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2023 Regular Session
SENATE BILL NO. 185
BY SENATOR REESE
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
COMMERCIAL REGULATIONS. Provides relative to the licensing and regulation of
virtual businesses. (8/1/23)
1 AN ACT
2 To amend and reenact R.S. 6:1382, 1384, 1385, 1386, 1387, 1388, 1390, 1392, 1393, and
3 1394, to enact R.S. 6:1385.1, 1385.2, 1386.1, 1386.2, 1388.1, 1391(D), (E), (F), and
4 (G), 1391.1, 1391.2, and 1393.1, and to repeal R.S. 6:1383(C)(5)(c) and (7) and (D),
5 and 1389, relative to the regulation and licensure of virtual currency businesses; to
6 provide relative to the authority, functions, and duties of the office of financial
7 institutions; to provide for definitions; to provide for applicability; to provide for
8 licensure requirements; to authorize reciprocity of licensure; to provide for
9 qualifications of licensure; to provide for the issuance, denial, and renewal of
10 licenses; to provide enforcement; to establish penalties for violations; to provide for
11 administrative rules; to provide for terms, conditions, and procedures; and to provide
12 for related matters.
13 Be it enacted by the Legislature of Louisiana:
14 Section 1. R.S. 6:1382, 1384, 1385, 1386, 1387, 1388, 1390, 1392, 1393, and 1394
15 are hereby amended and reenacted and R.S. 6:1385.1, 1385.2, 1386.1, 1386.2, 1388.1,
16 1391(D), (E), (F), and (G), 1391.1, 1391.2, and 1393.1, are hereby enacted to read as
17 follows:
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1 §1382. Definitions
2 For the purposes of this Chapter As used in this Chapter, unless the context
3 otherwise requires, the following terms shall be defined as follows:
4 (1) "Acting in concert" means persons that knowingly act together with
5 a common goal of jointly acquiring control of a licensee whether or not
6 pursuant to an express agreement.
7 (2) "Applicant" means a person that applies for a license pursuant to this
8 Chapter.
9 (3) "Affiliate" means any person who controls, is controlled by, or is
10 under common control with another person.
11 (4) "Blockchain" means any ledger of exchange, sale, or transfer of
12 virtual currency which is accessible by computers or operators that are part of
13 any virtual currency network.
14 (5) "Coin" means any electronic representation value on any digital
15 currency network.
16 (6) "Commissioner" means the commissioner of the office of financial
17 institutions.
18 (2)(7) "Control", when used in the context described, means both of the
19 following:
20 (a) When used in reference to a transaction or relationship involving virtual
21 currency, power to execute unilaterally or prevent indefinitely a virtual currency
22 transaction.
23 (b) When used in reference to a person, any of the following:
24 (i) the The direct or indirect power to direct the management, operations, or
25 policies of the person through legal or beneficial ownership of voting power in the
26 person or under a contract, arrangement, or understanding.
27 (ii) The power to vote, directly or indirectly, at least twenty-five percent
28 of outstanding voting shares or voting interests of a licensee or person in control
29 of a licensee, including persons acting in concert in such instances.
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1 (iii) The power to elect or appoint a majority of responsible individuals
2 of a licensee.
3 (iv) The power to exercise directly or indirectly, a controlling influence
4 over the management or policies of a licensee or person in control of a licensee.
5 (v) Any other set of facts and circumstances, as determined by the
6 commissioner in his discretion, that may constitute control.
7 (3) "Department" means the office of financial institutions.
8 (4)(8) "Exchange", when used as a verb, means to assume control of virtual
9 currency from, or on behalf of, a resident, at least momentarily, to sell, trade, or
10 convert either of the following:
11 (a) Virtual currency for legal tender, bank credit, or one or more forms of
12 virtual currency.
13 (b) Legal tender or bank credit for one or more forms of virtual currency.
14 (5) "Executive officer" means an individual who is a director, officer,
15 manager, managing member, partner, or trustee of a person that is not an individual.
16 (6)(9) "Insolvent" means any of the following:
17 (a) Having generally ceased to pay debts in the ordinary course of business
18 other than as a result of a bona fide dispute.
19 (b) Being unable to pay debts as they become due.
20 (c) Being insolvent within the meaning of federal bankruptcy law.
21 (7)(10) "Legal tender" means a medium of exchange or unit of value,
22 including the coin or paper money of the United States, issued by the United States
23 or by another government, provided the issuance by another government is not
24 virtual currency.
25 (8)(11) "Licensee" means a person licensed pursuant to this Chapter.
26 (12) "Mining" means the use of any machine to solve any series of
27 complex mathematical equations, problems, or puzzles, in binary or nonbinary
28 sequences, used by any existing blockchain to either:
29 (a) Create any new virtual currency coin or token.
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1 (b) Add any block to any existing blockchain.
2 (13) "Nationwide Multistate Licensing System and Registry" or
3 "NMLS" means the multistate system developed by the Conference of State
4 Bank Supervisors and the American Association of Residential Mortgage
5 Regulators and owned and operated by the State Regulatory Registry, LLC, or
6 any successor or affiliated entity, for the licensing and registration of persons
7 in financial services industries or any other similar online multistate database.
8 (14) "Office" means the office of financial institutions.
9 (9)(15) "Person" means an individual, general partnership, estate, business
10 or nonprofit entity, or other legal entity limited partnership, limited liability
11 company, corporation, trust, association, joint stock corporation, or other legal
12 entity, or any individual or group of individuals, however organized. The term
13 shall not include a public corporation, government, or governmental subdivision,
14 agency, or instrumentality.
15 (10) "Reciprocity agreement" means an arrangement between the department
16 and the appropriate licensing agency of another state which permits a licensee
17 operating under a license granted by the other state to engage in virtual currency
18 business activity with or on behalf of a resident.
19 (11) "Registrant" means a person that registers with this state pursuant to R.S.
20 6:1390 to conduct virtual currency business activity.
21 (12) "Registration" means the ability pursuant to R.S. 6:1389 to conduct
22 virtual currency business activity.
23 (13)(a)(16)(a) "Regulated financial institution" means a federally chartered
24 or state-chartered insured depository institution and its wholly-owned subsidiaries
25 chartered pursuant to the laws of this state, another state, or the United States,
26 a Louisiana state-chartered trust company, a trust company chartered by another
27 state, or a federally chartered trust company.
28 (b) "Regulated financial institution" shall not include either of the following:
29 (i) An industrial loan company.
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1 (ii) A trust company chartered by a state with which this state does not have
2 a reciprocity governing trust-company activities.
3 (14)(a)(17)(a) "Resident" means any of the following:
4 (i) A person who is domiciled in this state.
5 (ii) A person who is physically located in this state for more than one hundred
6 eighty-three days of the previous three hundred sixty-five days.
7 (iii) A person who has a place of business in this state.
8 (b) "Resident" shall include a legal representative of a person that meets one
9 of the criteria provided for in Subparagraph (a) of this Paragraph.
10 (15)(18) "Responsible individual" means an individual who has managerial
11 authority with respect to a licensee's or registrant's virtual currency business activity
12 with, or on behalf of, a resident. any individual that is ultimately responsible for
13 establishing or directing policies and procedures of the licensee, including but
14 not limited to an executive officer, manager, director, or trustee.
15 (16)(19) "State" means a state of the United States, the District of Columbia,
16 Puerto Rico, the United States Virgin Islands, or any territory or insular possession
17 subject to the jurisdiction of the United States.
18 (17)(20) "Store", except in the phrase "store of value", means to maintain
19 control of virtual currency on behalf of a resident by a person other than the resident.
20 "Storage" and "storing" have corresponding meanings.
21 (21) "Tangible net worth" means all business assets minus liabilities,
22 minus intangible assets, including goodwill and other intangible assets. For the
23 purposes of this Paragraph, an intangible asset may include but is not limited
24 to favorable leasehold rights, trademarks, trade names, internet domain names,
25 and noncompete agreements.
26 (22) "Token" means any electronic representation value on any virtual
27 currency network.
28 (18)(23) "Transfer" means to assume control of virtual currency from, or on
29 behalf of, a resident and do any of the following:
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1 (a) Credit the virtual currency to the account of another person.
2 (b) Move the virtual currency from one account of a resident to another
3 account of the same resident.
4 (c) Relinquish control of virtual currency to another person.
5 (19)(24) "United States dollar equivalent of virtual currency" means the
6 equivalent value of a particular virtual currency in United States dollars shown on
7 a virtual currency exchange based in the United States for a particular date or period
8 specified in this Chapter.
9 (25) "Unsafe or unsound act or practice" means and includes but is not
10 limited to a practice or conduct by a person licensed to engage in virtual
11 currency business activity in the state which creates the likelihood of material
12 loss, insolvency, dissipation of the licensee's assets that materially prejudices the
13 interests of residents, and any other set of facts and circumstances, as
14 determined by the commissioner in accordance with this Chapter and
15 applicable law.
16 (20)(a)(26)(a)"Virtual currency" means a digital representation of value that
17 is used as a medium of exchange, unit of account, or store of value, and that is not
18 legal tender, whether or not denominated in legal tender.
19 (b) "Virtual currency" shall not include either of the following:
20 (i) A transaction in which a merchant grants, as part of an affinity or rewards
21 program, value that cannot be taken from or exchanged with the merchant for legal
22 tender, bank credit, or virtual currency.
23 (ii) A digital representation of value issued by or on behalf of a publisher and
24 used solely within an online game, game platform, or family of games sold by the
25 same publisher or offered on the same game platform.
26 (21)(27) "Virtual currency administration" means issuing virtual currency
27 with the authority to redeem the currency for legal tender, bank credit, or other
28 virtual currency.
29 (22)(28) "Virtual currency business activity" means any of the following:
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1 (a) Exchanging, transferring, or storing virtual currency or engaging in virtual
2 currency administration, whether directly or through an agreement with a virtual
3 currency control services vendor.
4 (b) Holding electronic precious metals or electronic certificates representing
5 interests in precious metals on behalf of another person or issuing shares or
6 electronic certificates representing interests in precious metals.
7 (c) Exchanging one or more digital representations of value used within one
8 or more online games, game platforms, or family of games for either of the
9 following:
10 (i) Virtual currency offered by or on behalf of the same publisher from which
11 the original digital representation of value was received.
12 (ii) Legal tender or bank credit outside the online game, game platform, or
13 family of games offered by or on behalf of the same publisher from which the
14 original digital representation of value was received.
15 (d) Virtual currency business activity shall not include mining.
16 (23)(29) "Virtual currency control services vendor" means a person that has
17 control of virtual currency solely under an agreement with a person that, on behalf
18 of another person, assumes control of virtual currency.
19 (30) "Virtual currency network" means any computer or operator
20 having access to a ledger of exchange, sale, or transfer of one or more virtual
21 currencies.
22 * * *
23 §1384. Licensure; general
24 A person shall not engage in virtual currency business activity, or hold itself
25 out as being able to engage in virtual currency business activity, with or on behalf
26 of a resident unless the person is one of the following:
27 (1) Licensed in this state by the department office pursuant to R.S. 6:1385.
28 (2) Registered with the department and operating pursuant to R.S. 6:1390.
29 (3)(2) Exempt from licensure or registration pursuant to R.S. 6:1383.
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1 §1385. Requirements
2 A. An applicant for a license pursuant to the provisions of this Chapter shall
3 submit the application through the Nationwide Multi-State Licensing System
4 (NMLS) and satisfy all of the following:
5 (1) Except as otherwise provided in Subsection B of this Section, provide
6 Provide all of the following information relevant to the applicant's proposed virtual
7 currency business activity:
8 (a) The legal name of the applicant, each current or proposed business United
9 States Postal Service address of the applicant, and any fictitious or trade name the
10 applicant uses or plans to use in conducting its virtual currency business activity with
11 or on behalf of a resident.
12 (b) The legal name, any former or fictitious name, and the residential and
13 business United States Postal Service address of each executive officer and
14 responsible individual of the applicant, and each person that has control of the
15 applicant.
16 (c) A description of the current and former business of the applicant for the
17 five years before the application is submitted or, if the business has operated for less
18 than five years, for the time the business has operated, including its products and
19 services, associated internet website addresses and social media pages, principal
20 place of business, projected user base, and specific marketing targets.
21 (d) The name, United States Postal Service address, and telephone number
22 of a person that manages each server the applicant expects to use in conducting its
23 virtual currency business activity with, or on behalf of, a resident and a copy of any
24 agreement with that person. A copy of the applicant's business plan, which shall
25 include a three-year financial pro forma, the anticipated volume of virtual
26 currency business activities in this state for the same period, the anticipated
27 number of virtual currency locations, including kiosk machines, in this state,
28 and evidence of the surety bond, and of the current and continued maintenance
29 of the tangible net worth required by R.S. 6:1386.
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1 (e) The name, United States Postal Service address, telephone number
2 of each affiliate of the applicant, and a description of the control relationship.
3 (f) A list of both of the following:
4 (i) Each money service or money transmitter license the applicant holds in
5 another state and the date the license expires.
6 (ii) Any license revocation, license suspension, or other disciplinary action
7 taken against the licensee in another state and any license applications rejected by
8 another state.
9 (f)(g) A list of any criminal conviction, deferred prosecution agreement, or
10 pending criminal proceeding in any jurisdiction against all of the following:
11 (i) The applicant.
12 (ii) Each executive officer of the applicant.
13 (iii) Each responsible individual of the applicant.
14 (iv)(iii) Each person that has control over the applicant.
15 (v)(iv) Each person over which the applicant has control.
16 (g)(h) A list of any litigation, arbitration, or administrative proceeding in any
17 jurisdiction in which the applicant, or an executive officer or a responsible individual
18 of the applicant, has been a party for the five years before the application is
19 submitted, determined to be material in accordance with generally accepted
20 accounting principles and to the extent the applicant would be required to disclose
21 the litigation, arbitration, or administrative proceeding in the applicant's audited
22 financial statements, reports to equity owners, and similar statements or reports.
23 (h)(i) A list of any bankruptcy or receivership proceeding in any jurisdiction
24 for the ten years before the application is submitted in which any of the following
25 was a debtor:
26 (i) The applicant.
27 (ii) Each executive officer of the applicant.
28 (iii) Each responsible individual of the applicant.
29 (iv)(iii) Each person who has control over the applicant.
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1 (v)(iv) Each person over which the applicant has control.
2 (i)(j) The name and United States Postal Service address of each bank in
3 which the applicant plans to deposit funds obtained by its virtual currency business
4 activity.
5 (j)(k) The source of funds and credit to be used by the applicant to conduct
6 virtual currency business activity with, or on behalf of, a resident and documentation
7 demonstrating that the applicant has the tangible net worth and reserves required
8 pursuant to R.S. 6:1386.
9 (k)(l) The United States Postal Service address and electronic mail address
10 to which communications from the department office may be sent.
11 (l)(m) The name, United States Postal Service address, and electronic mail
12 address of the registered agent of the applicant in this state.
13 (m)(n) A copy of the certificate, or a detailed summary acceptable to the
14 department, of coverage for each liability, casualty, business-interruption, or and
15 cyber-security insurance policy maintained by the applicant for itself, an executive
16 officer, a or as to any responsible individual, or the applicant's users affiliate, agent,
17 or control person, of the applicant, with respect to the virtual currency business
18 activities of the applicant.
19 (n)(o) If applicable, the date on which, and the state where, the applicant is
20 formed and a copy of a current certificate of good standing issued by that state.
21 (p) A copy of the applicant's audited financial statement for the prior
22 year.
23 (o)(q) If a person has control of the applicant and the person's equity interests
24 are publicly traded in the United States, a copy of the audited financial statement of
25 the person for the most recent fiscal year or most recent report of the person filed
26 pursuant to 15 U.S.C. 78.
27 (p)(r) If a person has control of the applicant and the person's equity interests
28 are publicly traded outside the United States, a copy of the audited financial
29 statement of the person for the most recent fiscal year of the person or a copy of the
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1 most recent documentation similar to that required in Subparagraph (o) (q) of this
2 Paragraph filed with the foreign regulator in the domicile of the person.
3 (q)(s) If the applicant is a partnership or a member-managed limited liability
4 company, the names and United States Postal Service addresses of all general
5 partners or members.
6 (r)(t) If the applicant is required to register with the Financial Crimes
7 Enforcement Network of the United States Department of the Treasury as a money
8 service business, evidence of the registration.
9 (s)(u) A set of fingerprints for each executive officer and responsible
10 individual and person who has control of the applicant. If the person resided
11 outside of the United States at anytime in the last ten years, the person shall also
12 provide an investigative background report prepared by an independent search
13 firm that meets the following requirements:
14 (i) At a minimum, the search firm shall satisfy both of the following:
15 (aa) Demonstrate that it has sufficient knowledge, resources, and
16 employs accepted and reasonable methodologies to conduct the research of the
17 background report.
18 (bb) Not be affiliated with or have an interest with the person it is
19 researching.
20 (ii) At a minimum, the investigative background report shall be written
21 in the English language and shall contain all of the following:
22 (aa) If available in the person's current jurisdiction of residency, a
23 comprehensive credit report, or any equivalent information obtained or
24 generated by the independent search firm to accomplish such report, including
25 a search of the court data in the countries, provinces, states, cities, towns, and
26 contiguous areas where the individual resided and worked.
27 (bb) Criminal records information for the past ten years, including but
28 not limited to felonies, misdemeanors, or similar convictions.
29 (cc) Employment history.
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1 (dd) Media history, including an electronic search of national and local
2 publications, wire services, and business applications.
3 (ee) Financial services-related regulatory history, including but not
4 limited to money transmission, securities, banking, insurance, and mortgage
5 related industries.
6 (t)(v) If available, for For each executive officer and responsible individual
7 and person who has control of the applicant, for the five years before the
8 application is submitted, employment history and history of any investigation of the
9 person who has control or the responsible the individual or legal proceeding to
10 which the person who has control or responsible individual was a party.
11 (u)(w) Other information the department office reasonably requires by rule.
12 (2) Be accompanied by a nonrefundable fee in the amount determined by the
13 department to cover the reasonable costs of regulation. Provide through and in the
14 manner prescribed by NMLS, a nonrefundable fee in an amount provided by
15 rule, for the reasonable regulatory cost of the application and investigation
16 process, and pursuant to this Section the applicant shall pay the reasonable
17 costs of the investigation incurred by the office that are in excess of the amount
18 of the nonrefundable fee amount, in the manner prescribed by the
19 commissioner.
20 B. For good cause, the department may waive the fee required pursuant to
21 Paragraph (A)(2) of this Section or permit the applicant to submit other information
22 instead of the required information.
23 C. An application for a license pursuant to this Section shall not be complete
24 until the department office receives all information required by the provisions of this
25 Chapter and completes its investigation pursuant to Subsection D C of this Section.
26 D.(1)C.(1) On receipt of a completed application, the department office shall
27 investigate all of the following:
28 (a) The financial condition and responsibility of the applicant.
29 (b) The relevant financial and business experience, character, and general
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1 fitness of the applicant.
2 (c) The competence, experience, character, and general fitness of each
3 executive officer, each responsible individual, and any person that has control of the
4 applicant, in order for the commissioner to reasonably determine that the
5 applicant will conduct its virtual currency business activity honestly, carefully
6 and efficiently, and in accordance with the requirements of this Chapter, and
7 any other applicable state or federal laws or regulations.
8 (2) At the option of the department office, it may investigate the business
9 premises of an applicant.
10 E.(1) D.(1) Not later than thirty sixty days after an application is complete,
11 the department office shall send the applicant notice of its decision to approve,
12 conditionally approve, or deny the application.
13 (2) If the department does not send the applicant notice of its decision within
14 thirty-one days of completion of the application, the application shall be deemed
15 denied.
16 (3) If the department office does not receive notice from the applicant that the
17 applicant accepts conditions specified by the department office within thirty-one
18 days following the department's notice conditions after the date of the notice of the
19 conditional approval, the application shall be deemed denied.
20 F.E. A license shall be effective on the later of either of the following:
21 (1) The date on which the department issues the license.
22 (2) The date the licensee provides the security required pursuant to R.S.
23 6:1386.
24 G. An applicant shall pay the reasonable costs of the department's
25 investigation pursuant to this Section.
26 No license shall be issued pursuant to this Chapter unless:
27 (1) The applicant provides a surety bond and the commissioner accepts
28 the surety bond required pursuant to R.S. 6:1386.
29 (2) The applicant provides evidence acceptable to the commissioner of
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1 the tangible net worth required pursuant to R.S. 6:1386.
2 (3) The applicant has paid all costs and fees required pursuant to this
3 Chapter in connection with a license application.
4 (4) The commissioner has issued notice of the decision to approve or
5 conditionally approve the application in accordance with Subsection D of this
6 Section.
7 §1385.1. Approval of advanced change of control notice
8 A. Whenever a change of control of a licensee or an applicant is
9 contemplated by any person, or persons acting in concert, the following
10 information shall be provided to the commissioner through the NMLS:
11 (1) A licensee or applicant shall do all of the following:
12 (a) File an advanced change of control notice within thirty days after
13 learning of the change of control and at least forty-five days prior to the date
14 the proposed transaction is to be consummated.
15 (b) Provide such information as required pursuant to R.S. 6:1385(A).
16 (2) After review of an advanced change of control notice filed pursuant
17 to Paragraph (1) of this Subsection, the commissioner may require the licensee
18 or applicant to provide additional information concerning the proposed person,
19 or persons acting in concert, to cause a change of control. The additional
20 information shall be limited to the same types required of the licensee or
21 applicant as part of its original application filed pursuant to R.S. 6:1385(A).
22 B. The commissioner shall approve an advanced change of control notice
23 filed under Paragraph (1) of this Subsection if, after investigation, he
24 determines that the person, or persons acting in concert, to cause a change of
25 control shall not adversely affect the ability of the licensee or applicant to
26 conduct its virtual currency business activity honestly, carefully, and efficiently,
27 and in accordance with the requirements of this Chapter, and any other
28 applicable state and federal laws and regulations.
29 C. If the commissioner determines that the proposed person, or persons
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1 acting in concert, to cause a change of control fails to meet the qualifications,
2 standards, and requirements pursuant to this Chapter, he shall inform the
3 licensee, applicant, proposed person, or persons acting in concert, to cause the
4 change of control in writing that the advanced change of control request is
5 denied and state the reasons for such denial. The licensee, applicant, proposed
6 person, or persons acting in concert, to cause the change of control may appeal
7 the denial in accordance with R.S. 6:1387(C).
8 D. The provisions of Paragraph (A)(1) of this Section shall not apply to
9 a public offering of securities under the laws of the United States.
10 E. Before filing an advanced change of control notice, any person, or
11 persons acting in concert, may request in writing a determination from the
12 commissioner as to whether the person, or persons acting in concert, would be
13 considered to be in control of a licensee or applicant upon consummation of a
14 proposed transaction. If the commissioner determines that the person, or
15 persons acting in concert, would not be in control of the licensee or applicant,
16 the commissioner shall respond in writing that the proposed transaction is not
17 subject to the requirements of Subsection A of this Section.
18 §1385.2. Approval of advanced change of responsible individual notice
19 A. Whenever a change is contemplated with respect to a reasonable
20 individual of a licensee or applicant, the following information shall be provided
21 to the commissioner through the NMLS:
22 (1) The legal name, any former or fictitious name, and the residential
23 and business United States Postal Service address of the proposed responsible
24 individual.
25 (2) A list of any criminal conviction, deferred prosecution agreement, or
26 pending criminal proceeding in any jurisdiction against the proposed
27 responsible individual.
28 (3) A list of any bankruptcy or receivership proceeding in any
29 jurisdiction for the prior ten years involving the proposed responsible
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1 individual.
2 (4) A list of any litigation, arbitration, or administrative proceeding in
3 any jurisdiction in which the proposed responsible individual was a party for
4 the prior five years.
5 (5) A set of fingerprints for the proposed responsible individual for
6 submission to the Federal Bureau of Investigation and the commissioner for
7 purposes of a national and state criminal background check. If the individual
8 resided outside of the United States at any time in the last ten years, he shall
9 also provide an investigative background report prepared by an independent
10 search firm pursuant to the requirements of R.S. 6:1385(A)(1)(u).
11 (6) The employment history of the proposed responsible individual for
12 the prior five years.
13 (7) A history of any investigation or legal proceeding to which the
14 proposed responsible individual was a party for the prior five years.
15 B. After review of an advanced change of responsible individual notice
16 filed pursuant to Subsection A of this Section, the commissioner may require
17 the licensee or applicant to provide additional information concerning the
18 proposed responsible individual. The additional information shall be limited to
19 the same information required of a licensee or an applicant as part of his
20 original application filed pursuant to R.S. 6:1385(A).
21 C. The commissioner shall approve an advanced change of responsible
22 individual notice filed under Subsection A of this Section if, after investigation,
23 he reasonably determines that the proposed responsible individual has the
24 relevant competence, experience, character, and general fitness considered
25 necessary to ensure that the licensee or applicant will continue to conduct its
26 virtual currency business activity honestly, carefully, and efficiently, and in
27 accordance with the requirements of this Chapter, and any other applicable
28 state and federal laws and regulations.
29 D. If the commissioner determines that the proposed responsible
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1 individual fails to meet the qualifications, standards, and requirements of this
2 Chapter, he shall inform the licensee, applicant, and proposed responsible
3 individual, in writing that the advanced change of control request is denied and
4 state the reasons for denial. The licensee, applicant, or proposed responsible
5 individual, may appeal the denial in accordance with R.S. 6:1387(C).
6 §1386. Required documents; securities Surety bond; tangible net worth
7 A.(1) Before a license is issued pursuant to the provisions of this Chapter, an
8 applicant shall submit a surety bond in the amount of one hundred thousand dollars
9 to the department that secures the applicant's faithful performance of its duties
10 pursuant to the provisions of this Chapter or in an amount the department office
11 specifies based on the nature and extent of risks in the applicant's virtual currency
12 business model plan.
13 (2)(a) The licensee shall maintain or increase the minimum amount of
14 security the surety bond to reflect the dollar amount of all licensed money
15 transmission virtual currency business activity in this state in the preceding
16 calendar year in accordance with the provisions of this Paragraph. A licensee may
17 decrease its security in accordance with the provisions of this Paragraph if the
18 security required is less than the amount of security on file with the department.
19 Dollar Amount of Virtual Currency Business ActivitySecurity Minimum Surety
20 Bond Amount Required
21 $0 to $5,000,000 $ 100,000
22 $5,000,000.01 to $10,000,000 $ 200,000
23 $10,000,000.01 to $15,000,000 $ 300,000
24 $15,000,000.01 to $20,000,000 $ 400,000
25 $20,000,000.01 to $25,000,000 $ 500,000
26 $25,000,000.01 to $30,000,000 $ 600,000
27 $30,000,000.01 to $35,000,000 $ 700,000
28 $35,000,000.01 to $40,000,000 $ 800,000
29 $40,000,000.01 to $45,000,000 $ 900,000
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1 Over $45,000,000 $1,000,000
2 (b) Security shall be in a form satisfactory to the department and payable to
3 the state for the benefit of any claimant against the licensee to secure the faithful
4 performance of the obligations of the licensee with respect to money transmission.
5 (c) The aggregate liability on a surety bond may not exceed the principal sum
6 of the bond. A claimant against a licensee may maintain an action on the bond, or the
7 department may maintain an action on behalf of the claimant.
8 (d) A surety bond shall cover claims for as long as the department specifies,
9 but for at least five years after the licensee ceases to provide money services in this
10 state. However, the department may permit the amount of security to be reduced or
11 eliminated before the expiration of that time to the extent the amount of the licensee's
12 obligations outstanding in this state is reduced. The department may permit a
13 licensee to substitute another form of security acceptable to the department for the
14 security effective at the time the licensee ceases to provide money services in this
15 state.
16 (e) The department office may increase the amount of security the surety
17 bond required to a maximum of seven million dollars.
18 (c) The surety bond shall be issued by an entity authorized to sell
19 insurance in the state in a form satisfactory to the commissioner and payable
20 to the office, for the benefit of any claimant against the licensee to secure the
21 faithful performance of the obligations and duties of the licensee with respect
22 to virtual currency business activities, with, or on behalf of, residents of this
23 state, and the payment of required but unpaid fee amounts due to the office, and
24 assessed but unpaid civil money penalties.
25 (d) The aggregate liability on a surety bond shall not exceed the principal
26 sum of the bond. A claimant against a licensee may maintain an action on the
27 bond.
28 (e) A surety bond shall cover claims for as long as the office specifies, but for
29 at least five years after the licensee ceases to engage in virtual currency business
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1 activities in this state. However, the commissioner may permit the amount of the
2 surety bond to be reduced or eliminated before the expiration of that time to the
3 extent the amount of the licensee's obligations outstanding in this state is reduced.
4 (3) Security deposited pursuant to this Subsection shall cover claims for the
5 period the department specifies by rule and for an additional period the department
6 specifies after the licensee ceases to engage in virtual currency business activity with
7 or on behalf of a resident.
8 B.(1)In addition to the security surety bond required pursuant to Subsection
9 A of this Section, a licensee and a registrant, at the time of the application for a
10 license pursuant to the provisions of this Chapter or filing of a registration, shall
11 submit to the department office evidence of and maintain at all times a tangible net
12 worth of the greater of one hundred thousand dollars or three percent of total assets
13 for the first one hundred million dollars, two percent of additional assets for one
14 hundred million to one billion dollars, and one-half percent of additional assets
15 for over one billion dollars.
16 (2) If a licensee materially violates any provision of this Chapter, or any
17 rule or regulation promulgated by the office, or any order issued by the
18 commissioner pursuant to this Chapter, the commissioner may, at any time,
19 require a licensee to increase its tangible net worth required to be maintained
20 pursuant to this Section. The licensee shall submit to the commissioner evidence
21 that it has the required additional tangible net worth not later than thirty days
22 after the licensee is notified in writing of the required increase.
23 (3) In determining the required additional tangible net worth, the
24 commissioner may consider a variety of factors, including but not limited to the
25 following:
26 (a) The actual and projected volume of the licensee's virtual currency
27 business activity in this state.
28 (b) Whether the licensee is currently licensed or regulated by the
29 commissioner under the Sale of Checks and Money Transmission Act, R.S.
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1 6:1031 et seq. and whether the licensee is in good standing in that capacity.
2 (c) The amount of leverage employed by the licensee.
3 (d) The liquidity position of the licensee.
4 (e) The products or services offered by the licensee.
5 C. A licensee or registrant may include in its calculation of net worth virtual
6 currency, measured by the average value of the virtual currency in United States
7 dollar equivalent over the prior six months, other than the virtual currency over
8 which it has control for a resident entitled to the protections provided in R.S. 10:8-
9 501 et seq.
10 D. For good cause, the department may require a licensee or registrant to
11 increase the net worth or reserves required under this Section. The licensee or
12 registrant shall submit to the department evidence that it has the additional net worth
13 or reserves not later than fifteen days after the licensee or registrant receives notice.
14 §1386.1. Meeting tangible net worth requirements
15 A. In satisfying the licensure and renewal requirements provided in this
16 Chapter, tangible net worth shall be clearly evidenced by filing or submitting
17 a current, audited financial statement to the commissioner through the NMLS
18 that is prepared in accordance with the general acceptable accounting
19 principles standards (GAAP) or consistent with the Public Company
20 Accounting Oversight Board (PCAOB) standards.
21 B. All licensing requirements, including renewals, relative to tangible net
22 worth shall be evidenced at the time of initial application for licensure and
23 renewal, maintained at all times during licensure and renewal, and reported
24 annually to the commissioner in compliance with Subsection A of this Section
25 and in accordance with R.S. 6:1388.
26 §1386.2. Protection of resident assets
27 A. To the extent a licensee stores, holds, or maintains custody or control
28 of virtual currency on behalf of a resident, the licensee shall hold virtual
29 currency of the same type and amount as that which is owed or obligated to the
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1 resident.
2 B. Each licensee is prohibited from selling, transferring, assigning,
3 lending, hypothecating, pledging, or otherwise using or encumbering assets,
4 including virtual currency, stored, held, or maintained by, or under the custody
5 or control of such licensee on behalf of a resident, except for the sale, transfer,
6 or assignment of such assets at the direction of the resident.
7 C. Each licensee is prohibited from commingling assets belonging to a
8 resident with assets belonging to a licensee, using the resident's assets to secure
9 or guarantee a transaction other than a transaction involving, or on behalf of,
10 the resident's contributing assets, maintaining the resident's assets in such a
11 manner that the resident may be unable to fully withdraw their assets, and
12 investing in such a manner that would not allow for sufficient assets, including
13 virtual currency, to fulfill all outstanding obligations to the resident.
14 D. In order to ensure compliance with the requirements of Subsection C
15 of this Section, a licensee may include the amount of his assets, in the same
16 account with a resident's assets, solely for the purpose of facilitating, selling,
17 transferring, assigning, lending, hypothecating, pledging, or using or
18 encumbering assets, including virtual currency, stored, held, maintained by or
19 under the custody or control of such licensee on behalf of a resident, and
20 operational needs related to such virtual currency business activities, provided
21 that the assets of the licensee shall be deemed resident assets and the licensee
22 may only withdraw or assert a claim on that amount to the extent that amount
23 exceeds that amount of resident assets held by or for a resident.
24 §1387. Issuance of license; appeal
25 A. Absent good cause, the department shall issue a license to an applicant if
26 the applicant complies with the provisions of this Chapter and pays the costs of the
27 investigation pursuant to R.S. 6:1385(G) and the initial licensee fee pursuant to R.S.
28 6:1385(A)(2) in an amount specified by the department.
29 No license shall be issued unless the commissioner has made a
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1 determination that the applicant has met the licensing requirements pursuant
2 to this Chapter, including all requirements of R.S. 6:1385 and 1386.
3 B. An applicant may appeal a denial of its application pursuant to R.S.
4 6:1385, in accordance with the Administrative Procedure Act, not later than thirty
5 days after the department office notifies the applicant of the denial or the application
6 is deemed denied.
7 C. In the case of a denial of an advanced change of control notice, or
8 denial of an advanced change of responsible individual notice, pursuant to
9 either R.S. 6:1385.1 or 1385.2, in accordance with the Administrative Procedure
10 Act, the applicant or licensee, may appeal the denial not later than thirty days
11 after the office notifies the applicant or licensee of the denial of the advanced
12 change of control notice, or the denial of an advanced change of responsible
13 individual notice, or in either case, the change is deemed denied.
14 §1388. Renewal of license; procedure; denial
15 A. Subject to Subsection G of this Section, not later than fifteen days before
16 the anniversary date of issuance of a license pursuant to the provisions of this
17 Chapter, a licensee may apply for renewal of the license by paying a renewal fee
18 determined by the department, not to exceed the reasonable costs of regulation, and
19 submitting to the department a renewal report pursuant to Subsection B of this
20 Section.
21 (1) Each person licensed as a virtual currency business activity licensee
22 shall submit an annual license renewal application on or before December
23 thirty-first of each year in a manner and form prescribed by the commissioner
24 and submit to the commissioner a renewal report pursuant to Subsection C of
25 this Section, provided the person is not issued a new license from November
26 first to December thirty-first of that year. A virtual currency business activity
27 license issued during this time period will expire on December thirty-first of the
28 following calendar year.
29 (2) An annual renewal application shall be accompanied by the required
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1 annual license renewal and investigation fees, pursuant to the rules and
2 regulations promulgated by the commissioner, as required pursuant to
3 Subsection F of this Section. An annual license renewal application submitted
4 after December thirty-first and before March first of the following year shall be
5 charged an annual license renewal late fee pursuant to the rules and regulations
6 promulgated by the commissioner, in addition to the annual license renewal and
7 investigation fees.
8 B.(1) An annual licensee renewal application that is timely submitted on
9 or before the license expiration date shall remain in force and effect until such
10 application is approved or denied by the commissioner. Nothing in this Section
11 shall preclude the commissioner from implementing any administrative or
12 enforcement action authorized by this Title for violations of this Chapter or for
13 material misrepresentation, that may have occurred prior to the renewal date
14 of a license.
15 (2) If the renewal application is submitted timely on or before December
16 thirty-first, the license shall remain in force and effect until the renewal
17 application is ether approved or denied by the commissioner. Nothing in this
18 Paragraph shall preclude the commissioner from implementing any
19 administrative or enforcement action authorized by this Title for violations of
20 this Chapter or for any material representation that may have occurred prior
21 to the renewal date of a license.
22 (3) If the commissioner has not received the renewal fee and late fee
23 before March first, the license to engage in virtual currency business activities
24 shall expire without hearing or notification, and the license shall not be
25 reinstated. However, the person whose license has expired may apply for a new
26 licence, subject to all new license application requirements of this Chapter, and
27 prior to such application being complete and eligible for approval
28 consideration, shall be subject to and shall pay unlicensed activity civil money
29 penalties in an amount determined by the commissioner.
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1 C.(1) The renewal report required by Subsection A of this Section shall be
2 submitted in a form and medium prescribed by the department office.
3 (2) The report shall contain all of the following:
4 (a) Either a A copy of the licensee's most recent reviewed annual financial
5 statement, if the licensee's virtual currency business activity in this state was less
6 than an amount, to be determined by the department, for the fiscal year ending before
7 the anniversary date of issuance of its license under this Chapter, or audited annual
8 financial statement if the licensee's virtual currency business activity in this state
9 amounted to more than the amount determined by the department for the fiscal year
10 ending before the anniversary date.
11 (b) If a person other than an individual has control of the licensee, a copy of
12 either of the following:
13 (i) The person's most recent reviewed current annual financial statement if
14 the person's gross revenue was less than an amount, to be determined by the
15 department, in the previous fiscal year, measured as of the anniversary date of
16 issuance of its license pursuant to the provisions of this Chapter.
17 (ii) The person's most recent current audited consolidated annual financial
18 statement if the person's gross revenue was more than an amount, to be determined
19 by the department in the previous fiscal year, measured as of the anniversary date of
20 issuance of its license pursuant to the provisions of this Chapter.
21 (c) A description of any of the following:
22 (i) Material change in the financial condition of the licensee.
23 (ii) Material litigation involving the licensee or an executive officer or
24 responsible individual of the licensee.
25 (iii) License suspension or revocation proceeding commenced, or other action
26 taken, involving a license to conduct virtual currency business activity issued by
27 another state on which reciprocal licensing is based.
28 (iv) Federal or state investigation involving the licensee.
29 (v) Data security breach involving the licensee.
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1 (d) The number of virtual currency business activity transactions with, or on
2 behalf of, residents for the period since, subject to Subsection G of this Section, the
3 later of the date the license was issued or the date the last renewal report was
4 submitted as of December thirty-first of the preceding calendar year and as of
5 September thirtieth of the current year.
6 (e)(i) The amount of United States dollar equivalent of virtual currency in the
7 control of the licensee at, subject to Subsection G of this Section, the end of the last
8 month that ends not later than thirty days before the date of the renewal report as of
9 December thirty-first of the preceding calendar year and as of September
10 thirtieth of the current year.
11 (ii) The total number of residents for whom the licensee had control of United
12 States dollar equivalent of virtual currency on that date as of December thirty-first
13 of the preceding calendar year and as of September thirtieth of the current
14 year.
15 (f) Evidence that the licensee continues to satisfy the requirements provided
16 for in R.S. 6:1386.
17 (g) A list of each location where the licensee operates its virtual currency
18 business activity.
19 (h) The name, United States Postal Service address, and telephone number
20 of each person that manages a server used by the licensee in conducting its virtual
21 currency business activity with or on behalf of a resident.
22 C.(1)D. If In addition to the provisions of Paragraph (B)(2) of this
23 Section, if a licensee does not timely comply with Subsection A of this Section, the
24 department office may use any enforcement measure action provided for in R.S.
25 6:1392.
26 (2) No notice or hearing shall be required for a suspension or revocation of
27 a license pursuant to the provisions of this Chapter for failure to pay a renewal fee
28 or file a renewal report.
29 D. If the department suspends or revokes a license pursuant to the provisions
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1 of this Chapter for noncompliance with Subsection A of this Section, the department
2 may end the suspension or rescind the revocation and notify the licensee of the action
3 if, subject to Subsection G of this Subsection, not later than twenty days after the
4 license was suspended or revoked, the licensee files a renewal report and pays a
5 renewal fee and pays any penalty assessed by the department.
6 E. The department shall give prompt notice to a licensee of the lifting of a
7 suspension or rescission of a revocation after the licensee complies with Subsection
8 D of this Section.
9 F. Suspension or revocation Expiration of a license pursuant to the
10 provisions of this Section shall not invalidate a transfer or exchange of virtual
11 currency for, or on behalf of, a resident made during the such expiration suspension
12 or revocation and shall not insulate the licensee from liability pursuant to the
13 provisions of this Chapter, nor from other enforcement action as provided for in
14 Subsection D of this Section.
15 G. For good cause, the department may extend a period of time provided for
16 in this Section.
17 H. A licensee that does not comply with the provisions of this Section shall
18 cease operations with, or on behalf of, a resident on or before the anniversary date
19 of issuance of its license pursuant to the provisions of this Chapter.
20 I.F. A licensee shall pay the reasonable and necessary costs of the
21 department's office's investigation under this Section.
22 §1388.1. Quarterly financial reports
23 A. Each licencee shall submit, through the NMLS, quarterly financial
24 reports, including transactional information, within forty-five days following
25 the close of each calendar quarter, in the form and containing such information,
26 as the commissioner shall prescribe, including both of the following:
27 (1) A statement of the financial condition of the licensee, including a
28 balance sheet and income sheet, along with transactional information, all in
29 United States currency, relating to virtual currency balances held on behalf of
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1 residents, virtual currency balances not held on behalf of residents, and other
2 investments.
3 (2) A certification of the financial reports by an officer or member of the
4 board of directors, or an equivalent governing body of the licensee, attesting to
5 the truth and correctness of such reports.
6 B. In addition, each licensee shall submit special reports to the
7 commissioner, at such times and in such form, as the commissioner may
8 require.
9 * * *
10 §1390. Transferability
11 A license or registration issued pursuant to the provisions of this Chapter
12 shall not be transferable or assignable.
13 §1391. Examinations
14 * * *
15 D. The commissioner may do any of the following:
16 (1) Conduct on-site examination or investigation, participate in a joint
17 or concurrent examination or investigation with another state or federal agency
18 or agencies, or examine or investigate the books, records, and accounts used in
19 the business of every licensee.
20 (2) Accept and rely upon an examination report or investigative report
21 of any other state or federal agency.
22 E. Nothing in Subsection D of this Section shall preclude the
23 commissioner from conducting an examination or investigation under
24 applicable provisions of this Chapter, including but not limited to any of the
25 following:
26 (1) Participating in a joint examination or investigation.
27 (2) Participating in a concurrent examination or investigation.
28 (3) Accepting results of an examination or investigation report conducted
29 by any state or federal agency.
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1 F. A joint report or concurrent report accepted by the commissioner
2 pursuant to this Section may be accepted as an official report of the office for
3 purposes of this Chapter.
4 G.(1) To efficiently and effectively enforce the provisions of this Chapter
5 and to minimize regulatory burdens, the commissioner may participate in a
6 multistate examination and investigation process for licensees that hold licenses
7 in this state and other states.
8 (2) As a participant in any mulitistate examination or investigation, the
9 commissioner may, to the extent provided by law, do all of the following:
10 (a) Cooperate, coordinate, and share information with other state
11 regulators of virtual currency business activities.
12 (b) Enter into written cooperation, coordination, or information sharing
13 contracts or agreements with organizations made up of other state
14 governmental regulators of virtual currency business activities.
15 (c) Cooperate, coordinate, and share information with organizations
16 made up of other state governmental regulators of virtual currency business
17 activities, provided that the organizations agree in writing to maintain
18 confidentiality and security of shared information.
19 (3) Nothing in this Section shall constitute a waiver of the commissioner's
20 authority to do any of the following:
21 (a) Conduct any examination or investigation authorized by law.
22 (b) Otherwise take any independent action authorized by law or any rule
23 promulgated in accordance with the Administrative Procedure Act.
24 (c) Enforce compliance of any order issued pursuant to this Chapter.
25 (4) The following shall not constitute a waiver of any examination fee
26 provided pursuant to this Chapter or any rule promulgated in accordance with
27 the Administrative Procedure Act:
28 (a) The commissioner's participation in any joint examination or
29 investigation.
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1 (b) The commissioner's acceptance of an examination or investigative
2 report conducted and prepared by other state or federal regulators of virtual
3 currency business activity.
4 §1391.1. Books, records, and accounts
5 A. Any licensee engaging in virtual currency business activities in this
6 state shall maintain and preserve the books, records, and accounts of its virtual
7 currency business activities, pursuant to R.S. 6:1391, for a period of five years
8 or longer, if required by the commissioner to resolve any examination,
9 investigation, or complaint.
10 B. The books, records, and accounts to be maintained by each licensee
11 shall include all of the following:
12 (1) For each transaction:
13 (a) The amount, date, and precise time of the transaction.
14 (b) Any payment instructions for the transaction.
15 (c) The total amount of fees and charges received and paid to, by, or on
16 behalf of the licensee.
17 (d) The names, account numbers, and physical address of the parties to
18 the transactions, including any customers and account holders of the licensee,
19 who are residents.
20 (2) A general ledger containing all assets, liabilities, ownership equity,
21 income, and expense accounts.
22 (3) Bank statements and bank reconciliation records.
23 (4) Any statement and valuation provided to customers and account
24 holders.
25 (5) Records or minutes of meetings of the board or directors, or an
26 equivalent governing body.
27 (6) Records demonstrating compliance with applicable state and federal
28 anti-money laundering laws, rules, and regulations, including customer and
29 account holder identification and verification documents, records linking
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1 customers and account holders to their respective accounts and balances, and
2 a record of any compliance breaches.
3 (7) Communications and documentation related to investigations of
4 customer and account holder complaints and transaction error resolutions.
5 (8) Any other books, records, and accounts as the commissioner may
6 require.
7 §1391.2. Compliance policies and procedures
8 A. Any licensee engaging in virtual currency business activity in this
9 state shall adopt and implement appropriate compliance policies and
10 procedures, as part of the required books, records, and accounts, as determined
11 by the commissioner by rule, or pursuant to this Chapter.
12 B. The policies and procedures shall be in writing and reviewed and
13 approved by the licensee's board of directors or an equivalent governing body,
14 and include, at a minimum, policies and procedures covering anti-fraud,
15 anti-money laundering, cyber security, privacy, and information security, and
16 such other policies and procedures as may be required by the commissioner by
17 rule, or pursuant to this Chapter.
18 C. Each licensee shall designate a qualified individual, or individuals,
19 that are responsible for coordinating and monitoring compliance with this
20 Section and all other applicable state and federal laws, rules, and regulations.
21 §1392. Enforcement power of the commissioner
22 A. For purposes of this Chapter, "enforcement measure action" means an
23 action to do or actions by the commissioner to enforce the requirements of this
24 Chapter, including any of the following:
25 (1) Suspend or revoke a license or a registration pursuant to the provisions
26 of this Chapter.
27 (2) Order a person to cease and desist from doing virtual currency business
28 activity with, or on behalf of, a resident.
29 (3) Request the court to appoint a receiver for the assets of a person doing
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1 virtual currency business activity with, or on behalf of, a resident.
2 (4) Request the court to issue temporary, preliminary, or permanent
3 injunctive relief against a person doing virtual currency business activity with, or on
4 behalf of, a resident.
5 (5) Assess civil money penalties.
6 (6) Recover on the security surety bond provided pursuant to R.S. 6:1386
7 and initiate a plan to distribute the proceeds for the benefit of a resident injured by
8 a violation of any provision of this Chapter, or law of this state other than this
9 Chapter, which applies to virtual currency business activity with, or on behalf of, a
10 resident.
11 (7) Impose necessary or appropriate conditions on the conduct of virtual
12 currency business activity with, or on behalf of, a resident.
13 B. Any enforcement action pursuant to this Section may be
14 supplemented by the exercise of any other enforcement power by the
15 commissioner, as may be authorized by this Title or by any other Title of the
16 Louisiana Revised Statutes of 1950.
17 §1393. Violations
18 A. The department office may take an enforcement measure action against
19 a licensee, registrant, or person that is neither a licensee nor registrant not a licensee
20 but is engaging in virtual currency business activity with, or on behalf of, a resident
21 in any of the following instances:
22 (1) The licensee, registrant, or person materially violates any provision of this
23 Chapter, a rule adopted or order issued pursuant to any provision of this Chapter, or
24 law of this state other than this Chapter which applies to virtual currency business
25 activity of the violator with, or on behalf of, a resident. violates any of the
26 provisions of this Chapter or any rule or regulation promulgated or any order,
27 including but not limited to a cease and desist order or subpoena, issued
28 pursuant to this Chapter.
29 (2) The licensee, registrant, or person does not cooperate substantially with
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1 an investigation by the department, fails to pay a fee, or fails to submit a report or
2 documentation. violates any provision of a voluntary consent or compliance
3 agreement that has been entered into with the commissioner.
4 (3) The licensee, registrant, or person, in the conduct of its virtual currency
5 business activity with, or on behalf, of a resident, engages in any of the following:
6 (a) An unsafe or unsound act or practice.
7 (b) An unfair or deceptive act or practice.
8 (c) Fraud or intentional misrepresentation.
9 (d) Another dishonest act.
10 (e) Misappropriation of legal tender, virtual currency, or other value held by
11 a fiduciary.
12 (4) An agency of the United States or another state takes an action against the
13 licensee, registrant, or person, which would constitute an enforcement measure if the
14 department had taken the action. The licensee or person does not cooperate
15 substantially with an investigation by the office, fails to pay a fee, or fails to
16 submit a report or documentation.
17 (5) The licensee, registrant, or person is convicted of a crime related to its
18 virtual currency business activity with, or on behalf of, a resident or involving fraud
19 or felonious activity that, as determined by the department, makes the licensee,
20 registrant, or person unsuitable to engage in virtual currency business activity.
21 (6) Any of the following occurs:
22 (a) The licensee, registrant, or person becomes insolvent.
23 (b) The licensee, registrant, or person makes a general assignment for the
24 benefit of its creditors.
25 (c) The licensee, registrant, or person becomes the debtor, alleged debtor,
26 respondent, or person in a similar capacity in a case or other proceeding under any
27 bankruptcy, reorganization, arrangement, readjustment, insolvency, receivership,
28 dissolution, liquidation, or similar law, and does not obtain from the court, within a
29 reasonable time, confirmation of a plan or dismissal of the case or proceeding.
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1 (d) The licensee, registrant, or person applies for, or permits the appointment
2 of, a receiver, trustee, or other agent of a court for itself or for a substantial part of
3 its assets.
4 (7)(6)The licensee, registrant, or person makes has knowingly provided or
5 caused to be provided a material misrepresentation to the department
6 commissioner, any false or fraudulent material fact or any false or fraudulent
7 financial statement, or has suppressed or withheld from the commissioner any
8 information which if submitted by the licensee would have resulted in a denial
9 of the license application.
10 (7) The licensee or person refuses to permit an examination by the
11 commissioner of the books and affairs, or has refused or failed within a
12 reasonable time to furnish any information, or make any report that may be
13 required by the commissioner pursuant to the provisions of this Chapter.
14 (8) The licensee or person fails to maintain records as required by the
15 commissioner after being given written notice to the last address of record and
16 thirty days within which to correct the failure. The commissioner may grant up
17 to two thirty-day extensions within which to correct the recordkeeping violation.
18 (9) The licensee or person continues in office any individual with power
19 to direct the management or policies of a person regulated by this Chapter,
20 including but not limited to any officer, director, or manager, if such individual
21 is convicted of, pleads guilty to, or is found guilty after a plea of nolo contendere
22 of any felony and has been adjudicated guilty in any state, federal, foreign, or
23 military court.
24 (10) The licensee or person violates any provision of a regulatory or
25 prohibitory statute by the government agency responsible for determining such
26 violations.
27 (11) The licensee or person misrepresents material facts or makes a false
28 promise likely to influence, persuade, or induce a resident to engage in virtual
29 currency business activity.
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1 (12) The licensee or person misrepresents or conceals a material fact,
2 term, or condition of a transaction to which he is a party, pertinent to a resident
3 to engage in virtual currency business activity.
4 (13) The licensee or person knowingly engages in any transaction,
5 practice, or course of business, which perpetrates a fraud upon any person in
6 connection with engaging in virtual currency business activity.
7 (14) The licensee or person fails to exchange, transfer, or store, without
8 just cause, any funds in accordance with any agreement connected with a
9 virtual currency business activity transaction.
10 (15) The licensee or person fails to account for or deliver to any person
11 any assets obtained in connection with a virtual currency business activity
12 transaction, including but not limited to legal tender, virtual currency, precious
13 metals, and electronic certificates.
14 (16) The licensee or person fails to pay any fee, civil money penalty, cost
15 or assessment imposed pursuant to this Chapter or by any rule or regulation
16 promulgated in accordance with this Chapter.
17 (17)The licensee or person violates the written restrictions or conditions
18 under which the license was issued.
19 (18) The licensee or person fails, after notice and without lawful excuse,
20 to obey any order or subpoena issued by the commissioner.
21 (19) The commissioner discovers any fact or condition currently exists
22 that, if it had existed at the time of the original application for licensure, would
23 have warranted the denial of the application.
24 B.(1) Notwithstanding any other law to the contrary, and in addition to
25 any other authority conferred upon the commissioner by any other provision
26 of law, the commissioner may, upon discovery, order an immediate suspension
27 of the license of any person licensed pursuant to this Chapter who does any of
28 the following:
29 (a) Fails to maintain a surety bond or fails to meet the tangible net worth
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1 requirements in any manner as provided for pursuant to R.S. 6:1386.
2 (b) Commits material violations pursuant to this Chapter such that, in
3 the opinion of the commissioner, the public safety and welfare demand that
4 emergency action be taken.
5 (c) Submits a payment of any fee for any application, notification,
6 examination, investigation, late fee, or penalty that is returned, declined, denied,
7 or otherwise not paid in full for any reason.
8 (d) Is convicted of a felony that would have prohibited the issuance or
9 renewal of the license.
10 (e) Has his license to engage in virtual currency business activities
11 suspended or revoked in another jurisdiction.
12 (2) A person whose license is suspended under this Subsection shall have
13 thirty days from the date of the order to request a hearing in accordance with
14 the Administrative Procedure Act. Failure to timely request a hearing shall
15 constitute a waiver of all hearing rights regarding the suspension.
16 C. In addition to any other authority conferred upon the commissioner
17 by this Chapter or this Title, the commissioner may issue a cease and desist
18 order, order refunds of any unauthorized portion of any fee, or charge any
19 person who collects in violation of this Chapter, and may impose a civil money
20 penalty as determined by the commissioner by rule upon any person who is
21 found to have violated any of the provisions of this Chapter or any rule or
22 regulation promulgated in accordance with this Chapter. Each separate
23 violation shall subject the person to a civil money penalty and each day the
24 person acts without complying with the provisions of this Chapter, or rules or
25 regulations promulgated in accordance with this Chapter, shall constitute a
26 separate violation.
27 D. The violations listed in this Subsection are nonexclusive, and are in
28 addition to and exist independent of, any violations set forth in other provisions
29 of this Chapter. Failure to comply with any provisions set forth in this Chapter
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1 may serve as a basis for any enforcement or other action authorized to the
2 commissioner under this Title. It shall be a violation of this Chapter for a
3 person engaged in virtual currency business activity pursuant to this Chapter
4 to do any of the following:
5 (1) Directly or indirectly employ any scheme, device, or artifice to
6 defraud or mislead any resident, when such person knew or should have known
7 that such scheme, device, or artifice was defrauding or misleading.
8 (2) Engage in any unfair or deceptive practice toward any resident.
9 (3) Fail to comply with this Chapter, any rules or regulations
10 promulgated pursuant to this Chapter, the laws of this state, or federal law,
11 including the rules and regulations issued thereunder, applicable to any virtual
12 currency business activity.
13 (4) Negligently make any false statement, or knowingly and willfully
14 make any omission or material fact, in connection with any information or
15 reports filed with a state of federal government agency or the NMLS, or in
16 connection with any investigation conducted by the commissioner or any other
17 state or federal government agency.
18 (5) Fail to truthfully account for any assets in connection with any virtual
19 currency business activity with, or on behalf of, a resident.
20 E. The commissioner may report apparent violations to other
21 appropriate state and federal regulators, the NMLS, federal law enforcement
22 agencies, the attorney general, or to the district attorney of the appropriate
23 parish, who may institute any proceeding as they consider appropriate.
24 F. Advisory opinions and interpretations of the office shall not be
25 considered rules requiring compliance with the rulemaking process of the
26 Administrative Procedure Act. The commissioner and the employees of the
27 office shall have no liability to any person with respect to an advisory opinion
28 or interpretation issued in connection with this Chapter.
29 G. All of the grounds for enforcement action listed in Subsection A of
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1 this Section are violations of this Chapter and may serve as the basis for any
2 other enforcement action provided to the commissioner by this Title.
3 H. The commissioner may share information about any person who is
4 licensed or required to be licensed pursuant to this Chapter with any state or
5 federal agency also having jurisdiction over the virtual currency business
6 activities of that person.
7 I. Any licensee whose license issued pursuant to this Chapter has been
8 revoked for any reason may not reapply for a license until at least five years
9 have elapsed from the date of the order of revocation, unless the commissioner,
10 in his sole discretion, prescribes an earlier or later date. For purposes of this
11 Subsection, the order shall be considered to be commissioner's notification of
12 revocation of the license. For the purpose of this Subsection, the term "licensee"
13 shall include the licensee, owners of ten percent or more, and its members if the
14 licensee is a limited liability company, its partners if the licensee is a
15 partnership, its officers and directors if the licensee is a corporation, and any
16 other person determined by the commissioner, in his sole discretion, to be
17 closely related to the licensee.
18 §1393.1. Required disclosures
19 A. Any licensee engaging in virtual currency business activity as defined
20 in R.S. 6:1382(25) in this state shall provide accurate and appropriate
21 disclosures to residents as it relates to the exchanging, transferring, or storing
22 of virtual currency through the licensee. Failure to provide the disclosures
23 required by this Section shall be a violation of this Chapter.
24 B. Disclosures shall be made separately from any other information
25 provided by the licensee to a resident and shall be clear, conspicuous, and in
26 legible writing in the English language.
27 C. Without limitation, the commissioner may require additional
28 disclosures by rule or regulation as considered necessary and appropriate.
29 D. The disclosures shall describe all material risks associated with the
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1 licensee's virtual currency products, services, and activities, and virtual
2 currency generally, including but not limited to the following:
3 (1) Virtual currency is not legal tender in the United States, is not backed
4 by the United States government, and accounts and value balances are not
5 subject to Federal Deposit Insurance Corporation or Securities Investor
6 Protection Corporation protections.
7 (2) Legislative and regulatory changes or actions at the state, federal, or
8 international level may adversely affect the value of virtual currency.
9 (3) Transaction in virtual currency may be irreversible, and accordingly,
10 losses due to fraudulent or accidental transactions may not be recoverable.
11 (4) Some virtual currency transactions may be immediately effective
12 when recorded on a public ledger, which is not necessarily the date or time that
13 the resident initiates the transaction.
14 (5) The value of virtual currency may be derived from the continued
15 willingness of market participants to exchange legal tender for virtual currency,
16 which may result in the potential for permanent and total loss of value of a
17 particular virtual currency, should the market for the virtual currency decline
18 or collapse for an extended period of time.
19 (6) Any surety bond required by this Chapter for the benefit of residents
20 may not be sufficient to cover all losses incurred by the residents.
21 (7) The residents should perform research before purchasing or investing
22 in virtual currency.
23 (8) The circumstances under which the licensee will, in the ordinary
24 course of business, disclose the resident's financial and account information to
25 third parties.
26 E. When opening a new account, and prior to entering into an initial
27 transaction with, for, or on behalf of, a resident, each licensee shall disclose in
28 clear, conspicuous, and legible writing in the English language, all relevant
29 terms and conditions associated with its virtual currency products, services, and
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1 activities and virtual currency generally, including but not limited to the
2 following:
3 (1) The resident's liability for unauthorized virtual currency
4 transactions.
5 (2) The resident's right to stop payment of a preauthorized virtual
6 currency transfer and the procedure to initiate the stop payment order.
7 (3) Under what circumstances the licensee will, absent a court or
8 government order, disclose information concerning the resident's account to
9 third parties.
10 (4) The resident's right to receive periodic account statements and
11 valuations from the licensee.
12 (5) The resident's right to receive a receipt, trade ticket, or other
13 evidence of a transaction.
14 (6) Any other disclosures as are customarily given in connection with the
15 opening of resident accounts.
16 F. Prior to each transaction in virtual currency with, for, or on behalf of,
17 a resident, each licensee shall furnish to each such customer or account holder
18 a written disclosure in clear, conspicuous, and legible writing in the English
19 language, containing the terms and conditions of the transaction, including but
20 not limited to the following:
21 (1) The amount of the transaction.
22 (2) Any fees, expenses, and charges borne by the resident, including
23 applicable exchange rates.
24 (3) The type of the virtual currency transaction.
25 (4) A notice that once executed the transaction shall not be reversible.
26 G. Each licensee shall ensure that all disclosures required in this Section
27 are acknowledged as received by the resident.
28 H. Upon completion of any transaction, each licensee shall provide to the
29 resident a receipt containing all of the following information:
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1 (1) The name and contact information of the licensee, to answer
2 questions and register complaints.
3 (2) The type, value, date, and precise time of the transaction.
4 (3) The fee charged.
5 (4) The exchange rate, if applicable.
6 (5) A statement of the liability of the licensee for nondelivery or delayed
7 delivery.
8 (6) A statement of the refund policy of the licensee.
9 (7) Any additional information the commissioner may require by rule.
10 I. Each licensee shall make available to the office, upon request, the form
11 of the receipts it is required to provide to a resident in accordance with
12 Subsection H of this Section.
13 §1394. Implementation
14 A. The department commissioner shall adopt rules, in accordance with the
15 Administrative Procedure Act, to implement and enforce the provisions of this
16 Chapter and may issue guidance as appropriate.
17 B. In addition to any other powers the commissioner may be authorized
18 to exercise pursuant to this Title, the commissioner may adopt and implement
19 emergency rules as he considers necessary and appropriate to prevent or
20 terminate any condition he reasonably considers to create an emergency relative
21 to a particular licensee or to licenses in general, including but not limited to
22 suspending the issuance or renewal of licenses, or suspending some or all virtual
23 currency business activities in this state.
24 C. In order to carry out the purposes of this Chapter, the commissioner
25 may do all of the following:
26 (1) Enter into agreements or relationships with other government
27 officials or federal and state regulatory agencies and regulatory associations in
28 order to improve efficiencies and reduce regulatory burden by standardizing
29 methods or procedures, and sharing records or related information obtained
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1 under this Chapter.
2 (2) Use, hire, contract, or employ analytical systems, methods, or
3 software in examinations or investigations pursuant to this Chapter.
4 (3) Consider, accept, and rely upon licensing, examination, or
5 investigative reports prepared by other government agencies or officials, within
6 or outside the state.
7 (4) Consider, accept, and rely upon audit reports prepared by an
8 independent certified public accountant or other qualified third-party auditor
9 for any person subject to the provisions of this Chapter and incorporate all, or
10 part of such audit reports, in the office's report of examination or investigation.
11 Section 2. R.S. 6:1383(C)(5)(c) and (7) and (D) and 1389 are hereby repealed.
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Xavier I. Alexander.
DIGEST
SB 185 Reengrossed 2023 Regular Session Reese
Present law provides relative to the Virtual Currency Business Act and provides for the
regulation of virtual currency business and defines certain terms.
Proposed law defines additional terms, including "acting in concert", "affiliate",
"blockchain", "coin", "commissioner", "mining", "national mulitistate licensing system and
registry", "office", "tangible net worth", "token", "unsafe or unsound act or practice", and
"virtual currency network".
Present law provides for the licensure and regulation of a person who engages in or holds
itself out as engaging in virtual currency business activity with, or on behalf of, a resident.
Present law describes activities for which present law is not applicable. Allows the office of
financial institutions (OFI) to determine that a person or class of persons, given facts
particular to that person, shall be exempt from the provisions of present law.
Proposed law retains present law and provides that activities of proposed law are applicable
to a person who provides virtual currency to a person exempt under this Chapter, that has
no agreement or relationship with a resident that is an end user of virtual currency and a
person whose virtual currency business activity, with or on behalf of a resident, is valued at
$5,000 or less on an annual basis. Further, proposed law deletes the requirement that allows
the OFI to determine that a person or class of persons, given facts particular to that person,
shall be exempt from the provisions of this Chapter.
Present law requires a person engaging in virtual currency business activity, or holding itself
out as being able to engage in virtual currency business activity, with or on behalf of a
resident, to be licensed by OFI and establishes the criteria for licensure.
Proposed law retains present law and adds as a requirement for licensure a copy of the
applicant's business plan, which includes a three-year financial pro forma, the anticipated
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volume of virtual currency business activities in this state, the anticipated number of virtual
currency locations, including kiosk machines, and evidence of the surety bond, and current
and continued maintenance of the tangible net worth.
Proposed law adds as a requirement for licensure that a person who has resided outside of
the United States at any time in the last 10 years to provide an investigative background
report prepared by an independent search firm, which includes the person's criminal records,
employment history, media history, and a financial service-related regulator history.
Present law provides for the acceptance or denial of an application for licensure within 30
days of completing an application.
Proposed law provides for the acceptance or denial of an application for licensure within 60
days of completing an application.
Proposed law provides that no license shall be issued unless the applicant provides a surety
bond, evidence of tangible net worth, pay all cost and fees, and notice is issued by the
commissioner of its decision to approve or conditionally approve the application.
Proposed law provides procedures, information, and notice when change of control of a
licensee or an applicant is contemplated by any person or persons acting in concert.
Proposed law provides procedures for approval of an advanced change of responsible
individual of a licensee or applicant.
Present law requires the licensee to submit a surety bond prior to the issuance of a license
in the amount of $100,000, tangible net worth of the greater of $100,000, or 3% of total
assets.
Proposed law retains present law and further adds that prior to issuance of a license a
licensee shall submit a tangible net worth of greater of $100,000 or 3% of total assets for the
first $100,000,000, 2% of additional assets for $100,000,000 to $1,000,000,000, and ½
percent of additional assets for over $1,000,000,000.
Proposed law provides that the commissioner may use the following factors in determining
additional tangible net worth:
(1)The actual and projected volume of the licensee's virtual currency business activity
in the state.
(2)Whether the licensee is currently licensed or regulated by the commissioner in this
state and is in good standing.
(3)The amount of leverage employed by the licensee.
(4)The liquidity position of the licensee.
(5)The products or services offered by the licensee.
Proposed law requires that tangible net worth shall be clearly evidenced by filing or
submitting a current audited financial statement to the commissioner. Provides that all
license requirements relative to tangible net worth shall be evidenced at the time of initial
application, maintained at all times during licensure, and reported annually to the
commissioner.
Proposed law provides that a licensee who stores, holds, or maintains custody or control of
virtual currency for a resident, such licensee shall hold virtual currency of the same type and
of the same amount. Prohibits a licensee from selling, transferring, assigning, lending,
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hypothecating, pledging, using, or encumbering virtual currency except for the sale, transfer,
or assignment of the virtual currency at the direction of the resident. Allows the licensee to
commingle the resident virtual currency with the licensee's virtual currency, provided the
licensee's assets are deemed resident assets and the licensee may only withdraw or assert a
claim on that amount to the extent that the amount exceeds that amount of resident assets
held by or for a resident.
Present law provides for the appeal of a denial of an application for licensure and the
renewal of a license.
Proposed law provides that no license shall be issued unless the commissioner has made a
determination that an applicant has met licensing requirements. Provides that in a case of
denial of an advanced change of control notice or denial of an advanced change of
responsible individual notice, the applicant can appeal the denial not later than 30 days after
the office notifies the applicant or licensee of the denial.
Proposed law provides that each person licensed as a virtual currency business activity
licensee shall submit an annual license renewal application on or before December 31st of
each year, accompanied by all fees. Further provides that any license renewal application
submitted after December 31st and before March first of the following year, shall be charged
an annual licensee renewal late fee. An annual licensee renewal application that is timely
submitted on or before the expiration date shall remain in force and effect until approved or
denied by the commissioner.
Present law requires quarterly financial reports.
Proposed law retains the requirements of quarterly financial reports.
Present law provides for the examination of books, records, and accounts of its virtual
currency business activities as the commissioner may reasonably require in order to
determine whether the person is complying with present law.
Proposed law retains present law and further provides that the examination can be conducted
on-site, or concurrent with another state or federal agency.
Proposed law provides that a licensee engaging in virtual currency business activities shall
maintain and preserve books, records, and accounts of its virtual currency business activities
for a period of five years or longer, if required by the commissioner.
Proposed law provides that all books, records, and accounts that are maintained by the
licensee shall have specific requirements.
Proposed law provides that licensees engaged in virtual currency business activity in the
state shall adopt and implement compliance policies and procedures, in writing, with
minimum standards in accordance with proposed law. Requires approval of policies and
procedures by the licensee's board of directors or an equivalent governing body.
Present law authorizes the office to enforce the provisions of present law through certain
actions and provides for penalties.
Proposed law retains present law and further provides that the enforcement actions may be
supplemented by the exercise of any other enforcement power by the commissioner as
authorized by present law.
Proposed law provides for suspension of a license for a person who fails to maintain a surety
bond, commits a violation that demands emergency action be taken, submits a fee that is
returned or not paid in full, convicted of a felony offense, or has his license to engage in
virtual currency business activities suspended or revoked in another jurisdiction.
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Proposed law requires a licensee engaged in virtual currency business activity in this state
to provide certain accurate and appropriate disclosures, describing all material risks
associated with the licensees virtual currency products, services, and activities and virtual
currency in general, and a failure to do so shall result in a violation.
Present law requires OFI to promulgate administrative rules to implement and enforce
proposed law.
Proposed law retains present law and authorizes the commissioner to adopt emergency rules
as necessary and appropriate to enforce the provisions of the Virtual Currency Business Act.
Effective August 1, 2023.
(Amends R.S. 6:1382, 1384, 1385, 1386, 1387, 1388, 1390, 1392, 1393, 1394; adds R.S.
6:1385.1, 1385.2, 1386.1, 1386.2, 1388.1, 1391(D), (E), (F), and (G), 1391.1, 1391.2,
1393.1; repeals R.S. 6:1383(C)(5)(c) and (7) and (D), and 1389)
Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Commerce, Consumer
Protection, and International Affairs to the original bill
1. Make technical changes.
Senate Floor Amendments to engrossed bill
1. Defines additional terms, including "blockchain", "coin", "mining", "token",
and "virtual currency network".
2. Deletes the term "good cause".
3. Clarifies that virtual currency business activity does not include virtual
currency mining.
4. Change the time for a licensee to file an advanced change of control notice
from 15 days to 30 days, after the licensee learns of the change of control.
5. Change the time for a licensee to report additional tangible net worth, that
may be required in the event of a violation of proposed law, from 15 days to
30 days.
6. Allows the licensee to commingle his assets with resident assets solely for
the purpose of virtual currency business activities, provided that the
licensee's assets are deemed resident assets and the licensee is subject to
withdrawal limitations.
7. Requires a copy of the applicant's audited financial statement for the prior
year.
8. Removes the provision that states an application is deemed denied if the
office does not send the applicant notice of its decision within 61 days of
completion of the application.
9. Make technical changes.
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