California's Department of Financial Institutions has warned the Bitcoin Foundation that it might be running afoul of currency transaction laws by "money transmission" without permission. A Bitcoin executive denies the accusation. "If this practice grows among states, it could have a potentially significant 'chilling effect' on financial services innovation," Bitcoin Foundation board member Jon Matonis says. Regulators have already cited Square, Liberty Reserve and NetSpend, among others, over related issues.

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