Massachusetts Senate Bill S690

Massachusetts 2023-2024 Regular Session

• Introduced: 2/16/23
• Refer: 2/16/23

Caption

Protecting consumers in cryptocurrency exchanges

Impact

The legislation intends to enhance consumer protection by holding virtual currency platforms accountable to state regulations. It sets forth specific requirements for licensing, including compliance policies on anti-fraud and cybersecurity measures. Additionally, it establishes a Virtual Currency Insurance Fund, aimed at providing grants to consumers who suffer financial losses due to failures in cryptocurrency exchanges. This fund will be financed through a 5 percent annual assessment on the gross revenues of registered platforms, which provides a direct financial incentive for these platforms to adhere to state regulations.

Summary

Senate Bill S690, also titled 'An Act Protecting Consumers in Cryptocurrency Exchanges', aims to establish a regulatory framework for virtual currency platforms operating in Massachusetts. The bill mandates that any entity engaging with Massachusetts residents to convert or exchange government currency and virtual currency must register with the state's division of banks. This registration will necessitate the submission of detailed information including business plans, organizational structure, and compliance policies to ensure that these platforms are operating transparently and responsibly.

Contention

However, the proposal is not without contention. Critics argue that imposing such regulatory requirements could stifle innovation within the burgeoning cryptocurrency industry. There are concerns that the licensing process may create barriers to entry for new businesses looking to offer virtual currency services. Additionally, there are debates over the adequacy of consumer protections being proposed, with some advocacy groups suggesting that the bill does not go far enough in addressing potential risks associated with virtual currency trading, such as volatility and the risk of fraud.