Legal Status of Barter Exchanges
Recently we have reviewed the legal status of Barter Trade
Exchanges globally. A major question was the applicability of money transmitter
laws to barter exchanges.
What is a Barter Exchange?
Barter exchanges act as a clearinghouse for barter
transactions between their members. The units of account for barter transactions are
known as “trade
credits.”
Such credits have value and are accepted as final means of payment within the
barter network and denote the right of a network member to receive, or the
obligation of a network member to pay, a certain value in goods and services. The
barter exchange serves as a third-party record keeper for these transactions. The
sole guarantee of a trade credit is a network member’s contractual
obligation to supply goods and services and accept payment in accordance with
the terms of a member agreement. Trade credits are not redeemable for cash
under any circumstances.
Is a Barter Exchange a Money Transmitter?
We requested an opinion from our lawyers regarding whether
commercial barter exchanges are regulated under any formal act.
The result we got was clear by stating that a commercial barter exchange acts
merely as a record keeper of barter transactions between its members and
therefore it is not “receiving money for transmission.” Also, because
the barter exchange is not a guarantor of the value of trade credits earned in
barter transactions, the barter exchange is not an issuer.
The letter concludes that because of this, commercial barter
exchanges need not seek licenses under current laws.
In the USA, representatives of the federal Financial Crimes Enforcement Network have also stated that the federal law governing money transmitters would not apply to barter exchanges.
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