Assigned to FIN FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
FACT SHEET FOR S.B. 1096
bullion depository; establishment
Purpose
Establishes the Arizona Bullion Depository (Depository), administered by the Department
of Insurance and Financial Institutions (DIFI), and outlines duties, procedures and requirements.
Background
DIFI is established to safeguard the public welfare by licensing, examining and supervising
financial institutions and enterprises in compliance with state law. The Director of DIFI (Director)
must have business experience and be well versed in financial institution matters, in addition to
other prescribed requirements (A.R.S. §§ 6-181 and 20-141).
The State Treasurer is responsible for the safekeeping of all securities for which the State
Treasurer is the lawful custodian. Securities may be deposited for safekeeping with any bank
eligible to be the state servicing bank or any trust company or trust department of any bank
qualified to do business in Arizona. The State Treasurer must invest and reinvest trust and treasury
monies in outlined obligations, bonds and other permitted investments (A.R.S. Title 35, Chapter
2, Article 2).
Federal law recognizes coins and currency, including Federal Reserve and national bank
notes, as legal tender for the payment of all debts, public charges, taxes and dues. Foreign gold or
silver coins are not recognized as legal tender for debt payment purposes (31 U.S.C. § 5103).
S.B. 1096 requires DIFI to establish multiple fees and deposit net fee proceeds, after
administrative costs, in the state General Fund.
Provisions
Depository Standards and Reporting Requirements
1. Establishes the Depository to serve as the custodian, guardian and administrator of certain
bullion and specie that may be transferred to or otherwise acquired by the state, a state agency,
a political subdivision or another instrumentality of the state (governmental entities).
2. Requires DIFI to administer the Depository through an Administrator who is hired by the
Director and serves at the discretion of the Director.
3. Allows the State Treasurer to deposit a portion of state monies in the Depository in the form
of bullion and considers any bullion deposits as part of the state's financial reserves. FACT SHEET
S.B. 1096
Page 2
4. Defines bullion as precious metals that are limited to gold and silver and that are formed into
uniform shapes and quantities such as ingots, bars or plates that have uniform content and
purity and that are suitable for or customarily used in the purchase, sale, storage, transfer and
delivery of bulk or wholesale transactions in precious metals.
5. Defines specie as a precious metal that is limited to gold and silver and that is stamped into
coins of uniform shape, size, design, content and purity that are suitable for or customarily
used as currency, as a medium of exchange or as the medium for purchase, sale, storage,
transfer or delivery of precious metals in retail or wholesale transactions.
6. Requires the Depository to provide a secure location for storing bullion.
7. Allows DIFI to contract with a third party to administer the daily operations of the Depository
and implement the Depository security, storage, transactional and administrative procedures.
8. Allows governmental entities to use the Depository to store bullion.
9. Prohibits foreign nations and U.S. enemies from using services provided by the Depository.
10. Allows the Depository, in accordance with rules adopted by the Director, to receive a deposit
of bullion or specie to ensure compliance with the law and protect the interests of the public,
government entities, the Depository and the Depository's account holders.
11. Requires the Depository to:
a) record the amount of precious metals a person deposits, regardless of form, in units of pure
troy ounces and specify the type and quantity of each precious metal deposited; and
b) adjust each Depository account balance to reflect Depository account additions,
withdrawals or deliveries.
12. Requires the Administrator to:
a) manage, supervise and direct the operations and affairs of the Depository and Depository
agents;
b) for Depository transactions involving state monies, governmental entities or private
persons, liaise with DIFI to ensure that each transaction is planned, administered and
executed in a prescribed manner; and
c) ensure that the Depository has current and efficient safety protocols to prevent theft, fraud
or unauthorized access to or removal of bullion.
13. Allows the Administrator to:
a) subject to the Director's approval, appoint or employ a Deputy Administrator or other
subordinate officers or employees as necessary and appropriate to properly effectuate
Depository administration; and
b) employ security officers to provide security services for the Depository as necessary.
14. Stipulates that the Administrator and any employee, official or third party associated with the
Depository's oversight or operation must:
a) have no financial interest in companies or entities that produce, sell or manage bullion; and
b) disclose immediately upon discovery any potential conflict of interest to DIFI. FACT SHEET
S.B. 1096
Page 3
15. Specifies that a violation of the financial interest and conflict of interest criteria may result in
termination, fines or other legal penalties as determined by DIFI.
16. Requires DIFI to contract with an independent third party that is an established provider with
a proven record of providing auditing services to depository institutions for the purpose of
conducting audits at least twice each year to verify the amount and value of the bullion and
specie stored in the Depository and to inspect security measures and safety protocols.
17. Allows the public to request a summary of totals of previous precious metal amounts and any
discrepancies found during an audit conducted by an eligible independent third party.
18. Exempts, from public disclosure, information that would jeopardize confidential Depository
information or the Depository's security protocols.
19. Requires the Administrator to provide quarterly reports to DIFI detailing the operations,
transactions and financial status of the Depository.
20. Requires DIFI, by June 30, to submit an annual report to the President of the Senate and
Speaker of the House of Representatives and provide a copy to the Secretary of State.
Transactional Currency Issuance and Redemption
21. Requires the Director to issue specie and establish a transactional currency, as deemed
practicable, and to:
a) for transactional currency, establish a means to ensure that:
i. the state or a person that holds transactional currency may use it as legal tender to pay
a debt or assign it to another person or the state; and
ii. the electronic means of the transfer of transactional currency to another person or the
state is expedient; and
b) for specie, authorize the Depository as the state's exclusive issuer and ensure:
i. that the specie holder may use the specie as legal tender to pay a debt; and
ii. the expedient transfer of transactional currency to another person or the state and that
specie is readily transferable.
22. Defines transactional currency as a representation of actual precious metals, specie and bullion
held in a Depository account by a Depository account holder that may be transferred by
electronic instruction and that reflects the exact unit of physical previous metals, specie or
bullion in the Pooled Depository Account in its fractional troy ounce measurement.
23. Allows the Director to contract with a private vendor to establish the transactional currency or
perform other statutory duties.
24. Requires the Director, who serves as trustee, or the Director's designee to:
a) on behalf of the transactional currency holders, hold in trust all specie and bullion owned
or purchased for transactional purposes;
b) maintain enough specie or bullion to provide for the redemption of all transactional
currency units that have been issued but not redeemed; and
c) establish a Pooled Depository Account in the Depository to hold in trust all owned,
allocated or purchased specie and bullion on behalf of transactional currency holders. FACT SHEET
S.B. 1096
Page 4
25. Requires the Administrator to issue transactional currency to a person or the state on payment:
a) to the Depository to purchase specie or bullion, or both, and on payment of an applicable
fee; and
b) to designate specie or bullion, or both, held on account and on payment of an applicable
fee.
26. Requires the Director, after receiving payment of the applicable fee, to:
a) use the received payment to buy specie or bullion, or both, in the number of troy ounces of
precious metal equal to the number of units of transactional currency and issue that
transactional currency to the purchaser;
b) deposit such specie or bullion into the Pooled Depository Account for the purchaser;
c) issue to the purchaser a Depository account with, or add to an existing account, a number
of transactional currency units equal to the amount of specie or bullion that the received
purchase monies would buy at the market price on that date as published by the Depository.
27. Allows a person who holds transactional currency to present to the Administrator any number
of transactional currency units to redeem for U.S. dollars and requires the Administrator, on
receipt of a redemption request, to:
a) sell from the specie or bullion held in the Pooled Depository Account a number of troy
ounces of specie or bullion equal to the number of U.S. dollars of the redeemed
transactional currency; and
b) provide the person an amount of U.S. dollars equal to the amount received from the sale of
specie or bullion, minus a fee charged.
28. Allows a Depository account holder who holds transactional currency to present to the
Administrator any number of units of the transactional currency to redeem for an equal number
of troy ounces of specie or bullion from the Pooled Depository Account and requires the
Administrator, on receipt of a redemption request, to:
a) withdraw the equivalent number of troy ounces of specie or bullion from the Pooled
Depository Account; and
b) deliver the specie or bullion as requested to the requestor on receipt of a fee.
29. Requires the Director, at the time of each transaction that issues or redeems transactional
currency, to determine the value of a transactional currency unit as published by the Depository
and requires the value of a transactional currency unit to equal the value of the appropriate
fraction of a troy ounce of precious metal as published by the Depository.
30. Specifies that specie, bullion and monies in the Pooled Depository Account are held by the
Director on behalf of transactional currency holders and are not available for legislative
appropriation.
Fees and Rulemaking Authority
31. Allows DIFI to charge a standard industry merchant fee.
32. Requires DIFI to establish the prescribed purchase, issuance and redemption fees. FACT SHEET
S.B. 1096
Page 5
33. Authorizes DIFI to use up to 10 percent of the prescribed fees to administer the Depository
and requires the Director to deposit any net Depository fee proceeds after administrative costs
in the state General Fund.
34. Requires DIFI to adopt rules for the state's use of the Depository and allows the Director to
adopt rules as necessary or convenient to:
a) ensure the security of specie, bullion, transactional currency, transactions and related data;
b) prevent fraud;
c) prevent the release of any Depository account information or Depository account holder-
related data subject to a court order; and
d) establish the prescribed fees.
Miscellaneous
35. Defines terms.
36. Becomes effective on the general effective date.
Prepared by Senate Research
January 22, 2025
MG/ci