Bill > A1392

Introduced Session

This bill requires digital currency businesses operating in New Jersey to register with the Department of Banking and Insurance and establishes certain consumer protections. Under the bill, "digital currency" means any type of digital unit that, regardless of legal tender status, has no administrator and is: (1) used as a currency, medium of exchange or stored value; or (2) used as a substitute for government currency. The bill excludes from the definition of "digital currency": (1) digital units that have nominal or no value as a currency or medium of exchange and are not used as a substitute for government currency; (2) digital units that can be used solely with a gift card program; (3) digital units that are used solely within online gaming platforms and have no market or application outside of those gaming platforms, or can be redeemed for real-world goods, services, discounts, or purchases, but cannot be converted into, or redeemed for government currency or digital currency; or (4) digital units that are used solely within an affinity program but do not otherwise meet the definition of digital currency as defined in the bill. The bill provides that a person engaged in digital currency business activity is required to complete a registration under the bill. Qualified trust companies and payment processors are not required to register. The registration is to be in writing, under oath, and completed in a form prescribed by the department, and is required to contain certain information including: (1) the exact name of the registrant, the form of organization, and the jurisdiction where organized or incorporated; (2) a list of the registrants, affiliates, and an organization chart illustrating the relationship between and among the registrant and its affiliates; (3) fingerprints and photographs of key members of the registrant's organization; (4) an organization chart of the registrant and its management structure; (5) a business plan; and (6) a registration fee set by the Commissioner of Banking and Insurance. Registrants are required to maintain and enforce confidential, written compliance policies, including policies with respect to anti-fraud, anti-money laundering, cyber security, privacy and information security, which shall be reviewed and approved by the registrant's board of directors or an equivalent governing body. The bill includes further consumer protections, including a requirement that the registrant hold digital currency of the same type and amount as that which it has custody from any person. Registrants are prohibited from selling, transferring, assigning, lending, hypothecating, pledging, or otherwise using or encumbering any digital currency, the custody of which is maintained for a New Jersey person, except for the sale, transfer, or assignment of such assets at the direction of such person. Registrants are required to make, keep, and preserve all of its books and records of its digital currency business activity in their original form or native file format for a period of at least five years from the date of their creation and in a condition that will allow the department to determine whether the registrant is complying with all applicable laws, rules, and regulations. The bill prohibits registrants from advertising its products, services, or activities in New Jersey or to any New Jersey person without including the legal name of the registrant and the legend that such registrant is a "registered New Jersey digital currency custodian." The registrant shall maintain, for examination by the commissioner, all advertising and marketing materials for a period of at least seven years from the date of their creation, including but not limited to print media, internet media, including websites, radio and television advertising, road show materials, presentations, and brochures. The bill provides that registrants must, prior to engaging in digital currency business activity with any customer, disclose in clear, conspicuous writing all material risks and relevant terms and conditions to the customer associated with the particular digital currency business activities in which it engages. Certain risks and relevant terms and conditions that must be disclosed are listed in the bill. Registrants must also establish and maintain written policies and procedures to fairly and timely resolve customer complaints. The department is also directed to include information on the department's website describing the material risks associated with engaging in digital currency business activity. The bill also provides for penalties for a violation of the bill's provisions, which include allowing the Commissioner of Banking and Insurance to seek injunctive relief and a civil penalty in an amount not to exceed $5,000 for each violation.

Committee Categories

Roy Freiman (D)*,  Yvonne Lopez (D)*,  Carol Murphy (D)*, 

Introduced, Referred to Assembly Science, Innovation and Technology Committee (on 01/14/2020)