Bill > A2155

Introduced Session

This bill, the "Digital Currency Jobs Creation Act," establishes a regulatory framework for digital currency businesses to operate in New Jersey and creates certain incentives for digital currency businesses to locate in the State. The bill defines a "digital currency servicer" to mean: (1) any person who, as its primary business, engages in digital currency creation, including mining; (2) any person who, as its primary business, engages in the provision of a distributed digital verification system; or (3) any registrant under this bill. 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 herein. The bill prohibits a municipality from prohibiting, abridging, levying a tax upon, or otherwise restricting the creation, retention, transmission or any other use of the digital currency within the State, except as otherwise provided for in the bill. The bill provides that no person shall, without completing a registration as set forth in the bill, engage in any digital currency custodial activity for more than 30 days. Qualified trust companies and payment processors are not required to register. Only a person engaging in digital currency custodial activity as its primary business is permitted to complete a registration under the bill. The registration is to be in writing, under oath, and completed in a form prescribed by the Department of Banking and Insurance, 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 application and its affiliates; (3) fingerprints and photographs of key members of the applicant'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. The bill requires each registrant to establish and maintain an effective cyber security program to ensure the availability and functionality of the registrant's electronic systems and to protect those systems and any sensitive data stored on those systems from unauthorized access or tampering. Each registrant is required to designate a qualified employee to serve as the registrant's Chief Information Security Officer responsible for overseeing and implementing the registrant's cyber security program and enforcing its cyber security policy. Registrants are also 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 custodial 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 superintendent, 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 custodial 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 custodial 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 bill also provides certain incentives for digital currency businesses to locate in New Jersey. The bill exempts receipts from retail sales of energy and utility service to a digital currency servicer or registrant for use or consumption directly and primarily in the creation of digital currency, including mining, from the tax imposed under New Jersey's "Sales and Use Tax Act." The bill provides that a digital currency servicer or registrant may file an application for a sales and use tax exemption with the Director of the Division of Taxation in the Department of the Treasury. The "Grow New Jersey Assistance Act," N.J.S.A.34:1B-242, provides certain business and insurance premiums tax credits for job creation and retention in New Jersey. For the purposes of the "Grow New Jersey Assistance Act," the bill designates digital currency servicers and registrants registered pursuant to this bill's provisions to be in a "targeted industry" and a "technology startup company." Therefore, in order for a digital currency servicer to be eligible for that program, the minimum number of new or retained full-time jobs would be a minimum of 10 new or 25 retained full-time jobs, which is less than is required for certain other types of business. Digital currency servicers and registrants would also be eligible for, in addition to the base amount of the tax credit, an additional $5,000 for each new or retained full-time job each year. Current law, N.J.S.A.54:48-4.3, allows the Director of the Division of Taxation to establish an electronic funds transfer system for payments of State taxes. The bill amends the definition of "electronic funds transfer" to include any transfer of digital currency. Thus, this change would allow the director to accept digital currency in the payment of State taxes. 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.

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Annette Chaparro (D)*,  Gordon Johnson (D)*,  Raj Mukherji (D)*, 

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