Bill Text: FL S0662 | 2024 | Regular Session | Comm Sub


Bill Title: Virtual Currency Kiosk Businesses

Spectrum: Bipartisan Bill

Status: (Failed) 2024-03-08 - Died in Fiscal Policy [S0662 Detail]

Download: Florida-2024-S0662-Comm_Sub.html
       Florida Senate - 2024                              CS for SB 662
       
       
        
       By the Committee on Banking and Insurance; and Senator Burton
       
       
       
       
       
       597-02367-24                                           2024662c1
    1                        A bill to be entitled                      
    2         An act relating to virtual currency kiosk businesses;
    3         amending s. 560.103, F.S.; defining terms and revising
    4         the definition of the term “control person”; amending
    5         s. 560.105, F.S.; requiring the Office of Financial
    6         Regulation of the Financial Services Commission to
    7         supervise virtual currency kiosk businesses;
    8         authorizing the commission to adopt rules; creating
    9         part V of ch. 560, F.S., entitled “Virtual Currency
   10         Kiosk Businesses”; creating s. 560.501, F.S.;
   11         providing legislative intent; creating s. 560.502,
   12         F.S.; prohibiting a virtual currency kiosk business
   13         from operating without registering or renewing its
   14         registration in accordance with certain provisions;
   15         requiring the office to make certain notifications;
   16         requiring certain entities to be licensed as money
   17         services businesses; providing criminal penalties for
   18         certain entities that operate or solicit business as a
   19         virtual currency kiosk business under certain
   20         circumstances; providing criminal penalties for
   21         persons who register or attempt to register as a
   22         virtual currency kiosk business by certain means;
   23         providing that a virtual currency kiosk business
   24         registration is not transferable or assignable;
   25         creating s. 560.503, F.S.; specifying application
   26         requirements for registering as a virtual currency
   27         kiosk business; requiring certain virtual currency
   28         kiosk businesses to submit an application within a
   29         specified timeframe; requiring a registrant to report
   30         certain changes in information within a specified
   31         timeframe; requiring a registrant to renew its
   32         registration at a specified timeframe; specifying
   33         requirements for a registrant to renew its
   34         registration; requiring that the registration of a
   35         virtual currency kiosk business be made inactive if
   36         such business does not renew its registration by a
   37         certain date; specifying requirements for a virtual
   38         currency kiosk business to renew its registration
   39         after becoming inactive; providing that a registration
   40         becomes null and void under certain circumstances;
   41         providing requirements if a registration becomes null
   42         and void; requiring the office to deny certain
   43         applications under certain circumstances; requiring
   44         that certain applications be denied under certain
   45         circumstances; providing that certain false statements
   46         made by the virtual currency kiosk business render its
   47         registration void; authorizing the commission to adopt
   48         rules; creating s. 560.504, F.S.; specifying
   49         requirements for specified disclosures and
   50         attestations displayed by the virtual currency kiosk;
   51         authorizing the commission to adopt rules; creating s.
   52         560.505, F.S.; requiring an owner-operator to transact
   53         business under its legal name; providing exceptions;
   54         requiring an owner-operator to maintain certain
   55         policies, processes, and procedures; creating s.
   56         506.506, F.S.; providing criminal penalties for
   57         violations of certain provisions or performing certain
   58         acts; authorizing a court to invalidate the
   59         registration of a registrant under certain
   60         circumstances; providing effective dates.
   61          
   62  Be It Enacted by the Legislature of the State of Florida:
   63  
   64         Section 1. Present subsections (4) through (28) and (29)
   65  through (36) of section 560.103, Florida Statutes, are
   66  redesignated as subsections (5) through (29) and (31) through
   67  (38), respectively, new subsections (4) and (30) and subsections
   68  (39) through (42) are added to that section, and present
   69  subsection (10) of that section is amended, to read:
   70         560.103 Definitions.—As used in this chapter, the term:
   71         (4)“Blockchain analytics” refers to the process of
   72  examining, monitoring, and gathering insights from the data and
   73  transaction patterns on a blockchain network. The primary aim of
   74  blockchain analytics is to understand and monitor the network’s
   75  health, track transaction flows, and identify potential security
   76  threats, including illicit activity, to extract actionable
   77  insights.
   78         (11)(10) “Control person” means, with respect to a money
   79  services business or virtual currency kiosk business, any of the
   80  following:
   81         (a) A person who holds the title of president, treasurer,
   82  chief executive officer, chief financial officer, chief
   83  operations officer, chief legal officer, or compliance officer
   84  for a money services business or virtual currency kiosk
   85  business.
   86         (b) A person who holds any of the officer, general partner,
   87  manager, or managing member positions named in the money
   88  services business’s or virtual currency kiosk business’s
   89  governing documents. As used in this paragraph, the term
   90  “governing documents” includes bylaws, articles of incorporation
   91  or organization, partnership agreements, shareholder agreements,
   92  and management or operating agreements.
   93         (c) A director of the money services business’s or virtual
   94  currency kiosk business’s board of directors.
   95         (d) A shareholder in whose name shares are registered in
   96  the records of a corporation for profit, whether incorporated
   97  under the laws of this state or organized under the laws of any
   98  other jurisdiction and existing in that legal form, who owns 25
   99  percent or more of a class of the company’s equity securities.
  100         (e) A general partner or a limited partner, as those terms
  101  are defined in s. 620.1102, who has a 25 percent or more
  102  transferable interest, as defined in s. 620.1102, of a limited
  103  partnership, limited liability limited partnership, foreign
  104  limited partnership, or foreign limited liability limited
  105  partnership, as those terms are defined in s. 620.1102.
  106         (f) A member, who is a person that owns a membership
  107  interest in a limited liability company or a foreign limited
  108  liability company, as those terms are defined in s. 605.0102(36)
  109  and (26), respectively, that holds a 25 percent or more
  110  membership interest in such company. As used in this subsection,
  111  the term “membership interest” means a member’s right to receive
  112  distributions or other rights, such as voting rights or
  113  management rights, under the articles of organization.
  114         (g) A natural person who indirectly owns 25 percent or more
  115  of the shares or stock interest, transferable interest as
  116  defined in s. 620.1102, or membership interest as defined in
  117  paragraph (f), of any legal entities referred to in paragraphs
  118  (d)-(f).
  119         (30)“Owner-operator” means a registrant or a licensed
  120  money services business.
  121         (39)“Virtual currency kiosk” means an electronic terminal
  122  that acts as a mechanical agent of the owner-operator, enabling
  123  the owner-operator to facilitate the exchange of virtual
  124  currency for fiat currency or other virtual currency for a
  125  customer.
  126         (40)“Virtual currency kiosk business” or “registrant”
  127  means a corporation, limited liability company, limited
  128  liability partnership, or foreign entity qualified to do
  129  business in this state which operates a virtual currency kiosk
  130  and which is not a money transmitter as defined in this section.
  131         (41)“Virtual currency kiosk transaction” means the process
  132  in which a customer uses a virtual currency kiosk to exchange
  133  virtual currency for fiat currency or other virtual currency. A
  134  transaction begins at the point at which the customer is able to
  135  initiate a transaction after the customer is given the option to
  136  select the type of transaction or account, and does not include
  137  any of the screens that display the required terms and
  138  conditions, disclaimers, or attestations.
  139         (42)“Wallet” means hardware or software that enables
  140  customers to store and use virtual currency.
  141         Section 2. Paragraph (a) of subsection (1) and paragraph
  142  (b) of subsection (2) of section 560.105, Florida Statutes, are
  143  amended to read:
  144         560.105 Supervisory powers; rulemaking.—
  145         (1) The office shall:
  146         (a) Supervise all money services businesses and their
  147  authorized vendors and virtual currency kiosk businesses.
  148         (2) The commission may adopt rules pursuant to ss.
  149  120.536(1) and 120.54 to administer this chapter.
  150         (b) Rules adopted to regulate money services businesses,
  151  including deferred presentment providers and virtual currency
  152  kiosk businesses, must be responsive to changes in economic
  153  conditions, technology, and industry practices.
  154         Section 3. Part V of chapter 560, Florida Statutes,
  155  consisting of ss. 560.501-560.506, Florida Statutes, is created
  156  and entitled “Virtual Currency Kiosk Businesses.”
  157         Section 4. Section 560.501, Florida Statutes, is created to
  158  read:
  159         560.501Legislative intent.—The Legislature intends to
  160  reduce unlawful and fraudulent activities by requiring virtual
  161  currency kiosk businesses to register with the state and by
  162  requiring such businesses and money transmitter licensees to
  163  regularly and consistently disclose to all customers of virtual
  164  currency kiosks certain specified risks relating to virtual
  165  currency kiosk transactions.
  166         Section 5. Effective March 1, 2025, section 560.502,
  167  Florida Statutes, is created to read:
  168         560.502Registration required; exemptions; penalties.—
  169         (1)A virtual currency kiosk business in this state may not
  170  operate without first registering, or renewing its registration,
  171  in accordance with s. 560.503. The office shall give written
  172  notice, in person or by mail, to each applicant that the agency
  173  has granted or denied the application for registration.
  174         (2)A money transmitter licensed as a money services
  175  business pursuant to s. 560.141 is exempt from registration as a
  176  virtual currency kiosk business but is subject to ss. 560.504,
  177  560.505, and 560.506.
  178         (3)An entity, in the course of its business, may not act
  179  as an intermediary with the ability to unilaterally execute or
  180  indefinitely prevent a virtual currency kiosk transaction, or
  181  otherwise meet the definition of a money transmitter as defined
  182  in s. 560.103, without being licensed as a money services
  183  business pursuant to part II of this chapter.
  184         (4)Unless licensed as a money services business pursuant
  185  to part II of this chapter, an entity that operates or solicits
  186  business as a virtual currency kiosk business without first
  187  being registered with the office or without maintaining its
  188  registration commits a felony of the third degree, punishable as
  189  provided in s. 775.082, s. 775.083, or s. 775.084.
  190         (5)A person who registers or attempts to register as a
  191  virtual currency kiosk business by means of fraud,
  192  misrepresentation, or concealment commits a felony of the third
  193  degree, punishable as provided in s. 775.082, s. 775.083, or s.
  194  775.084.
  195         (6)A virtual currency kiosk business registration issued
  196  under this part is not transferable or assignable.
  197         Section 6. Section 560.503, Florida Statutes, is created to
  198  read:
  199         560.503Registration applications.—
  200         (1)To apply to be registered as a virtual currency kiosk
  201  business under this part, the applicant must submit all of the
  202  following to the office:
  203         (a)A completed registration application on forms
  204  prescribed by rule of the commission, which must include the
  205  following information:
  206         1.The legal name, including any fictitious or trade names
  207  used by the applicant in the conduct of its business, and the
  208  physical and mailing address of the applicant.
  209         2.The date of the applicant’s formation and the state in
  210  which the applicant was formed, if applicable.
  211         3.The name, social security number, alien identification
  212  or taxpayer identification number, business and residence
  213  addresses, and employment history for the past 5 years for each
  214  person who meets the definition of a control person.
  215         4.A description of the organizational structure of the
  216  applicant, including the identity of any parent or subsidiary of
  217  the applicant, and the disclosure of whether any parent or
  218  subsidiary is publicly traded.
  219         5.The name of the registered agent in this state for
  220  service of process.
  221         6.The physical address of the location of each virtual
  222  currency kiosk through which the applicant proposes to conduct
  223  or is conducting business in this state.
  224         7. An attestation that the applicant has developed clearly
  225  documented policies, processes, and procedures regarding the use
  226  of blockchain analytics to prevent transfers to wallet addresses
  227  linked to known criminal activity, including the manner in which
  228  such blockchain analytics activity will integrate into its
  229  compliance controls, and that the applicant will maintain and
  230  comply with such blockchain analytics policies, processes, and
  231  procedures.
  232         8.Any other information as required by this chapter or
  233  commission rule.
  234         (b)Any information needed to resolve any deficiencies
  235  found in the application within a time period prescribed by
  236  rule.
  237         (2) A virtual currency kiosk business operating in this
  238  state on or before January 1, 2025, must submit a registration
  239  application to the office within 30 days after that date.
  240         (3)A registrant shall report, on a form prescribed by rule
  241  of the commission, any change in the information contained in an
  242  initial application form or an amendment thereto within 30 days
  243  after the change is effective.
  244         (4)A registrant must renew its registration annually on or
  245  before December 31 of the year preceding the expiration date of
  246  the registration. To renew such registration, the registrant
  247  must submit a renewal application that provides:
  248         (a)The information required in paragraph (1)(a) if there
  249  are changes in the application information, or an affidavit
  250  signed by the registrant that the information remains the same
  251  as the prior year.
  252         (b)Upon request by the office, evidence that the
  253  registrant has been operating in compliance with ss. 560.504 and
  254  560.505. Such evidence may be prescribed by rule by the
  255  commission and may include, but is not limited to, all of the
  256  following:
  257         1.Current disclosures presented to customers during the
  258  transaction process.
  259         2.Current use of blockchain analytics to prevent transfers
  260  to wallet addresses linked to known criminal activity.
  261         (5)The registration of a virtual currency kiosk business
  262  that does not renew its registration by December 31 of the year
  263  of expiration must be made inactive for 60 days. A virtual
  264  currency kiosk business may not conduct business while its
  265  registration is inactive.
  266         (6)Within 60 days after the registration becomes inactive
  267  pursuant to subsection (5), a virtual currency kiosk business
  268  must renew its registration by submitting all of the following:
  269         (a)The information required in paragraph (1)(a) if there
  270  are changes in the application information, or an affidavit
  271  signed by the registrant that the information remains the same
  272  as the prior year.
  273         (b)Evidence that the registrant was operating in
  274  compliance with ss. 560.504 and 560.505. Such evidence may be
  275  prescribed by rule by the commission and may include, but is not
  276  limited to, all of the following:
  277         1.Current disclosures presented to customers during the
  278  transaction process.
  279         2.Current use of blockchain analytics to prevent transfers
  280  to wallet addresses linked to known criminal activity.
  281  
  282  Any renewal registration made pursuant to this subsection
  283  becomes effective upon the date the office approves the
  284  application for registration. The office shall approve the
  285  renewal registration within a time period prescribed by rule.
  286         (7)Failure to submit an application to renew the virtual
  287  currency kiosk business’s registration within 60 days after the
  288  registration becomes inactive pursuant to subsection (5) shall
  289  result in the registration becoming null and void. If the
  290  registration is null and void, a new application to register the
  291  virtual currency kiosk business pursuant to subsection (1) must
  292  be submitted to the office and a certification of registration
  293  must be issued by the office before the virtual currency kiosk
  294  business may conduct business in this state.
  295         (8)If a control person of a registrant or prospective
  296  registrant has engaged in any unlawful business practice, or
  297  been convicted or found guilty of, or pled guilty or nolo
  298  contendere to, regardless of adjudication, a crime involving
  299  dishonest dealing, fraud, acts of moral turpitude, or other acts
  300  that reflect an inability to engage lawfully in the business of
  301  a registered virtual currency kiosk business, the office must
  302  deny the prospective registrant’s initial registration
  303  application or the registrant’s renewal application.
  304         (9)A virtual currency kiosk business that submits a
  305  renewal application and fails to provide evidence of compliance
  306  upon request pursuant to paragraph (4)(b) or as required in
  307  paragraph (6)(b) shall have its application denied by the
  308  office.
  309         (10)Any false statement made by a virtual currency kiosk
  310  business with respect to the name of the business or its
  311  business address or location in any application for registration
  312  under this section renders the registration void. A void
  313  registration may not be construed as creating a defense to any
  314  prosecution for violation of this chapter.
  315         (11)The commission may adopt rules to administer this
  316  section.
  317         Section 7. Section 560.504, Florida Statutes, is created to
  318  read:
  319         560.504Disclosures.—
  320         (1)Disclosures or attestations required by this section
  321  and displayed by a virtual currency kiosk must meet all of the
  322  following requirements:
  323         (a)Be full and complete.
  324         (b)Contain no material misrepresentations.
  325         (c)Be readily understandable and in the language in which
  326  the virtual currency kiosk transaction is conducted.
  327         (d)Be displayed in at least 14-point type.
  328         (2)Before authorizing a customer to initiate a virtual
  329  currency kiosk transaction, the owner-operator shall ensure that
  330  the virtual currency kiosk displays the disclosures in this
  331  section on two separate screens:
  332         (a)The first disclosure must be in substantially the
  333  following form:
  334  
  335         WARNING: CONSUMER FRAUD OFTEN STARTS WITH CONTACT FROM
  336         A STRANGER WHO IS INITIATING A DISHONEST SCHEME.
  337  
  338         I UNDERSTAND THAT DISHONEST SCHEMES MAY APPEAR IN MANY
  339         FORMS, INCLUDING, BUT NOT LIMITED TO:
  340         1.Claims of a frozen bank account or credit
  341         card.
  342         2.Fraudulent bank transactions.
  343         3.Claims of identity theft or job offerings in
  344         exchange for payments.
  345         4.Requests for payments to government agencies
  346         or companies.
  347         5.Requests for disaster relief donations or
  348         loans.
  349         6.Offers to purchase tickets for lotteries,
  350         sweepstakes, or drawings for vehicles.
  351         7.Prompts to click on desktop pop-ups, such as
  352         virus warnings or communication from alleged familiar
  353         merchants.
  354         8.Communication from someone impersonating a
  355         representative of your bank or a law enforcement
  356         officer.
  357         9.Requests from persons who are impersonating
  358         relatives or friends in need or promoting investment
  359         or romance scams.
  360  
  361         PROTECT YOURSELF FROM FRAUD. NEVER SEND MONEY TO
  362         SOMEONE YOU DON’T KNOW.
  363  
  364         (b)The second disclosure must be in substantially the
  365  following form:
  366  
  367         WARNING: FUNDS LOST DUE TO USER ERROR OR FRAUD MAY NOT
  368         BE RECOVERABLE. TRANSACTIONS CONDUCTED ON THIS VIRTUAL
  369         CURRENCY KIOSK ARE IRREVERSIBLE. I UNDERSTAND THESE
  370         RISKS AND WISH TO CONTINUE WITH CONDUCTING MY VIRTUAL
  371         CURRENCY KIOSK TRANSACTION.
  372  
  373         PROTECT YOURSELF FROM FRAUD. NEVER SEND MONEY TO
  374         SOMEONE YOU DON’T KNOW.
  375  
  376         (3)(a)After the disclosures provided in subsection (2) are
  377  acknowledged by the customer, the virtual currency kiosk
  378  business shall ensure that the virtual currency kiosk displays
  379  on a pop-up window the following question to the customer: “ARE
  380  YOU USING THIS KIOSK TO SEND VIRTUAL CURRENCY TO A WALLET OWNED
  381  BY SOMEONE ELSE?”
  382         (b)The virtual currency kiosk business shall require the
  383  customer to respond to the question in paragraph (a) with a “no”
  384  response before the customer can proceed to the attestation
  385  required in subsection (4).
  386         (c)The virtual currency kiosk business shall ensure that
  387  the virtual currency kiosk terminates a customer’s virtual
  388  currency kiosk transaction if the customer provides a “yes”
  389  response to the question in paragraph (a).
  390         (4)After the disclosure provided in subsection (2) and,
  391  with respect to virtual currency kiosk businesses, an answer of
  392  “no” to the question provided in paragraph (3)(a), the owner
  393  operator must ensure that the virtual currency kiosk displays,
  394  on a screen by itself, a toll-free number for the customer to
  395  contact regarding the risk of engaging in virtual currency
  396  transactions and the following attestation in substantially the
  397  following form:
  398  
  399         I ATTEST THAT I HAVE BEEN GIVEN A TOLL-FREE NUMBER AND
  400         THAT I HAVE HAD AN OPPORTUNITY TO CALL THE NUMBER TO
  401         SPEAK WITH SOMEONE REGARDING THE RISKS OF ENGAGING IN
  402         VIRTUAL CURRENCY KIOSK TRANSACTIONS. I FURTHER ATTEST
  403         THAT I UNDERSTAND THAT I MAY BE SOLELY RESPONSIBLE FOR
  404         LOSS OF FUNDS DUE TO USER ERROR OR FRAUD.
  405  
  406         (a)If a customer makes the attestation in this subsection,
  407  the virtual currency kiosk may allow the customer to proceed
  408  with the virtual currency kiosk transaction.
  409         (b)If the customer does not make the attestation in this
  410  subsection, the owner-operator must ensure that the virtual
  411  currency kiosk terminates the customer’s virtual currency kiosk
  412  transaction.
  413         (5)The commission may adopt rules to administer this
  414  section and to ensure that virtual currency kiosk disclosures
  415  are responsive to consumer fraud and emerging technology.
  416         Section 8. Section 560.505, Florida Statutes, is created to
  417  read:
  418         560.505Conduct of business.—
  419         (1)An owner-operator may transact business under this part
  420  only under the legal name by which such business is registered.
  421  The use of a fictitious name is allowed if the fictitious name
  422  has been registered with the Department of State and disclosed
  423  to the office as part of an initial registration or license
  424  application, or subsequent amendment to the application, before
  425  its use.
  426         (2) An owner-operator must maintain clearly documented
  427  policies, processes, and procedures with regard to the manner in
  428  which the blockchain analytics activity integrates into their
  429  compliance controls. An owner-operator must use blockchain
  430  analytics to prevent transfers to wallet addresses linked to
  431  known criminal activity.
  432         Section 9. Section 560.506, Florida Statutes, is created to
  433  read:
  434         560.506Penalties.—
  435         (1)An owner-operator of a virtual currency kiosk which
  436  violates s. 560.504 commits a felony of the third degree,
  437  punishable as provided in s. 775.082, s. 775.083, or s. 775.084.
  438         (2)Each of the following violations constitutes a
  439  misdemeanor of the second degree, punishable as provided in s.
  440  775.082 or s. 775.083:
  441         (a)Operating a virtual currency kiosk under any name other
  442  than that designated in the registration, unless written
  443  notification is given to the office.
  444         (b)Assigning or attempting to assign a virtual currency
  445  kiosk business registration issued under this part.
  446         (c)Operating a virtual currency kiosk without the use of
  447  blockchain analytics as required under s. 560.505.
  448         (3)In addition to the criminal penalties provided for
  449  under this section, a court may invalidate the registration of
  450  any registrant under this part who has been found guilty of
  451  conduct prohibited in subsection (1) or subsection (2).
  452         Section 10. Except as otherwise expressly provided in this
  453  act, this act shall take effect January 1, 2025.

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