Legislation: House Bill 180
Sponsors: Representatives Zach Fansler (D) and Sam Kito (D)
Introduced on March 14, 2017, HB 180 requires businesses that receive, store, transmit, buy or sell, exchange or convert, control, issue, or administer virtual currencies to obtain a money transmission license from the Alaska Department of Commerce, Community, and Economic Development (“Department”). The bill adds new requirements to the license application procedure, including the submission of each control person’s fingerprints so that the appropriate agencies can obtain “a report of criminal justice information and a national criminal history record check,” and personal history and experience information sufficient to allow the Department to obtain a credit report from a consumer reporting agency and information related to any administrative, civil, or criminal findings by a governmental jurisdiction.
In addition to the foregoing, similar to the original bill, the Department is required to “investigate the applicant's financial condition and responsibility, financial and business experience, competence, character, and general fitness.” This investigation can occur at the applicant’s place of business and the applicant must pay for the reasonable costs of the site visit.
The Bill caps the surety bond requirement at $1,000,000.
HB 180 also adds insurance companies, title insurance companies, escrow agents, and attorneys to the list of entities/persons excluded the licensing requirements.
The Bill has been referred to the Labor and Commerce Committee for further deliberation.
Legislation: House Bill 2417
Sponsor: Representative Jeff Weninger (R)
Introduced on February 7, 2017, HB 2417 provides that executable distributed code contracts written on a blockchain are essentially equivalent to all other forms of contracts. The bill states that transactions based on these self-executing contracts could not be “denied legal effect, validity, or enforceability” because of the executable distributed code contracts term. Further, any signature recorded on the blockchain would be equated to a legal signature under Arizona law and would be "considered to be in an electronic format and to be an electronic record." Lastly, the bill states individuals who own or have the right to use information they place on the blockchain retain those rights. The Arizona House and Senate passed the bill and it has been signed by Governor Doug Ducey.
Legislation: House Bill 2216
Sponsor: Representative Paul Boyer (R)
Introduced on January 17, 2017, and signed into law by Governor Doug Ducey on April 18, 2017 after being passed by the Arizona House and Senate, HB 2216 makes it “unlawful to require a person to use or be subject to electronic firearm tracking technology or to disclose any identifiable information about the person or the person's firearm for the purpose of using electronic firearm tracking technology.” Electronic firearm tracking technology is defined as “a platform, system or device or a group of systems or devices that uses a shared ledger, distributed ledger or blockchain technology or any other similar form of technology or electronic database for the purpose of storing information in a decentralized or centralized way, that is not owned or controlled by any single person or entity and that is used to locate or control the use of a firearm.” The bill allows for two exceptions to this ban: (1) “a law enforcement officer who obtains a [valid] search warrant and who uses electronic firearm tracking technology to locate a person or a firearm that is the subject of a criminal investigation.” and (2) “if the owner [of a firearm] consents in writing to the use of electronic firearm tracking technology on that owner's firearm.”
In response to the multiple shootings involving law enforcement personnel in 2016, a university professor, project manager, and software developer designed the Glockchain, a new firearm that uses blockchain technology to track when it is fired. The firearm creates a record each time it is drawn or fired on a transparent and unalterable blockchain, so that firearm used by police personnel will be used to make departments more accountable. Proponents of this technology point to the accountability it will create for police officers and other shooters. However, supporters of the bill raised privacy concerns.
Legislation: Senate Bill 741
Sponsor: Senator Tony Mendoza (D)
Introduced on February 17, 2017, SB 741 prohibits the selling of raffle tickets in exchange for cryptocurrency. The bill applies to raffles “conducted by an eligible organization for the purpose of directly supporting beneficial or charitable purposes or financially supporting another private, nonprofit eligible organization  that performs beneficial or charitable purposes.” An eligible organization is defined as a “private, nonprofit organization established by, or affiliated with, a district agricultural association, county fair association, or citrus fruit fair association.” The bill also prohibits operating or conducting raffles over the Internet. Although the bill does not explain the basis for the cryptocurrency and Internet raffle prohibitions, it is possible that the bill’s proponents are concerned about cybersecurity and identity issues raised when raffles are not conducted using readily verifiable payment methods in a physical location within the state.
Legislation: Assembly Bill 1123
Sponsor: Assemblymember Matt Dababneh (D)
On March 30, 2017, AB 1123, which had previously not concerned virtual currency at all, was amended to set forth a proposed virtual currency licensing scheme. If passed, the Bill would enact the Virtual Currency Act that would require virtual currency businesses to obtain a license from the Commissioner of Business Oversight (“Commissioner”) in order to operate within the state. The bill defines a virtual currency business as any entity that “maintains full custody or control of virtual currency in this state on behalf of others.” To apply for a license, businesses would be required to submit a lengthy 19-section application form and pay a $5,000 initial application fee. Additionally, after a license is granted, the business would have to pay a license renewal fee ($2,500), costs associated with conducting an annual assessment ($75/hour for each examiner), and a fee based upon the number of branch offices located in the state ($125/location).
The Bill requires virtual currency businesses to maintain capital in an amount determined by the Commissioner to “ensure the safety and soundness of the licensee and maintain consumer protection and its ongoing operations.” The Bill also gives the Commissioner the discretion to determine the amount of a bond or trust account that each licensee is required to maintain “for the benefit of its customers,” and which has to be in US dollars.
The Bill also requires licensed businesses to provide consumers with a specific consumer protection disclosure as well as a receipt containing the licensee’s name and contact information; type, value, date, and time of the transaction; type and amount of any fees charged; exchange rate, if applicable; refund policy statement; and any additional information the Commissioner may require.
The Bill also allows businesses that pose low or no risk to consumers, as determined by the Commissioner, and that operate with less than $1 million in outstanding obligations to pay a $500 application fee for a two-year provisional license. In making its determination, the Commissioner is required to consider a non-exhaustive list of factors, including the business’ nature and scope; the anticipated volume of business; the nature and scope of the risks to consumers; the measures already taken to mitigate or limit the risks the business presents; and whether the business is simultaneously regulated/authorized by another governmental entity. To ensure that applicants are providing ample consumer protection, the Commissioner may also require that the business adhere to risk-based performance standards related to safety, soundness, and consumer protection.
The Bill provides exemptions from licensing for certain public and private entities: governments at all levels and their agents and instrumentalities; the US Postal Service; commercial/industrial banks; those licensed as money transmitters under California’s Money Transmission Act; merchants/consumers that use virtual currency solely for purchasing or selling goods or services; and businesses engaged solely in “transactions in which the recipient of virtual currency is an agent of the payee pursuant to a preexisting written contract and delivery of the virtual currency to the agent satisfies the payor’s obligation to the payee.”
The Commissioner retains the right to examine a licensee’s business practices at any time in addition to an annual review. Further, the Bill requires businesses to file a report with the Commissioner within five business days upon (1) the filing of a petition for bankruptcy or reorganization under the Bankruptcy Code; (2) the filing of a petition for receivership or for the commencement of judicial/administrative proceedings for dissolution or reorganization; (3) the commencement of revocation or suspension proceedings of a license of the virtual currency business; (4) the cancellation or impairment of the licensee’s bond or trust account; or (5) a felony charge or conviction of an executive officer, manager, director, or person in control of the licensee.
In the event that a virtual currency business is not abiding by the statute, the Bill includes an enforcement process whereby the licensee can surrender its license voluntarily or the Commissioner can offer informal guidance, suspend or revoke a license, or order the business to end its operations.
Legislation: House Bill 1481
Sponsors: Representatives Chris Lee (D) and Mark Nakashima (D)
Introduced on January 25, HB 1481 “establish[es] a working group consisting of representation from the public and private sectors to examine, educate, and promote best practices for enabling blockchain technology to benefit local industries, residents, and the State of Hawaii.” Section two of the bill identifies the primary functions of the working group: (1) to study the uses of blockchain technology, and (2) to develop methods of providing education on blockchain technology. If the bill is approved, the working group will compile a report for the legislature.
The bill arose out of a desire to ensure that Hawaii’s tourism industry has the ability to serve tourists who prefer to use virtual currency: "A large portion of Hawaii's tourism market comes from Asia where the use of bitcoin as a virtual currency is expanding. Hawaii has the unique opportunity to explore the use of blockchain technology to make it easier for visitors to consume local goods and services and to drive the tourism economy.” On February 22, 2017, the Hawaii House Committee on Finance unanimously recommended that the Hawaii House of Representatives pass HB 1481 without any amendments. The entire House will now consider the bill.
Legislation: House Resolution 120
Sponsor: Representative Michael Zalewski (D)
Introduced on February 8, 2017, H.Res. 120 creates a Legislative Blockchain and Distributed Ledger Task Force to “study how and if [s]tate, county, and municipal governments can benefit from a transition to a blockchain based system for recordkeeping and service delivery.” The resolution calls for a report of findings and recommendations to be presented to the General Assembly before January 1, 2018, that includes an analysis of the following:
- Opportunities and risks associated with using blockchain and distributed ledger technology;
- Different types of blockchains, both public and private, and different consensus algorithms;
- Projects and use cases currently under development in other states and nations, and how those cases could be applied in Illinois;
- How current State laws can be modified to support secure, paperless recordkeeping;
- The State Public Key Infrastructure and digital signatures; and
- Official reports and recommendations from the Illinois Blockchain Initiative; and be it further.”
Recognizing that “nations and municipalities across the world are studying and implementing government reforms that bolster trust and reduce bureaucracy through verifiable open source blockchain technology in a variety of use cases from medical records, land records, banking, and property auctions,” Illinois recently created the Illinois Blockchain Initiative, which promotes a “collaborative regulatory exchange with technology firms, software developers, and service providers, so that if regulation is needed, it will be the product of a collaborative and proactive approach, with the goal of encouraging economic development through innovation.” Illinois has been a leader in incorporating blockchain technology into its public sector, and H. Res. 120 is the next step in exploring and hopefully implementing innovative blockchain-based use cases and meaningful legislation.
Legislation: Maine Senate Paper 305
Sponsors: Senator Eric Brakey (R) and Senator Garrett Mason (R)
Maine Senators Brakey and Mason introduced a legislative proposal to study the use of blockchain technology for election purposes. S. P. 305 calls for a commission to “study the potential uses for blockchain technology to support and enhance Maine’s current paper ballot election system for the purpose of improving paper ballot security, increasing election transparency and reducing costs.” If approved, the commission would consist of bipartisan legislators from the Senate and House as well as representatives from the offices of the Secretary of State and Attorney General. At the end of the study, the commission is to submit a report that “includes its findings and recommendations, including suggested legislation, for presentation to the Second Regular Session of the 128th Legislature” by December 6, 2017.
Legislation: Senate Bill 398
Sponsor: Senator Ben Kieckhefer (R)
Introduced on March 20, 2017, SB 398 amends the Nevada Revised Statutes to add provisions relating to the use of blockchain technology. The bill, which was amended on April 24, 2017, adds a definition for blockchain (“an electronic record created by the use of a decentralized method by multiple parties to verify and store a digital record of transactions which is secured by the use of a cryptographic hash of previous transaction information”) to the Uniform Electronic Transactions Act, Chapter 719 of the NRS.
Section three of the bill includes blockchain records within the meaning of electronic records, which gives legal effect to executable distributed code contracts, records, and signatures, and the evidence of such on a blockchain. If passed, this bill will prohibit the exclusion of blockchain evidence from a “proceeding” on the basis that a blockchain was used to create it. The bill also states that submitting a blockchain record satisfies any legal writing or signature requirement.
The bill also amends Chapters 244 and 268 of the NRS to prohibit local governments from: “(1) imposing a tax or fee on the use of a blockchain; (2) requiring a certificate, license or permit to use a blockchain; and (3) imposing any other requirement relating to the use of a blockchain,” but does not prohibit “a county from using a blockchain in the performance of its powers or duties.” The amended version of the bill was passed by the Nevada Senate and sent to the Assembly for consideration on April 25.
Legislation: House Bill 436
Sponsors: Representatives Barbara Biggie (R) and Keith Ammon (R)
On March 8, 2017, the New Hampshire House of Representatives passed an amended version of House Bill 436 (“HB 436”), with a vote of 185-170. The original version of HB 436, introduced on January 5, 2017, sought to amend New Hampshire’s Licensing of Money Transmitters statute (Chapter 399-G of the New Hampshire Revised Statutes) to specifically exempt businesses engaged in virtual currency transactions.
Thereafter, the House Commerce and Consumer Affairs Committee amended the bill changing the language of the exemption to exclude “persons who engage in the business of selling or issuing payment instruments or stored value solely in the form of convertible virtual currency; or receive convertible virtual currency for transmission to another location” from the licensing requirement. Additionally, unlike the original version, the amended version adds a statement that virtual currency-related businesses would be subject to the New Hampshire Regulation of Business Practices for Consumer Protection.
HB 436, as amended, will benefit a wide range of virtual currency start-ups and small businesses as they are currently required to obtain a money transmitter license, and satisfy the various, obligations for money transmitter businesses (including strenuous capital requirements and reporting/recordkeeping requirements). Easing those restrictions will allow these companies to focus their resources on innovation.
The bill will next be considered by the New Hampshire Senate.
Legislation: Texas House Joint Resolution 89
Sponsor: Representative Matt Schaefer (R)
Filed on March 2, 2017, H. J. Res. 89 proposes a constitutional amendment “relating to the right to own, hold, and use any mutually agreed upon medium of exchange.” The amendment states that the “right of the people to own, hold, and use a mutually agreed upon medium of exchange, including cash, coin, bullion, digital currency, or scrip, when trading and contracting for goods and services shall not be infringed. No government shall prohibit or encumber the ownership or holding of any form or amount of money or other currency.” Under Texas’s constitution amendment procedure, the measure will be placed on the general election ballot if it is passed by at least 2/3 majority in both the Texas House of Representatives and Senate. If that ultimately occurs and the voters approve it, Texas will be the first state to establish constitutional virtual currency rights that would limit subsequent regulation efforts.
Legislation: Senate Bill 59
Sponsor: Senator Ann Cummings (D), Representative William Frank (D)
Introduced on February 1, 2017, SB 59 focuses on the need “to amend and establish laws pertaining to consumer litigation funding companies; licensed lenders; money servicers; debt adjusters; and loan servicers.” To accomplish that, the bill adds a definition of virtual currency to the state’s money services statute (8 V.S.A. § 2500 et seq.): “stored value that (A) can be a medium of exchange, a unit of account, or a store of value; (B) has an equivalent value in money or acts as a substitute for money; (C) may be centralized or decentralized; and (D) can be exchanged for money or other convertible virtual currency.”
The bill also seeks to amend 8 V.S.A. §2540 of the Vermont money services statute, which addresses permissible investments. Currently, the statute requires a licensee to “maintain at all times permissible investments that have a market value computed in accordance with generally accepted accounting principles of not less than the aggregate amount of all of its outstanding payment instruments and stored-value obligations issued or sold and money transmitted by the licensee or its authorized delegates.” SB 59 amends the statute to include virtual currency owned by the licensee as a permissible investment to the “extent of outstanding transmission obligations received by the licensee in identical denomination of virtual currency.”
Legislation: Washington Senate Bill 5031
Sponsors: Senators Jan Angel (R) and Mark Mullet (D)
Introduced on January 10, 2017, SB 5031 “revises the uniform money services act with regard to licensing and enforcement provisions applicable to money transmitters and currency exchanges.” The bill, which was signed by Governor Jay Inslee on April 17, 2017 and goes into effect on July 23, 2017, requires a virtual currency business to obtain a money transmitter license or operate as an authorized delegate of a licensed money transmitter before engaging in the business of money transmission or advertising, soliciting, or holding itself out as providing money transmission services. In addition to applicable fees, applicants must also cover the cost of any onsite investigation conducted by the Director of Financial Institutions (“Director”) or its designee. The bill provides exemptions from licensing for certain public and private entities, including governments at all levels and their agents and instrumentalities, attorneys, insurance/title insurance companies, financial institutions, and investment advisors/securities broker-dealers.
Section four of the bill outlines the information that an applicant must provide as part of the application process, which includes a) personal and business identification information; b) information concerning criminal convictions from the preceding ten years; c) a description of money transmission services previously provided; d) a list of proposed authorized delegates or other people authorized by a licensee to represent him/her; e) a list of other money transmitter licenses; f) information relating to previous disciplinary action taken related to money transmission; and g) a description of the source of funds and credit that will be used to provide money transmission services.
The bill requires businesses that store virtual currency on behalf of others to provide the Director with a “third-party security audit of all electronic information and data systems.” The bill requires licensees to maintain a surety bond for a minimum of $10,000 up to a maximum of $550,000 based on the previous year’s money transmission dollar volume and payment instrument dollar volume. The Director has the discretion to increase the bond requirement up to a maximum of $1 million based on the “nature and volume of business activities and the financial health of the company.” Online currency exchange licensees must “maintain a surety bond in an amount based on the previous year’s currency exchange dollar volume,” with a minimum of $10,000 up to a maximum of $50,000. The bond must cover claims for at least five years after a licensee has violated the bill or has stopped providing money/online currency exchange services. Failure to maintain a surety bond may lead to a cease and desist order.
In addition to a surety requirement, the bill requires licensees to abide by several requirements to maintain their licenses, including submitting accurate annual reports, paying annual assessments, maintaining a specific amount of permissible investments, providing reporting to other government agencies, and reporting any changes in their businesses. Further, licensees must provide specific disclosures to anyone inquiring about the use of their products or services, such as a fee/charges schedule, a statement as to whether the product or service provided is insured or guaranteed by a US agency, a statement that the transfer of virtual currency is irrevocable, and a notice describing the licensee’s liability for certain actions.
Legislation: Senate Bill 5264
Sponsors: Senators Steve Conway (D) and Ann Rivers (R)
Introduced on January 18, 2017, SB 5264 seeks to amend Washington’s Uniform Controlled Substances Act to restrict the use of virtual currency for the purposes of marijuana sale and distribution. The bill “prohibits a marijuana producer, processor, or retail outlet from paying with or accepting virtual currency for the purchase or sale of marijuana or marijuana products.”
After being introduced in the Washington Senate, it was referred to the Senate Commerce, Labor, and Sports Committee, which held a public hearing on January 25, 2017. Proponents of the bill worry that permitting the use of an unregulated virtual currency will hinder the state’s goal of financial transparency within the marijuana industry. However, marijuana business owners and others oppose the measure because they believe that virtual currency can offset the increasing number of marijuana shop robberies due to the industry’s current reliance on cash.
Legislation: House Bill 2585
Sponsors: Delegate Erikka Storch (R), Delegate Karen Arvon (R), Delegate William Romine (R), Delegate Allen Evans (R), Delegate Marty Gearheart (R), Delegate Clif Moore (D), Delegate Martin Atkinson (R), Delegate Mark Zatezalo (R), Delegate John Shott (R), Delegate Roger Hanshaw (R), Delegate Tony Lewis (R)
Introduced on February 21, 2017, HB 2585 amends West Virginia’s penal code to add an article relating to laundering proceeds from specified criminal activities. The bill covers financial transactions using various monetary instruments, including cryptocurrency, defined as “digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, and which operates independently of a central bank.”
The bill makes it unlawful for an individual to “conduct or attempt to conduct a financial transaction involving the proceeds of criminal activity knowing that the property involved in the financial transaction represents the proceeds of, or is derived directly or indirectly from the proceeds of, criminal activity” or “transport, transmit, or transfer, or attempt to transport, transmit or transfer monetary instruments or property involving the proceeds of criminal activity, knowing that the monetary instruments or property are the proceeds of some form of criminal activity.” Engaging in this prohibited conduct is a felony offense, with violators facing fines of up to $5,000 and/or five years in state prison. While the bill does not define cryptocurrency as money, its inclusion of cryptocurrency alongside “coin or currency of the United States or of any other country” in the definition of monetary instruments signals the state’s recognition of the similarities between cryptocurrency and other fiat currencies.The West Virginia House of Representatives and Senate have passed the bill. Governor Jim Justice approved the bill on April 26, 2017, and the bill is awaiting his signature.