Cryptocurrency Legislation Landscape in Vermont, 2024

As of 2024, Vermont has taken a notable approach towards cryptocurrency and blockchain technology, reflecting a blend of innovation-friendly policies and clear legal categorization.

1. Legal Categorization of Cryptocurrency:

In Vermont, cryptocurrency is legally categorized as property instead of currency. Under the Vermont Money Services Act (VMSA), “virtual currency” is defined comprehensively, covering various aspects like a medium of exchange, a unit of account, or a store of value, and its equivalent value in money or acting as a substitute for money. The definition also acknowledges that virtual currencies can be centralized or decentralized and exchangeable for money or other convertible virtual currencies. This broad definition ensures that cryptocurrency tokens fitting these criteria fall within the scope of the VMSA.

2. Cryptocurrency as a Permissible Investment:

The VMSA directly lists cryptocurrency as a permissible investment under Vermont law. It specifies that virtual currency owned by the licensee is permissible to the extent of outstanding transmission obligations received by the licensee in the identical denomination of virtual currency. This provision authorizes citizens of Vermont to legally invest in cryptocurrency, as seen by the state government.

3. Blockchain Business Development:

A significant stride in Vermont’s blockchain policy is the enactment of Senate Bill 269 (SB 269), titled “An Act Related to Blockchain Business Development.” Effective from July 1, 2018, the Act aims to stimulate economic development by promoting the adoption of blockchain technology. It intends to create new jobs and spur economic innovation by encouraging blockchain businesses to operate in Vermont. The Act recognizes the security benefits of blockchain technology and its potential applications beyond cryptocurrencies.

4. Blockchain-Based Limited Liability Corporations (BBLLCs):

One of the critical features of SB 269 is the authorization of blockchain-based limited liability companies (BBLLCs). These entities are allowed to customize their governance structures using blockchain technology. BBLLCs can integrate blockchain into their business models, potentially leading to the technology’s broader commercial application. The Act provides specific requirements for companies to operate as BBLLCs, including election in their articles of organization and compliance with registration requirements.

5. Tax Implications for BBLLCs:

BBLLCs in Vermont are taxed similarly to regular LLCs, either as partnerships or corporations, depending on their election. This flexibility in taxation is significant considering Vermont’s corporate tax structure. BBLLCs can avoid double taxation by electing to be taxed as partnerships, aligning with the state’s high corporate tax rates.

6. Future Considerations:

While Vermont has been progressive in its approach to blockchain, the legal status of cryptocurrency as money is ambiguous, especially after El Salvador adopted Bitcoin as legal tender. This development could necessitate a revisit of the VMSA to clarify cryptocurrency’s status as money or property under Vermont law.

In conclusion, Vermont’s cryptocurrency and blockchain legislation framework in 2024 highlights a state that is open to technological innovations while providing a legal structure that fosters the growth of blockchain enterprises. The state’s legislation is characterized by its detailed definitions, investment allowances, and support for blockchain-based businesses.