THE SENATE |
S.B. NO. |
2225 |
TWENTY-NINTH LEGISLATURE, 2018 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to virtual currency.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Section 489D-4, Hawaii Revised Statutes, is amended as follows:
1. By adding five new definitions to be appropriately inserted and to read:
""Exchange", in
the context of virtual currency, means to assume control of virtual currency
from or on behalf of a person in the State, at least momentarily, to sell,
trade, or convert:
(1) Virtual
currency for money, monetary value, or one of more forms of virtual currency;
or
(2) Money or
monetary value for one or more forms of virtual currency.
"Money" means a medium
of exchange or unit of value, including coin or paper money, issued by the
United States or another country or union of countries recognized by the United
States.
"Store" or
"storage", in the context of virtual currency, means maintaining
control of virtual currency on behalf of another person.
"Transfer", in the
context of virtual currency, means to assume control of virtual currency from
or on behalf of a person in the State and to:
(1) Credit the
virtual currency to the account of another person;
(2) Move the
virtual currency from one account of the person to another account of the same
person; or
(3) Relinquish
control of virtual currency to another person.
"Virtual currency"
means a digital representation of value that is used as a medium of exchange,
unit of account, or store of value; and is not money, regardless of whether
denominated in money. "Virtual
currency" does not include:
(1) Units of value
that are issued in affinity or rewards programs that cannot be redeemed for
either money or virtual currencies; or
(2) Units of value that are used solely within online gaming platforms that have no market or application outside of the gaming platforms."
2. By amending the definition of "control" to read:
""Control" means:
(1) In reference to
a person, ownership of, or the power to vote, twenty-five per cent or more
of the outstanding voting securities of a licensee or controlling person. For purposes of determining the percentage of
a licensee controlled by any person, there shall be aggregated with the
controlling person's interest the interest of any other person controlled by
the person, or by any spouse, parent, or child of the person[.]; and
(2) In reference to a transaction or relationship involving virtual currency, power to execute unilaterally or prevent indefinitely a virtual currency transaction."
3. By amending the definition of "monetary value" to read:
""Monetary value"
means a medium of exchange, regardless of whether [or not]
redeemable in money[.] and includes virtual currency."
4. By amending the definition of "money transmission" to read:
""Money transmission" means to engage in the business of:
(1) Selling or issuing payment instruments; or
(2) Receiving money or monetary value for transmission, transfer, exchange, or delivery to a location within or outside the United States by any and all means, including wire, Internet, facsimile, or electronic transfer.
Money transmission does not apply to courier services. Money transmission does not include solely providing connection services to the Internet, telecommunications services, or network access."
5. By amending the definition of "outstanding payment obligation" to read:
""Outstanding payment obligation" means:
(1) Any payment instrument issued by the licensee that has been sold in the United States:
(A) Directly
by the licensee; or
(B) By
an authorized delegate of the licensee in the United States, which has been
reported to the licensee as having been sold,
and that has not yet been paid by or for the licensee; and
(2) All
other [outstanding] money transmission obligations [of] that
the licensee has issued, or has agreed to transmit, deliver, or
instruct to be delivered, in the United States[.] that have not
been fully performed by the licensee."
6. By amending the definition of "permissible investments" to read:
""Permissible investments" means:
(1) Cash;
(2) Certificates of deposit or other debt obligations of a financial institution, either domestic or foreign;
(3) Bills of exchange or time drafts drawn on and accepted by a commercial bank, known as bankers' acceptances, that are eligible for purchase by member banks of the Federal Reserve System;
(4) Any investment bearing a rating of one of the three highest grades as defined by a nationally recognized organization that rates securities;
(5) Investment securities that are obligations of the United States, its agencies, or its instrumentalities, obligations that are guaranteed fully as to principal and interest by the United States, or any obligations of any state, municipality, or any political subdivision thereof;
(6) Shares in a money market mutual fund, interest-bearing bills, notes, or bonds, debentures or stock traded on any national securities exchange or on a national over-the-counter market, mutual funds primarily composed of these securities, or a fund composed of one or more permissible investments as set forth in paragraphs (1) to (5);
(7) Any demand borrowing agreement or agreements made with a corporation or a subsidiary of a corporation whose capital stock is listed on a national exchange;
(8) Receivables that
are due to a licensee from its authorized delegates pursuant to a contract
under section 489D-21, that are not past due or doubtful of collection; [or]
(9) Virtual
currency subject to this chapter; or
[(9)] (10) Any other investments or security
device approved by the commissioner."
SECTION 2. Section 489D-8, Hawaii Revised Statutes, is amended to read as follows:
"§489D-8 Permissible
investments and statutory trust. (a) A licensee, at all times, shall possess
permissible investments having an aggregate market value, calculated in
accordance with generally accepted accounting principles, of not less than the
aggregate amount of all outstanding payment obligations. This requirement may be waived by the commissioner
if the dollar volume of a licensee's outstanding payment obligations does not
exceed the bond or other security devices posted by the licensee pursuant to
section 489D-7.
(b)
In lieu of the permissible investments required in subsection (a), a
licensee, in connection with storage or transfer of virtual currency, may
possess like-kind virtual currency of the same volume as the outstanding
payment obligations of the licensee contracted to be completed in virtual
currency.
(c)
A licensee transmitting money and virtual currency shall maintain
applicable levels and types of permissible investments as described in
subsections (a) and (b).
(d)
The commissioner, with respect to any money transmitter licensee, may
limit the extent to which a type of investment within a class of permissible
investments may be considered a permissible investment, except for money, time
deposits, savings deposits, demand deposits, and certificates of deposit issued
by a federally insured financial institution.
The commissioner may prescribe by rule, or allow by order, other types
of investments that the commissioner determines to have a safe and sound
equivalent to other permissible investments.
[(b)] (e) Permissible investments, even if commingled
with other assets of the licensee, shall be held in trust for the benefit of
the purchasers and holders of the licensee's outstanding payment obligations in the event of the
bankruptcy of the licensee."
SECTION 3. Section 489D-9, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:
"(d) An application for a license under this chapter shall be made in writing, and in a form prescribed by NMLS or by the commissioner. Each application shall contain the following:
(1) For all applicants:
(A) The exact name of the applicant, any fictitious or trade name used by the applicant in the conduct of its business, the applicant's principal address, and the location of the applicant's business records;
(B) The history of the applicant's material litigation and criminal convictions for the five-year period prior to the date of the application;
(C) A description of the business activities conducted by the applicant and a history of operations;
(D) A description of the business activities in which the applicant seeks to engage within the State;
(E) A list identifying the applicant's proposed authorized delegates in the State, if any, at the time of the filing of the license application;
(F) A sample authorized delegate contract, if applicable;
(G) A sample form of payment instrument, if applicable;
(H) The locations where the applicant and its authorized delegates, if any, propose to conduct their licensed activities in the State;
(I) The name and address of the clearing bank or banks on which the applicant's payment instruments will be drawn or through which payment instruments will be payable;
(J) Disclosure of any pending or final suspension, revocation, or other enforcement action by any state or governmental authority for the five-year period prior to the date of the application; and
(K) Any other information the commissioner may require;
(2) If the applicant is a corporation, the applicant shall also provide:
(A) The date of the applicant's incorporation and state of incorporation;
(B) A certificate of good standing from the state in which the applicant was incorporated;
(C) A description of the corporate structure of the applicant, including the identity of any parent or subsidiary company of the applicant, and the disclosure of whether any parent or subsidiary company is publicly traded on any stock exchange;
(D) The name, business and residence address, and employment history, for the past five years, of the applicant's principals, and each person who upon approval of the application will be a principal of the licensee;
(E) For the five-year period prior to the date of the application, the history of material litigation involving, and criminal convictions of, each principal of the applicant;
(F) A copy of the applicant's most recent audited financial statement, including balance sheets, statements of income or loss, statements of changes in shareholder equity, and statements of changes in financial position, and, if available, the applicant's audited financial statements for the preceding two-year period or, if the applicant is a wholly owned subsidiary of another corporation, either the parent corporation's consolidated audited financial statements for the current year and for the preceding two-year period, or the parent corporation's Form 10-K reports filed with the United States Securities and Exchange Commission for the prior three years in lieu of the applicant's financial statements, or if the applicant is a wholly owned subsidiary of a corporation having its principal place of business outside the United States, similar documentation filed with the parent corporation's non-United States regulator;
(G) Copies of all filings, if any, made by the applicant with the United States Securities and Exchange Commission, or with a similar regulator in a country other than the United States, within the year preceding the date of filing of the application; and
(H) Information
necessary to conduct a criminal history record check in accordance with section
846-2.7 of each person who upon approval of the application will be a principal
of the licensee, accompanied by the appropriate payment of the applicable fee
for each record check; [and]
(3) If the applicant is not a corporation, the applicant shall also provide:
(A) The name, business and residence address, personal financial statement, and employment history, for the past five years, of each principal of the applicant;
(B) The name, business and residence address, and employment history, for the past five years, of any other persons who upon approval of the application will be a principal of the licensee;
(C) The place and date of the applicant's registration or qualification to do business in this State;
(D) The history of material litigation and criminal convictions for the five-year period before the date of the application for each principal of the applicant;
(E) Copies of the applicant's audited financial statements, including balance sheets, statements of income or loss, and statements of changes in financial position for the current year and, if available, for the preceding two-year period; and
(F) Information
necessary to conduct a criminal history record check in accordance with section
846-2.7 of each principal of the applicant, accompanied by the appropriate
payment of the applicable fee for each record check[.]; and
(4) If the applicant's business model transfers or stores virtual currency on behalf of others, the applicant shall also provide a third party security audit of all electronic information and data systems acceptable to the commissioner."
SECTION 4. Section 489D-12, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) The annual license fee shall be accompanied by a report, in a form prescribed by the commissioner, which shall include:
(1) A copy of the
licensee's most recent audited annual financial statement, including balance
sheets, statement of income or loss, statement of changes in shareholder's
equity, and statement of cash flows or, if a licensee is a wholly owned
subsidiary of another corporation, the consolidated audited annual financial
statement of the parent corporation in lieu of the licensee's audited annual
financial statement[;]. If the
applicant's business model transfers or stores virtual currency on behalf of
others, the applicant shall also provide a third party security audit of all
electronic information and data systems acceptable to the commissioner;
(2) For the most recent quarter for which data is available prior to the date of filing the annual report, but in no event more than one hundred twenty days prior to the renewal date, the licensee shall provide the number of money transmissions sold, issued, or received for transmission, transfer, exchange, or delivery by the licensee in the State, and as applicable, the dollar amount and monetary value of those transmissions, and the dollar amounts and monetary value of outstanding payment obligations;
(3) Any material changes to any of the information submitted by the licensee on its original application that have not previously been reported to the commissioner on any other report required to be filed under this chapter;
(4) For the most
recent quarter for which data is available prior to the date of filing the
annual report, but in no event more than one hundred twenty days prior to the
renewal date, a list of the licensee's permissible investments, including the
total market value of each type of permissible investment, and the total dollar
amount and monetary value of all outstanding payment obligations[;],
as applicable;
(5) A list of the locations, if any, within this State where business regulated by this chapter is being conducted by either the licensee or the licensee's authorized delegates;
(6) Disclosure of any pending or final suspension, revocation, or other enforcement action by any state or governmental authority;
(7) The licensee's evidence of a valid bond or other security device as required pursuant to section 489D‑7; and
(8) Any other information the commissioner may require.
A license may be renewed by filing a renewal statement on a form prescribed by NMLS or by the commissioner and paying a renewal fee at least four weeks prior to the renewal date for licensure for the following year."
SECTION 5. Section 489D-18, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) Each licensee shall make, keep, preserve, and make available for inspection by the commissioner the following books, accounts, and other records for a period of three years:
(1) A record or
records of each payment instrument[;] and other money transmission;
(2) A general ledger containing all assets, liability, capital, income, and expense accounts that shall be posted at least monthly;
(3) Bank statements and bank reconciliation records;
(4) Records of all outstanding payment obligations;
(5) Records of each payment instrument and other money transmission paid within the three-year period;
(6) A list of the names and addresses of all of the licensee's authorized delegates; and
(7) Any other records the commissioner reasonably requires by rule adopted pursuant to chapter 91."
SECTION 6. Section 489D-20, Hawaii Revised Statutes, is amended to read as follows:
"[[]§489D-20[]]
Money transmitter receipts and refunds. (a)
Each licensee who receives money or monetary value for transmission and
the licensee's authorized delegates shall transmit the monetary equivalent of
all money or equivalent value received from a customer for transmission, net of
any fees, or issue instructions committing the money or its monetary
equivalent, to the person designated by the customer within ten business days
after receiving the money or equivalent value, unless otherwise ordered by the
customer or unless the licensee or its authorized delegate has reason to
believe that a crime has occurred, is occurring, or may occur as a result of
transmitting the money.
(b) Each licensee who receives money or monetary value for transmission and the licensee's authorized delegates shall provide a receipt to the customer that clearly states the amount of money or equivalent value presented for transmission and the total of the fees charged by the licensee. If the rate of exchange for a money transmission to be paid in the currency of another country is fixed by the licensee for that transaction at the time the money transmission is initiated, the receipt provided to the customer shall disclose the rate of exchange for that transaction, and the duration, if any, for the payment to be made at that fixed rate of exchange. If the rate of exchange for a money transmission to be paid in the currency of another country is not fixed at the time the money transmission is sent, the receipt provided to the customer shall disclose that the rate of exchange for that transaction will be set at the time the recipient of the money transmission picks up the funds in the foreign country.
(c) For purposes of this section:
(1) Money is considered to have been transmitted when it is available to the person designated by the customer, whether or not the designated person has taken possession of the money;
(2) "Monetary equivalent", when used in connection with a money transmission in which the customer provides the licensee or its authorized delegate with the money of one government, and the designated recipient is to receive the money of another government, means the amount of money, in the currency of the government that the designated recipient is to receive, as converted at the retail exchange rate offered by the licensee or its authorized delegate to the customer in connection with the transaction; and
(3) "Fees" do not include revenue that a licensee or its authorized delegate generates, in connection with a money transmission, in converting the money of one government into the money of another government.
(d) Each licensee who receives money or monetary value for a money transmission and the licensee's authorized delegates shall refund to a customer all moneys received for transmittal within ten days of receipt of a written request for a refund unless any of the following occurs:
(1) The moneys have been transmitted and delivered to the person designated by the customer prior to receipt of the written request for a refund;
(2) Instructions have been given committing an equivalent amount of money to the person designated by the customer prior to receipt of a written request for a refund;
(3) The licensee or its authorized delegate has reason to believe that a crime has occurred, is occurring, or may occur as a result of transmitting the money as requested by the customer or refunding the money as requested by the customer; or
(4) The licensee is otherwise barred by law from making a refund.
(e) Before entering into any agreement to perform
money transmission involving virtual currency, a licensee shall obtain the
customer's agreement that contains the following language, and retain it as a
record pursuant to section 489D-18:
"Most
virtual currencies are based on computer cryptography and derive their value
solely from the market's perception of their value, which can experience great
swings. These currencies are:
(1) Not backed by
any physical commodity, such as gold or silver;
(2) Not backed by
the United States or any other national government;
(3) Not legal
tender for debts; and
(4) Not insured by
the Federal Deposit Insurance Corporation or any government agency.
You should be aware that there is the potential for consumers to lose all of their virtual currency. Though cash can also be lost, with virtual currency this loss can occur because of a computer failure, malicious software attack, an attack, closure, or disappearance of a virtual currency exchange company, lack of security, loss of your private key, or a sudden or dramatic change in value, as just a few examples. Some virtual currency users have been unable to access their legitimate virtual currency account because of heavy traffic by other users, or a prevalence of criminal activity in virtual currency use. To protect yourself, become educated as to potential risks before deciding whether you want to transact in virtual currency.""
SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 8. This Act shall take effect on July 1, 2018.
INTRODUCED BY: |
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Report Title:
Money Transmitters; Virtual Currency
Description:
Amends the laws relating to money transmitters to include virtual currency as a money transmission.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.