Legal status of Barter Exchanges 2018
Recently we have reviewed the legal status of BarterTrade Exchanges globally. A major question was the applicability of moneytransmitter laws to barter exchanges.
What is a Barter Exchange?
Barter exchanges act as a clearinghouse for bartertransactions between their members. Theunits of account for barter transactions are known as “trade credits.” Suchcredits have value and are accepted as final means of payment within the barternetwork and denote the right of a network member to receive, or the obligationof a network member to pay, a certain value in goods and services. The barter exchange serves as a third-partyrecord keeper for these transactions. The sole guarantee of a trade credit is a network member’s contractualobligation to supply goods and services and accept payment in accordance withthe terms of a member agreement. Trade credits are not redeemable for cashunder any circumstances.
Is a Barter Exchange a Money Transmitter?
We requested an opinion from our lawyers regardingwhether commercial barter exchanges are regulated under any formal act.
The result we got was clear by stating that a commercialbarter exchange acts merely as a record keeper of barter transactions betweenits members and therefore it is not “receiving money for transmission.” Also, because the barter exchange is not aguarantor of the value of trade credits earned in barter transactions, thebarter exchange is not an issuer.
The letter concludes that because of this, commercialbarter exchanges need not seek licenses under current laws.
In the USA, representatives of the federal FinancialCrimes Enforcement Network have also stated that the federal law governingmoney transmitters would not apply to barter exchanges.