Authorities in Pennsylvania have not paid much attention to the state’s crypto sector. While states like Texas are popular for their friendly approach towards cryptocurrency and even welcome mining activities, others like New York are notoriously hostile to the industry. For Pennsylvania, authorities may be taking a more uninvolved approach to regulating the sector.

The Pennsylvania Department of Banking and Securities (DoBS) published a document in 2019 in response to inquiries from companies operating virtual currency exchanges. The guidance that Pennsylvania law’s definition of money does not cover cryptocurrencies, and as such, these entities do not require a Money Transmitter License (MTL) to operate.

Both 1 Pa. C.S. 1991 and 13 Pa. C.S. 1201(b)(24) define money as “lawful money of the United States,” and “a medium of exchange currently authorized or adopted by a domestic or foreign government.” Since crypto is not lawfully accepted as legal tender at the state and federal levels, the DoBS took the back seat.

The document also states that the MTL does not apply to crypto companies because while they facilitate crypto trading, they do not transmit fiat currency. The DoBS then stretches this explanation to crypto ATMs and kiosks as they also do not transfer fiat. These conditions suggest the government of Pennsylvania is allowing crypto companies the regulatory freewill to function as they like. However, lawmakers can change this position at any time.

Pennsylvania’s uncommitted position on cryptocurrencies is surprising, considering that it heavily regulates and taxes gambling. In 2004, the state launched the Pennsylvania Gaming Control Board (PGCB) to oversee gambling activity, issue licenses, enforce compliance, and ensure public trust in the state’s casinos. Essentially, all gambling activity is regulated by the state control board.

Pennsylvania is now taking its gambling regulation a bit further and is considering the regulation of skill games as they become increasingly popular across restaurants and bars in the Keystone State. Online gambling is also legal in Pennsylvania as introduced by law in 2017. Like many other states, Pennsylvania has specific rules all interested players must follow. For instance, online gambling is only allowed for people physically within state lines.

As the state expands gambling laws, considering the effects of similar regulatory oversight on the crypto sector might be necessary. Currently, applying for a gambling license is not an easy and quick process. Applicants must have venues ready, pay application fees, obtain all required documents, and pay licensing fees upon approval.

Also, the PGCB expects any entity building producing, designing, or modifying gaming devices to obtain a manufacturer’s license. Unfortunately, completing the required Manufacturer Application and Disclosure Information Form requires extensive data, including criminal history, bankruptcy history, information on long-term debt, political contributions, regulatory action history, and information on a diversity plan. Although the gambling industry in Pennsylvania is growing despite the PGCB’s approach, a similar method to crypto regulation may produce adverse effects.

The global crypto industry is still largely considered nascent even though it has been more than 14 years since the pseudonymous Satoshi Nakamoto published the Bitcoin whitepaper. While many countries scramble to create proper regulatory frameworks, the US has not provided enough clarity for the operation of crypto businesses at the federal level. If Pennsylvania follows the federal approach, or establishes stifling laws, citizens may suffer through several ill effects of a new non-crypto-friendly Pennsylvania.

Firstly, crypto companies already laying the groundwork and building a vibrant cryptosphere in Pennsylvania would likely begin to exit. As this happens, individuals and entities looking to set up related firms would either suspend plans or relocate their companies to crypto-friendly states.

A tough regulatory landscape could also stifle innovation. For many years, Pennsylvania has attracted crypto miners because the state provides several options – including nuclear power, waste coal, and fracked gas – to power the energy-intensive business of mining digital assets. However, lawmakers have been worried about the adverse effects of mining on the environment and have raised bills to restrict crypto mining. At any time, the Pennsylvania legislature may once again initiate similar legislation that could quickly turn Pennsylvania’s attractive stance towards crypto innovation into a non-friendly region for the industry.