(Reprinted with amendments adopted on April 24, 2023)
FIRST REPRINT S.B. 333
- *SB333_R1*
SENATE BILL NO. 333–SENATOR NEAL
MARCH 20, 2023
____________
Referred to Committee on Commerce and Labor
SUMMARY—Revises provisions relating to virtual currency.
(BDR 57-18)
FISCAL NOTE: Effect on Local Government: No.
Effect on the State: Yes.
~
EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.
AN ACT relating to virtual currency; requiring a virtual currency
business to register with the Commissioner of Financial
Institutions before engaging in virtual currency business
activity with or on behalf of a resident of this State;
creating the Virtual Currency Recovery Account;
authorizing the Commissioner to impose a civil penalty
on a virtual currency business that engages in certain
conduct; authorizing the Commissioner to award
payments of restitution to certain residents who are
victims of fraud committed by a virtual currency business;
requiring a virtual currency business to provide certain
disclosures to a resident before engaging in virtual
currency business activity with or on behalf of the
resident; prohibiting a person from engaging in certain
conduct relating to the solicitation of virtual currency
business activity; prohibiting a virtual currency business
from engaging in certain advertisements or promotions;
prohibiting a domestic life insurer from investing money
allocated to certain accounts in virtual currency; and
providing other matters properly relating thereto.
Legislative Counsel’s Digest:
This bill, sets forth various requirements and restrictions concerning virtual 1
currency and virtual currency business activity. Section 9 of this bill defines 2
“virtual currency business activity” to mean, in general: (1) receiving virtual 3
currency for transmission or transmitting virtual currency; (2) storing, holding or 4
maintaining custody or control of virtual currency on behalf of others; (3) buying 5
and selling virtual currency as a business; (4) performing exchange services as a 6
– 2 –
- *SB333_R1*
business; or (5) controlling or issuing virtual currency. Section 8 of this bill 7
designates a person who engages in virtual currency business activity as a “virtual 8
currency business.” Sections 3-7 and 9.5 of this bill define additional words and 9
terms for the purposes of sections 2-17.5 of this bill. Section 10 of this bill exempts 10
a broker-dealer registered with the Securities and Exchange Commission and 11
certain financial institutions from the provisions of sections 2-17.5. 12
Section 11 of this bill requires a virtual currency business, before engaging in 13
virtual currency business activity with or on behalf of a resident of this State, to 14
register with the Commissioner of Financial Institutions by submitting a form 15
containing certain information. Section 12 of this bill provides that if the 16
Commissioner determines that a virtual currency business has committed an act 17
constituting fraud against an older person, vulnerable person or a person under 21 18
years of age, the Commissioner is authorized to impose a civil penalty against the 19
virtual currency business in an amount not to exceed 5 percent of the gross revenue 20
of the virtual currency business in the immediately preceding year that was derived 21
from engaging in virtual currency business activities. Section 12 requires the 22
money collected from the civil penalty to be deposited in the Virtual Currency 23
Recovery Account, which is created by section 13 of this bill. 24
Section 14 of this bill authorizes the Commissioner to award payments of 25
restitution from the Account to eligible residents. Under section 14, a resident is 26
eligible for a grant from the Account if: (1) the resident is a victim of fraud 27
committed by a virtual currency business; (2) at the time the fraud was committed, 28
the resident was an older person, a vulnerable person or a person under 21 years of 29
age; and (3) the resident meets any other criteria for eligibility established by the 30
Commissioner by regulation. 31
Section 15 of this bill requires a virtual currency business, before engaging in 32
virtual currency business activity with or on behalf of a resident, to provide to the 33
resident a written disclosure containing the material risks involved in the activity 34
and certain other information. Section 15.5 of this bill prohibits a person from 35
engaging in any act or practice for the purpose of soliciting virtual currency 36
business activity with a resident of this State that is intended to produce an 37
erroneous belief by the resident that the person wishes to pursue a romantic or 38
sexual relationship. Section 16 of this bill prohibits a virtual currency business 39
from engaging in advertising or promotions which target any person or group of 40
persons who, for certain specified reasons, is particularly vulnerable to financial 41
exploitation. Section 17 of this bill authorizes the Commissioner to adopt 42
regulations to carry out the provisions of sections 2-17. 43
Existing law authorizes a domestic life insurer to establish separate accounts 44
and allocate to those accounts amounts to provide for life insurance or annuities 45
payable in fixed or variable amounts, or both. Existing law authorizes any amounts 46
allocated to a separate account to be invested without regard to any requirements or 47
limitations set forth under existing law governing the investments of life insurance 48
companies. (NRS 688A.390) Section 17.5 of this bill prohibits a domestic life 49
insurer from investing any amount allocated to a separate account to provide for life 50
insurance in virtual currency. 51
– 3 –
- *SB333_R1*
THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN
SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:
Section 1. Title 57 of NRS is hereby amended by adding 1
thereto a new chapter to consist of the provisions set forth as 2
sections 2 to 17, inclusive, of this act. 3
Sec. 2. As used in this chapter, unless the context otherwise 4
requires, the words and terms defined in sections 3 to 9.5, 5
inclusive, of this act have the meanings ascribed to them in those 6
sections. 7
Sec. 3. “Commissioner” means the Commissioner of 8
Financial Institutions. 9
Sec. 4. “Exchange service” means: 10
1. The conversion or exchange of government currency or 11
other value into virtual currency; 12
2. The conversion or exchange of virtual currency into 13
government currency or other value; or 14
3. The conversion or exchange of one form of virtual 15
currency into another form of virtual currency. 16
Sec. 5. “Government currency” means currency which has 17
been issued by a government and has been designated as legal 18
tender in its country of issuance through law, regulation or 19
government decree. 20
Sec. 5.5. “Older person” has the meaning ascribed to it in 21
NRS 200.5092. 22
Sec. 6. “Resident” means a person whose information on 23
record with or available to a virtual currency business indicates 24
that the person has: 25
1. A home address in this State; 26
2. A mailing address in this State; or 27
3. An Internet protocol address connected with a location in 28
this State. 29
Sec. 7. 1. “Virtual currency” means a digital 30
representation of value that is used as a medium of exchange or a 31
form of digitally stored value. 32
2. The term includes a digital representation of value that: 33
(a) Has a centralized repository or administrator; 34
(b) Is decentralized and does not have a centralized repository 35
or administrator; or 36
(c) May be created or obtained by computing or 37
manufacturing effort. 38
3. The term does not include a digital representation of value 39
that is used exclusively: 40
(a) Within one or more online game platforms and which does 41
not have a market or application outside of those gaming 42
– 4 –
- *SB333_R1*
platforms and cannot be converted to or redeemed for government 1
currency; or 2
(b) As part of a consumer affinity or rewards program which 3
can be applied solely as payment for purchases with the issuer of 4
the digital representation of value or other designated merchant 5
but cannot be converted to or redeemed for government currency. 6
Sec. 8. “Virtual currency business” means a person who 7
engages in virtual currency business activity. 8
Sec. 9. “Virtual currency business activity” means: 9
1. Receiving virtual currency for transmission or transmitting 10
virtual currency, except where the transaction is undertaken for 11
nonfinancial purposes and does not involve the transfer of more 12
than a nominal amount of virtual currency; 13
2. Storing, holding or maintaining custody or control of 14
virtual currency on behalf of others; 15
3. Buying and selling virtual currency as a business; 16
4. Performing exchange services as a business; or 17
5. Controlling or issuing virtual currency. 18
Sec. 9.5. “Vulnerable person” has the meaning ascribed to it 19
in NRS 200.5092. 20
Sec. 10. The provisions of this chapter do not apply to a: 21
1. Bank, trust company, bank holding company, credit union, 22
building and loan association, savings and loan association, 23
savings bank or mutual savings bank organized under the laws of 24
any state or the United States. 25
2. Broker-dealer registered with the Securities and Exchange 26
Commission. 27
Sec. 11. 1. Before engaging in any virtual currency 28
business activity with or on behalf of any resident, a virtual 29
currency business shall register with the Commissioner by 30
submitting to the Commissioner a form prescribed by the 31
Commissioner that contains, without limitation: 32
(a) The name and address of the virtual currency business; 33
(b) Any affiliate or subsidiary of the virtual currency business; 34
and 35
(c) Any other virtual currency business in which the virtual 36
currency business holds an ownership interest. 37
2. A virtual currency business that has registered pursuant to 38
subsection 1 shall thereafter promptly notify the Commissioner of 39
every material change in the information provided in the form 40
submitted pursuant to subsection 1. 41
Sec. 12. 1. If the Commissioner determines that a virtual 42
currency business has committed any act constituting fraud 43
against a resident who is an older person, vulnerable person or 44
under 21 years of age, the Commissioner may, after notice and a 45
– 5 –
- *SB333_R1*
hearing, impose a civil penalty against the virtual currency 1
business in an amount not to exceed 5 percent of the gross 2
revenue of the virtual currency business in the immediately 3
preceding year that was derived from engaging in virtual currency 4
business activities. 5
2. The money collected by the Commissioner from the civil 6
penalty imposed pursuant to subsection 1 must be deposited in the 7
Virtual Currency Recovery Account created by section 13 of this 8
act. 9
Sec. 13. 1. The Virtual Currency Recovery Account is 10
hereby created in the State General Fund. 11
2. The Commissioner shall administer the Account. The 12
money in the Account must be expended to award payments of 13
restitution to eligible residents in accordance with section 14 of 14
this act. 15
3. The Commissioner may apply for and accept any gift, 16
donation, bequest, grant, transfer or other source of money for 17
deposit in the Account. 18
4. The interest and income earned on the money in the 19
Account, after deducting applicable charges, must be credited to 20
the Account. 21
5. The money in the Account must remain in the Account and 22
does not revert to the State General Fund at the end of any fiscal 23
year. 24
Sec. 14. 1. To the extent that money is available in the 25
Virtual Currency Recovery Account created by section 13 of this 26
act, the Commissioner may award payments of restitution from the 27
Account to eligible residents who submit an application to the 28
Commissioner in the form and manner prescribed by the 29
Commissioner. 30
2. Except as otherwise provided in subsection 3, a resident is 31
eligible for a payment of restitution from the Account if: 32
(a) The resident is a victim of fraud committed by a virtual 33
currency business; 34
(b) At the time the fraud was committed by the virtual currency 35
business, the resident was: 36
(1) An older person; 37
(2) A vulnerable person; or 38
(3) Under 21 years of age; and 39
(c) The resident meets any other criteria for eligibility 40
established by the Commissioner by regulation. 41
3. The amount of money from the Account that may be 42
awarded to a resident based upon any number of applications 43
submitted by the resident involving a single virtual currency 44
business must not exceed $10,000. 45
– 6 –
- *SB333_R1*
4. The Commissioner shall adopt regulations to carry out the 1
provisions of this section. The regulations must include, without 2
limitation: 3
(a) The procedure by which a person may apply for a payment 4
of restitution from the Account; 5
(b) Any additional criteria that a person must meet to be 6
eligible for a payment of restitution from the Account; and 7
(c) Procedures to distribute the money in the Account in a fair 8
and equitable manner. 9
Sec. 15. A virtual currency business shall, before engaging 10
in virtual currency business activity with or on behalf of a 11
resident, provide to the resident a written disclosure, which 12
includes, without limitation, all material risks that, to the best of 13
the virtual currency business’s knowledge, the virtual currency 14
business activity may pose and the following statements: 15
1. That virtual currency is not legal tender and is not backed 16
by the United States government; 17
2. That the virtual currency held by the virtual currency 18
business on behalf of the resident is not insured by the Federal 19
Deposit Insurance Corporation; 20
3. That transactions in virtual currency held by the virtual 21
currency business on behalf of the resident may be irreversible 22
and losses due to fraudulent or accidental transactions may not be 23
recoverable; 24
4. That laws determining the rights and obligations of virtual 25
currency users are not fully developed and a court may find that 26
the elements of the transaction, including, without limitation, the 27
timing, amount, identity or location of the parties may not be the 28
same as if the transaction had occurred with government 29
currency; and 30
5. That the value of the virtual currency held by the virtual 31
currency business on behalf of the resident may change more 32
quickly and unexpectedly than that of government currency and 33
may in fact become zero. 34
Sec. 15.5. A person shall not engage in any act or practice 35
for the purpose of soliciting virtual currency business activity with 36
a resident that is intended to produce an erroneous belief by the 37
resident that the person wishes to pursue a romantic or sexual 38
relationship with the resident. 39
Sec. 16. A virtual currency business shall not engage in 40
advertising or promotions which target any person or group of 41
persons who, by reason of age, health, economic status, infirmity, 42
impaired understanding or disability, is particularly vulnerable to 43
financial exploitation. 44
– 7 –
- *SB333_R1*
Sec. 17. The Commissioner may adopt such regulations as 1
are necessary to carry out the provisions of this chapter. 2
Sec. 17.5. NRS 688A.390 is hereby amended to read as 3
follows: 4
688A.390 1. A domestic life insurer may establish one or 5
more separate accounts, and may allocate thereto amounts 6
(including without limitation proceeds applied under optional modes 7
of settlement or under dividend options) to provide for life insurance 8
or annuities (and benefits incidental thereto), payable in fixed or 9
variable amounts or both, subject to the following: 10
(a) The income, gains and losses, realized or unrealized, from 11
assets allocated to a separate account shall be credited to or charged 12
against the account, without regard to other income, gains or losses 13
of the company. 14
(b) Except as may be provided with respect to reserves for 15
guaranteed benefits and funds referred to in paragraph (c): 16
(1) Amounts allocated to any separate account and 17
accumulations thereon may be invested and reinvested without 18
regard to any requirements or limitations prescribed by the laws of 19
this state governing the investments of life insurance companies [;] , 20
except that no amounts allocated to any separate account or any 21
accumulations thereon to provide for life insurance may be 22
invested in virtual currency, as defined in section 7 of this act; and 23
(2) The investments in such separate account or accounts 24
shall not be taken into account in applying the investment 25
limitations otherwise applicable to the investments of the company. 26
(c) Except with the approval of the Commissioner and under 27
such conditions as to investments and other matters as the 28
Commissioner may prescribe, which shall recognize the guaranteed 29
nature of the benefits provided, reserves for: 30
(1) Benefits guaranteed as to dollar amount and duration; and 31
(2) Funds guaranteed as to principal amount or stated rate of 32
interest, 33
shall not be maintained in a separate account. 34
(d) Unless otherwise approved by the Commissioner, assets 35
allocated to a separate account shall be valued at their market value 36
on the date of valuation, or if there is no readily available market, 37
then as provided under the terms of the contract or the rules or other 38
written agreement applicable to such separate account; but unless 39
otherwise approved by the Commissioner, the portion if any of the 40
assets of such separate account equal to the company’s reserve 41
liability with regard to the guaranteed benefits and funds referred to 42
in paragraph (c) shall be valued in accordance with the rules 43
otherwise applicable to the company’s assets. 44
– 8 –
- *SB333_R1*
(e) Amounts allocated to a separate account in the exercise of 1
the power granted by this section shall be owned by the company, 2
and the company shall not be, nor hold itself out to be, a trustee with 3
respect to such amounts. If and to the extent so provided under the 4
applicable contracts, that portion of the assets of any such separate 5
account equal to the reserves and other contract liabilities with 6
respect to such account shall not be chargeable with liabilities 7
arising out of any other business the company may conduct. 8
(f) No sale, exchange or other transfer of assets may be made by 9
a company between any of its separate accounts or between any 10
other investment account and one or more of its separate accounts 11
unless, in case of a transfer into a separate account, such transfer is 12
made solely to establish the account pursuant to subsection 6 or to 13
support the operation of the contracts with respect to the separate 14
account to which the transfer is made, and unless such transfer, 15
whether into or from a separate account, is made: 16
(1) By a transfer of cash; or 17
(2) By a transfer of securities having a readily determinable 18
market value, provided that such transfer of securities is approved 19
by the Commissioner. 20
The Commissioner may approve other transfers among such 21
accounts if, in the opinion of the Commissioner, such transfers 22
would not be inequitable. 23
(g) To the extent such company deems it necessary to comply 24
with any applicable federal or state laws, such company, with 25
respect to any separate account, including without limitation any 26
separate account which is a management investment company or a 27
unit investment trust, may provide for persons having an interest 28
therein appropriate voting and other rights and special procedures 29
for the conduct of the business of such account, including without 30
limitation special rights and procedures relating to investment 31
policy, investment advisory services, selection of independent 32
public accountants and the selection of a committee, the members of 33
which need not be otherwise affiliated with such company, to 34
manage the business of such account. 35
2. Any contract providing benefits payable in variable amounts 36
delivered or issued for delivery in this state, including a group 37
contract and any certificate issued thereunder, shall contain a 38
statement of the essential features of the procedures to be followed 39
by the insurance company in determining the dollar amount of such 40
variable benefits. Any such contract under which the benefits vary 41
to reflect investment experience, including a group contract and any 42
certificate in evidence of variable benefits issued thereunder, shall 43
state that such dollar amount will so vary and shall contain on its 44
– 9 –
- *SB333_R1*
first page a statement to the effect that the benefits thereunder are on 1
a variable basis. 2
3. No company shall deliver or issue for delivery within this 3
state variable contracts unless it is licensed or organized to do a life 4
insurance or annuity business in this state, and the Commissioner is 5
satisfied that its condition or method of operation in connection with 6
the issuance of such contracts will not render its operation 7
hazardous to the public or its policyholders in this state. In this 8
connection, the Commissioner shall consider among other things: 9
(a) The history and financial condition of the company; 10
(b) The character, responsibility and fitness of the officers and 11
directors of the company; and 12
(c) The law and regulations under which the company is 13
authorized in the state of domicile to issue variable contracts. 14
If the company is a subsidiary of an admitted life insurance 15
company, or affiliated with such company through common 16
management or ownership, it may be deemed by the Commissioner 17
to have met the provisions of this subsection if either it or the parent 18
or the affiliated company meets the requirements hereof. 19
4. Notwithstanding any other provision of law, the 20
Commissioner has sole authority to regulate the issuance and sale of 21
variable contracts, and to issue such reasonable rules and regulations 22
as may be appropriate to carry out the purposes and provisions of 23
this section. 24
5. Except for NRS 688A.190, 688A.240 and 688A.250 in the 25
case of a variable annuity contract and NRS 688A.060, 688A.110, 26
688A.120, 688A.130, 688A.290 to 688A.360, inclusive, and 27
688B.050 in the case of a variable life insurance policy and except 28
as otherwise provided in this Code, all pertinent provisions of this 29
Code shall apply to separate accounts and contracts relating thereto. 30
Any individual variable life insurance contract, delivered or issued 31
for delivery in this state, shall contain grace, reinstatement and 32
nonforfeiture provisions appropriate to such a contract. Any 33
individual variable annuity contract, delivered or issued for delivery 34
in this state, shall contain grace and reinstatement provisions 35
appropriate to such a contract. The reserve liability for variable 36
contracts shall be established in accordance with actuarial 37
procedures that recognize the variable nature of the benefits 38
provided and any mortality guarantees. 39
6. A domestic life insurer which establishes one or more 40
separate accounts pursuant to this section may participate therein by 41
allocating and contributing to such separate account funds which 42
otherwise might be invested pursuant to NRS 682A.410 and 43
682A.514. The insurer shall have a proportionate interest in any 44
such account, along with all other participating contract holders, to 45
– 10 –
- *SB333_R1*
the extent of its participation therein. The aggregate amount so 1
allocated or contributed by such an insurer to one or more separate 2
accounts shall not, without the consent of the Commissioner, exceed 3
the greater of: 4
(a) One hundred thousand dollars; 5
(b) One percent of its admitted assets as of December 31 next 6
preceding; or 7
(c) Five percent of its surplus as to policyholders as of 8
December 31 next preceding. 9
All funds allocated or contributed by the insurer to a separate 10
account for the purpose of participation therein shall be included in 11
applying the limitations upon investments otherwise specified in this 12
Code. The insurer shall be entitled to withdraw at any time in whole 13
or in part its participation in any separate account to which funds 14
have been allocated or contributed and to receive upon withdrawal 15
its proportional share of the value of the assets of the separate 16
account at the time of withdrawal. 17
Sec. 18. 1. This section becomes effective upon passage and 18
approval. 19
2. Sections 1 to 17.5, inclusive, of this act become effective: 20
(a) Upon passage and approval for the purpose of adopting any 21
regulations and performing any other preparatory administrative 22
tasks that are necessary to carry out the provisions of this act; and 23
(b) On January 1, 2024, for all other purposes. 24
H