Massachusetts 2023-2024 Regular Session

Massachusetts Senate Bill S690 Compare Versions

Only one version of the bill is available at this time.

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1	1	1 of 1
2	2	SENATE DOCKET, NO. 1709 FILED ON: 1/19/2023
3	3	SENATE . . . . . . . . . . . . . . No. 690
4	4	The Commonwealth of Massachusetts
5	5	_________________
6	6	PRESENTED BY:
7	7	Susan L. Moran
8	8	_________________
9	9	To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
10	10	Court assembled:
11	11	The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:
12	12	An Act protecting consumers in cryptocurrency exchanges.
13	13	_______________
14	14	PETITION OF:
15	15	NAME:DISTRICT/ADDRESS :Susan L. MoranPlymouth and Barnstable 1 of 12
16	16	SENATE DOCKET, NO. 1709 FILED ON: 1/19/2023
17	17	SENATE . . . . . . . . . . . . . . No. 690
18	18	By Ms. Moran, a petition (accompanied by bill, Senate, No. 690) of Susan L. Moran for
19	19	legislation to protect consumers in cryptocurrency exchanges. Financial Services.
20	20	The Commonwealth of Massachusetts
21	21	_______________
22	22	In the One Hundred and Ninety-Third General Court
23	23	(2023-2024)
24	24	_______________
25	25	An Act protecting consumers in cryptocurrency exchanges.
26	26	Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority
27	27	of the same, as follows:
28	28	1 SECTION 1. The General Laws are hereby amended by inserting, after chapter 167J, the
29	29	2following chapter:-
30	30	3 CHAPTER 167K. LICENSING OF VIRTUAL CURRENCY EXCHANGES
31	31	4 Section 1. Definitions
32	32	5 For the purposes of this chapter, the following words shall have the following meanings:
33	33	6 “Commissioner”, the commissioner of banks.
34	34	7 “Division”, the division of banks.
35	35	8 “Virtual Currency Platform”, a person or entity that operates a digital platform that offers
36	36	9any of the following services to consumers:
37	37	10 (a) the conversion or exchange of government currency into virtual currency; 2 of 12
38	38	11 (b) the conversion or exchange of virtual currency into government currency; or
39	39	12 (c) the conversion or exchange of one form or virtual currency into another form of
40	40	13virtual currency.
41	41	14 A virtual currency platform shall not be construed to mean any person or entity that
42	42	15accepts virtual currency as a form of payment for any type of goods not defined as virtual
43	43	16currency or government currency.
44	44	17 “Government currency”, government-issued currency that is designated as legal tender in
45	45	18its country of issuance through government decree, regulation or law.
46	46	19 “Massachusetts customer”, a person who uses a virtual currency exchange service whose
47	47	20information on record with or available to said exchange service indicates a Massachusetts home
48	48	21address, a Massachusetts mailing address, or an internet protocol address connected with a
49	49	22Massachusetts location.
50	50	23 “Principal beneficiary”, any person entitled to ten per cent or more of the benefits of a
51	51	24trust.
52	52	25 “Principal officer”, an executive officer of an entity, including the chief executive,
53	53	26financial, operating, and compliance officers, president, managing partner, general partner,
54	54	27controlling partner and trustee, as applicable.
55	55	28 “Principal stockholder”, any person that directly or indirectly owns, controls or holds
56	56	29with power to vote ten per cent or more of any class of outstanding capital stock of a corporate
57	57	30entity or possesses the power to direct or cause the direction of the management or policies of the
58	58	31entity. 3 of 12
59	59	32 “Qualified trust company”, a bank, trust company, bank holding company, credit union,
60	60	33building or loan association, savings or loan association, savings bank or mutual bank organized
61	61	34under the laws of any state or the United States, provided such bank, trust company, bank
62	62	35holding company, credit union, building or loan association, savings or loan association, savings
63	63	36bank or mutual bank organized under the laws of any state or the United States does not issue or
64	64	37sell any payment instrument through an authorized delegate who is not a bank, trust company,
65	65	38bank holding company, credit union, building or loan association, savings or loan association,
66	66	39savings bank or mutual bank.
67	67	40 “Virtual currency,” any type of digital unit that is used as a medium of exchange or a
68	68	41form of digitally stored value or that is incorporated into payment system technology. Virtual
69	69	42currency shall be construed to include digital units of exchange that (a) have a centralized
70	70	43repository or administrator; (b) are decentralized and have no centralized repository or
71	71	44administrator; or (c) may be created or obtained by computing or manufacturing effort. Virtual
72	72	45currency shall not be construed to include digital units that are used (a) solely within online
73	73	46gaming platforms with no market or application outside such gaming platforms, or (b)
74	74	47exclusively as part of a consumer affinity or rewards program, and can be applied solely as
75	75	48payment for purchases with the issuer or other designated merchants, but cannot be converted
76	76	49into or redeemed for fiat currency.
77	77	50 “Virtual currency business activity”, any one of the following activities:
78	78	51 Storing, holding, or maintaining custody or control of virtual currency on behalf of
79	79	52others;
80	80	53 Buying or selling virtual currency as a customer business; 4 of 12
81	81	54 Performing exchange services as a customer business; and
82	82	55 Controlling or issuing virtual currency.
83	83	56 Section 2. Licensing Process and Requirements
84	84	57 A virtual currency platform engaging with Massachusetts customers shall register with
85	85	58the division of banks:
86	86	59 (a) Such registration shall be in writing, under oath, and completed in a form prescribed
87	87	60by the commissioner. The registration shall include the following:
88	88	61 (1) The name of the registrant, including any business name, the form of organization,
89	89	62and the jurisdiction where the registrant is organized or incorporated;
90	90	63 (2) A list of the registrant's affiliates and an organizational chart illustrating the
91	91	64relationship between and among the registrant and its affiliates;
92	92	65 (3) An organizational chart of the registrant and its management structure, including its
93	93	66principal officers or senior management, indicating lines of authority and the allocation of duties
94	94	67among its principal officers or senior management;
95	95	68 (4) A business plan, including a description of the proposed, current and historical
96	96	69business of the registrant, details on the products and services provided and to be provided, all
97	97	70associated Internet web site addresses, the jurisdictions in which the registrant is engaged in
98	98	71business, the principal place of business, the primary markets of operation, the projected
99	99	72customer base, any specific marketing targets and the physical address of any place of operation
100	100	73in the state; and 5 of 12
101	101	74 (5) A registration fee as described in section 3.
102	102	75 Section 3. Registration fee
103	103	76 A virtual currency platform engaging with Massachusetts customers shall pay annually
104	104	77an assessment equal to 5 per cent of such platform’s gross annual revenues derived from
105	105	78engaging in virtual currency business activity with Massachusetts customers.
106	106	79 All monies generated from the assessment described in this section shall be credited to
107	107	80the Virtual Currency Insurance Fund, as established by section 2RRRRR of chapter 29.
108	108	81 Section 4. Change of information
109	109	82 In the event of any material change in the registration information submitted in
110	110	83accordance with section 2 of this chapter, the registrant shall, within seven days of the change,
111	111	84supplement or amend such registration by completing and submitting a form as prescribed by the
112	112	85commissioner.
113	113	86 Section 5. Compliance policies
114	114	87 Each registrant shall maintain and enforce confidential, written compliance policies,
115	115	88including policies with respect to anti-fraud, anti-money laundering, cyber security, privacy and
116	116	89information security, that shall be reviewed and approved by the registrant's board of directors or
117	117	90an equivalent governing body.
118	118	91 Section 6. Advertising requirements 6 of 12
119	119	92 (a) No registrant shall advertise its products, services or activities in the state or to any
120	120	93person without including the legal name of the registrant and a legend stating that the registrant
121	121	94is registered to engage in virtual currency business activity in the commonwealth.
122	122	95 (b) Each registrant shall maintain, for examination by the commissioner, all advertising
123	123	96and marketing materials for a period of not less than seven years from the date of their creation,
124	124	97including, but not limited to, print media, Internet media, including Internet web sites, radio and
125	125	98television advertising, road show materials, presentations and brochures. Each registrant shall
126	126	99maintain a hard copy, Internet web site captures of material changes to Internet web site
127	127	100advertising and marketing and audio and video scripts of such advertising and marketing
128	128	101materials, as applicable.
129	129	102 Section 7. Compliance review
130	130	103 Each registrant shall permit the commissioner to examine the registrant whenever the
131	131	104commissioner determines such examination to be necessary or advisable, including, but not
132	132	105limited to, to determine compliance with the requirements set forth in sections 1 to 9, inclusive,
133	133	106of this act, and shall assist the commissioner in any such examination. The examination may
134	134	107include, but shall not be limited to, the premises, books, records and any other pertinent material
135	135	108of the registrant or its affiliates.
136	136	109 Section 8. Risk disclosure
137	137	110 (a) (1) Each registrant shall, prior to engaging in virtual currency business activity with
138	138	111any person, disclose in clear, conspicuous writing all material risks to the person associated with
139	139	112the particular virtual currency business activities in which it engages. Such risks may include, but
140	140	113shall not be limited to: 7 of 12
141	141	114 (A) Virtual currency is not legal tender, is not backed by the United States government
142	142	115and the virtual currency held by the registrant on behalf of the person is not subject to Federal
143	143	116Deposit Insurance Corporation protections;
144	144	117 (B) Transactions in the virtual currency held by the registrant on behalf of the person may
145	145	118be irreversible, and, accordingly, losses due to fraudulent or accidental transactions may not be
146	146	119recoverable;
147	147	120 (C) Laws determining the rights and obligations of virtual currency users are not fully
148	148	121developed, and a court of law may find that the elements of the transaction, including, but not
149	149	122limited to, the timing, amount, identity or location of the parties, may not be the same as if the
150	150	123transaction had occurred with government currency;
151	151	124 (D) The value of the virtual currency held by the registrant on behalf of the person may
152	152	125change more quickly and unexpectedly than that of government currency, and may in fact
153	153	126become zero; and
154	154	127 (E) Technological difficulties experienced by the registrant may prevent the person from
155	155	128accessing the virtual currency held by the registrant on behalf of the person.
156	156	129 (2) The commissioner shall post on the department's Internet web site information
157	157	130substantially similar to the information required to be disclosed pursuant to this subsection,
158	158	131including information about the material risks described in this subsection.
159	159	132 (b) Each registrant shall, prior to engaging in virtual currency business activity with any
160	160	133person, disclose in clear, conspicuous writing all relevant terms and conditions associated with 8 of 12
161	161	134the registrant's virtual currency business activity. Such disclosures may include, but need not be
162	162	135limited to:
163	163	136 (1) the person's liability for unauthorized transactions;
164	164	137 (2) the person's right to interrupt or prevent any transaction and the procedure to initiate
165	165	138an interruption or prevention;
166	166	139 (3) the circumstances under which the registrant will, absent a court or government order,
167	167	140disclose information concerning the person's account to third parties;
168	168	141 (4) the person's right to receive periodic account statements and valuations from the
169	169	142registrant;
170	170	143 (5) the person's right to receive a receipt, trade ticket or other evidence of a transaction;
171	171	144and
172	172	145 (6) the person's right to prior notice of a change in the registrant's rules or policies.
173	173	146 (c) Each registrant shall, prior to engaging in virtual currency business activity with any
174	174	147person, disclose in clear, conspicuous writing the terms and conditions of the transaction. The
175	175	148disclosures may include, but need not be limited to:
176	176	149 (1) The amount of the transaction;
177	177	150 (2) any fees, expenses and charges borne by the person, including applicable exchange
178	178	151rates;
179	179	152 (3) the type and nature of the transaction; and 9 of 12
180	180	153 (4) a warning that once executed the transaction may not be undone.
181	181	154 (d) Each registrant shall ensure that all disclosures required in this section are
182	182	155acknowledged in writing as received by persons.
183	183	156 (e) Each registrant shall, upon completion of any transaction, provide to any person
184	184	157initiating the transaction, a receipt containing the following information:
185	185	158 (1) The name and contact information of the registrant, including a telephone number
186	186	159established by the registrant to answer questions and register complaints;
187	187	160 (2) the type, value, date and precise time of the transaction;
188	188	161 (3) any fee charged; and
189	189	162 (4) any exchange rate applied.
190	190	163 Section 9. Customer complaint policies
191	191	164 (a) Each registrant shall establish and maintain written policies and procedures to fairly
192	192	165and timely resolve customer complaints.
193	193	166 (b) Each registrant shall provide, in a clear and conspicuous manner, on such registrant's
194	194	167Internet web site or web sites, and in all physical locations the following disclosures:
195	195	168 (1) The registrant's mailing address, electronic mail address and telephone number for the
196	196	169receipt of complaints;
197	197	170 (2) a statement that the complainant may also bring a complaint to the attention of the
198	198	171division; and 10 of 12
199	199	172 (3) the division's mailing address, Internet web site address and telephone number.
200	200	173 Section 10. Violation of this chapter
201	201	174 (a) If it appears to the commissioner that any person has committed or is about to commit
202	202	175a violation of any provision of this act or of any rule or order of the commissioner, the
203	203	176commissioner may apply to any superior court in the commonwealth for an order temporarily or
204	204	177permanently restraining and enjoining that person from violating or continuing to violate this act
205	205	178or any rule, regulation or order of the commissioner and for injunctive or other relief as the
206	206	179nature of the case may require.
207	207	180 (b) If, after notice and hearing, the commissioner finds that a person has violated any
208	208	181provision of this chapter or a rule adopted under this chapter, the commissioner may order the
209	209	182person to pay the commissioner a civil penalty in an amount specified by the commissioner not
210	210	183exceeding 5 thousand dollars for each violation. Each violation shall constitute a separate offense
211	211	184and the penalty under this subsection shall be in addition to a suspension or revocation of a
212	212	185registration. No proceeding shall be initiated and no penalty shall be assessed pursuant to this
213	213	186subsection until such person is notified in writing of the nature of the violation and is afforded a
214	214	187reasonable period of time, as set forth in the notice, to correct the violation and fails to do so.
215	215	188 (c) The commissioner may compromise, settle and collect civil penalties for violations of
216	216	189any provision of this chapter, or of any rule, regulation or order issued or promulgated pursuant
217	217	190to this chapter.
218	218	191 Section 11. Each registrant may accept credit cards and debit cards for the purchase of
219	219	192virtual currency. 11 of 12
220	220	193 SECTION 2. Chapter 29 of the General Laws is hereby amended by inserting, after
221	221	194section 2QQQQQ, the following section:-
222	222	195 Section 2RRRRR. Virtual Currency Insurance Fund
223	223	196 (a) There shall be a virtual currency insurance fund administered by the office of the
224	224	197treasurer. Notwithstanding any general or special law to the contrary, there shall be credited to
225	225	198the fund any revenue generated pursuant to section 3 of chapter 167K, or other money authorized
226	226	199by the general court and specifically designated to be credited to the fund, and any gifts, grants,
227	227	200private contributions, investment income earned by the fund's assets and any designated funds
228	228	201from other sources. No expenditures from the fund shall cause the fund to be in deficiency at the
229	229	202close of the fiscal year. Any money in the fund at the end of the fiscal year shall not revert to the
230	230	203General Fund.
231	231	204 (b) The fund shall be used, without further appropriation, for a grant program to be
232	232	205administered by the division of banks.
233	233	206 (c) Eligible grantees shall be Massachusetts customers that have deposited government
234	234	207currency for the purchase of virtual currency, or have exchanged government currency for virtual
235	235	208currency in a virtual currency exchange service that is unable to meet any monetary obligations
236	236	209to any of its customers at the time of submission of the grant application.
237	237	210 (d) Grant funding distributed pursuant to this section shall be distributed amongst all
238	238	211eligible grantees until the amount in the fund is exhausted. Grant funding shall not exceed 10
239	239	212thousand dollars per grantee, per virtual currency exchange service. 12 of 12
240	240	213 (e) The division shall promulgate any regulations necessary for the distribution of
241	241	214funding pursuant to this section.