypto In Washington

Overview of Cryptocurrency Legality and Regulation in Washington State

Legality of Cryptocurrency in Washington State

In the State of Washington, cryptocurrency, including but not limited to Bitcoin, Ethereum, and other forms of digital money are legal means for medium of exchange, as a form of stored value or an investment. People and companies may hold, trade, and acquire cryptocurrencies without being subjected to the prohibitions that come with the state level. The Washington State Department of Financial Institutions (DFI) oversees virtual currency under the Uniform Money Services Act (RCW 19.230), which defines companies that handle transmission, exchange, or issuance of virtual currency as money transmitters, subject to licensing and regulatory requirements.

Regulations of the Cryptocurrency Market

The State of Washington has developed a comprehensive virtual currency regulatory scheme that concentrates on consumers protection and AML concerns. The major state specific laws and constitutions are given in the following table.

Law/Regulation	Description	Authority
Uniform Money Services Act (RCW 19.230)	Requires a Money Transmitter License for businesses facilitating cryptocurrency exchanges or custodial services; mandates minimum net worth, surety bond, and AML/KYC compliance.	Washington State DFI
Consumer Protection Laws (RCW 19.86)	Enforces risk disclosures for cryptocurrency businesses to protect consumers from fraud and volatility; DFI provides state-specific educational resources.	Washington State DFI
Senate Bill 6065 (2018)	Established the Washington Blockchain Work Group to study blockchain and virtual currency, delivering recommendations for state-specific regulatory frameworks.	Washington State Legislature

Unique State-Specific Regulation

Washington is known for being one of the first U.S. states to pass blockchain-specific legislation in the form of Senate Bill 5638. (2019), which edited the RCW to state that blockchain tech and digital signatures have acceptance in legal and commercial terms. The bill also promotes blockchain technology for state records and for smart contracts, it puts Washington at the forefront of blockchain advocacy. The Washington Blockchain Work Group’s 2024 report further establishes the state’s commitment to promoting a blockchain friendly economy with an eye on consumer protections, such an initiative is not reflected in the majority of the states.

Common Cryptocurrency Exchanges and Exchange Procedures

Washington State's restrictive standards for licensure pursuant to RCW 19.230 have resulted in limited access to certain exchanges. DeFi compliant centralized exchanges have access to:

- Coinbase: You can trade, stake and store cryptocurrency; holds a money transmitter license.

- Kraken: Secure U.S.-based cryptocurrency platform; state licensing compliant.

- Gemini: Offers trading and custody; holds a DFI license.

There are peer-to-peer (P2P) platforms such as LocalBitcoins, where users can directly trade with each other as long as they have available means of payment including bank transfers or cash. Decentralized exchanges (DEXs) themselves, such as Uniswap, are available via non-custodial wallets (i.e., MetaMask) and do not require state licensing for individual users. Bitcoin ATMs located in Seattle, Tacoma, and Spokane permit cash payments, with operators required to possess a DFI license. (Exchange like Binance, in particular, and Others. US have limited their operations in Washington following the state’s strict regulations.

Unique Exchange Feature

The energetic tech community in Seattle has also inspired local efforts like the Cascadia Blockchain Council, which works with exchanges and businesses to spread the word on compliance and education. Unique Regional Cryptocurrency Project Launches In Washington, Helping Local Communities Access Compliant Platforms Washington | Jan. 8, 2019 | Today, a dynamic group of community leaders from Washington announced they are making it easier than ever for their communities to use cryptocurrencies!

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DeFi Market

Washington residents have access to DeFi platforms such as Aave, Compound, and Uniswap to lend, borrow, and trade. Businesses who facilitate DeFi activities where money transmission contingent on money transfer (custodial-like) occurs may need a money transmitter license pursuant to RCW 19.230, although no guidance at this time specific to DeFi is available at this time. Challenges There are risks in terms of smart contract and centralized protections. The Washington Blockchain Work Group has not only set its sights on examining DeFi, they are in the process of creating special regulations for the state, showing that Washington isn’t going to wait for other states or the federal government to take a stance.

NFT Market

NFTs are virtual property under Washington, and owner is required to pay the federal capital gains tax now that the IRS has guidance on virtual assets. Marketplaces OpenSea, Rarible and Foundation are available for purchasing, selling and minting NFTs. The businesses processing fiat-to-NFT transactions could require a money transmitter license. IP and ownership provisions should be clear from the outset. Seattle’s vibrant arts scene is an advocate for NFTs, as local creators are making digital art and collectibles available for fans, which have been supported by institutions such as the unique Seattle NFT Museum, a special venue that highlights NFT art and informs the general public about it.

Useful Information

• Legality of Cryptocurrency Legal for individuals and businesses to own, exchange and utilize in Washington State.
• Regulator: Washington State Department of Financial Institutions (DFI).
• Respect for these laws: Uniform Money Services Act (RCW 19.230) and Senate Bill 5638 (2019).
• Money Transmitter License: If facilitating transactions or storage with cryptocurrencies.
• AML/KYC CDD Requirements: CDD is required for both licensed services as including customer identification and transaction monitoring.
• Consumer Protection: Risk disclosure mapping under RCW 19.86; DFI provides state-specific resources on education.
• Blockchain Work Group: Provides recommendations for blockchain and virtual currency regulation specific to the state of Washington.
• Cascadia Blockchain Council: Promotes compliance, education, and increases regional utilization of cryptocurrency.
• Seattle NFT Museum: Features NFT art and backs Washington’s NFT ecosystem.

Conclusion

Washington State regulations are pro-innovation but it carefully looks to protect consumers and AML laws with cryptocurrencies. The Uniform Money Services Act (19.230 RCW) and Senate Bill 5638 (2019) form a framework with a Washington state accent, along with work carried out by the Washington Blockchain Work Group in creating a state model. Compliant exchanges including Coinbase and Kraken, along with P2P platforms and DEXs, as well as Bitcoin ATMs, are fulfilling the needs of residents, while the specific initiatives such as Cascadia Blockchain Council and Seattle NFT Museum are increasing the level of local involvement. The DeFi market and the NFT market are both expanding with continuous regulation finetuning to serve amidst the Washington state being a hotbed for blockchain innovations.