The Bitcoin Foundation has issued an incredibly detailed response to the cease and desist letter it was sent by the Department of Financial Institutions (DFI) in California.

According to the DFI's letter, which was sent on May 30, the Bitcoin Foundation requires licensure as a money transmitter under California law.

"The California state DFI said this was an invitation to talk. I've received nicer invitations, but we took it then as an opportunity to engage in a discussion about what we think the issues are and how we think the law agrees," Patrick Murck of the Bitcoin Foundation told CoinDesk.

The primary points raised in the response letter are that the foundation doesn’t sell bitcoins nor operates in California, so it is not under the jurisdiction of the DFI.

"Even if we did operate an exchange or sell bitcoins, we have never done it with anyone in California, so they have no jurisdictional basis for coming and looking at us in the first place," said Murck.

The response letter goes further than addressing these main issues. It also goes into detail as to why, under Californian law, bitcoin isn't a payment instrument and explains that the foundation doesn't sell or issue "stored value" and does not receive money for transmission.

Murck said the foundation decided to go into this detail so businesses in the space can see clearly what constitutes money transfer and what doesn't.

"We believe that the direct sale of bitcoins in the state of California does not constitute money transmission, and that's an important point, because there are a lot of businesses sitting on the side-lines because they're scared that just by selling bitcoins, they would become money transferrers," he explained.

Murck went on to say he thinks the response letter, which was drafted by legal firm Perkins Coie, will lead to more discussions with the DFI over the next few weeks, and will hopefully result in a letter of opinion.

Murck said the Bitcoin Foundation is working to set up chapters across the globe, which will be able to help bitcoin companies with any legal or regulatory problems they face in their own localities.

He feels the most vulnerable businesses are the ones holding pooled customer money (both local fiat currency and bitcoin) because these "are the highest risk to consumers".

Murck said attorneys are starting to become very popular among those in bitcoin and advised people with any concerns to seek legal advice.

"It was great to walk into the Bitcoin London conference yesterday and have a legal panel that people love and pay so much attention to, but it's also a shame.

"The people who should be front and centre on the stage are the entrepreneurs building companies. Hopefully we can get back to that place," he concluded.

Bitcoin Foundation Response to California DFI by Jon Matonis

Image credit: Flickr