Bill > A2891

Introduced Session

This bill, the "Digital Asset and Blockchain Technology Act," regulates digital asset business activity. The bill defines "digital asset" to mean a representation of economic, proprietary, or access rights that is stored in a machine-readable format, has a transaction history that is recorded in a distributed, digital ledger or digital data structure in which consensus is achieved through a mathematically verifiable process. Examples of digital assets include digital consumer assets, digital securities, and virtual currency. The bill provides that a person may not engage in a digital asset business activity, or hold itself out as being able to engage in a digital asset business activity, with or on behalf of a resident unless the person is licensed in this State by the Department of Banking and Insurance, or has filed a pending license with the department, or licensed in another state to conduct digital asset business activity by a state with which this state has a reciprocity agreement. The bill provides the department may license a person to carry on one or more of the following digital asset business activities: (1) receiving a digital asset for transmission or transmitting a digital asset, except where the transaction is undertaken for non-financial purposes and does not involve the transfer of more than a nominal amount of a digital asset; (2) storing, holding, or maintaining custody of a digital asset on behalf of others, exempting all custodians otherwise regulated as a bank, trust, broker-dealer, or financial institution in any state or by the United States; (3) buying and selling digital assets as a customer business; (4) performing exchange services of digital assets as a customer business; (5) administering or issuing a digital asset; or (6) borrowing or lending, or facilitating the borrowing or lending of, of customer digital assets. The bill provides that a person who violates the provisions requiring licensure is liable for a penalty of $500 per day, from the first day the department issues a notice of failure to apply a license until a license application is filed with the department. The bill provides that an application for a license must be made in the form and medium to be prescribed by the department by regulation. Each application must be accompanied by a nonrefundable fee. Applicants must provide certain information relevant to the applicant's proposed digital asset business activity. For good cause, the department may waive any required information, and may permit an applicant to submit other information instead of the required information. The bill provides that a person licensed by another state to engage in digital asset business activity in that state may engage in digital asset business activity with or on behalf of a resident of New Jersey to the same extent as a licensee if: (1) the department determines that the state in which the person is licensed has in force laws regulating digital asset business activity that are substantially similar to, or more protective of users than, this act; and (2) the person submits certain information and certifications to the department. The bill requires the department to grant or deny any digital asset business license application or license reciprocity application within 30 days of its receipt. The department may refuse an application for a digital asset business license or license reciprocity application if a licensee or applicant fails to meet certain standards specified in the bill. Licenses issued pursuant to the bill are not transferrable or assignable. The bill provides standards for the annual renewal of digital asset business licenses. Licensees are required to submit a renewal report that contains an update of all information required at initial licensing and a description of any: (1) material change in the financial condition of the licensee; (2) material litigation involving the licensee or an executive officer, responsible individual, or controlling person of the licensee; (3) license suspension or revocation proceeding commenced, or other action taken, involving a license to conduct digital asset business activity issued by another state on which reciprocal licensing is based; (4) federal or state investigation involving the licensee; (5) material change in the business of the licensee; and (6) changes to the executive officers of the licensee. The bill provides that the department may audit any digital asset business licensee. The department may suspend or revoke a digital asset business license upon certain findings that. The bill provides that the department may issue general guidance to industry participants on how to best protect the interests of clients. Under the bill, any denial, suspension, or revocation of a license, or warning notice issued by the department is to prominently indicate that a right of appeal is available. A licensee or prospective licensee which is aggrieved by a decision of the department may appeal the decision by filing a request for a hearing before the Office of Administrative Law. The bill requires the terms and conditions of a digital asset business involving a consumer's account to be disclosed at the time the consumer contracts for a digital asset business service. The disclosure must be full and complete, contain no material misrepresentations, be in readily understandable language and may include, as appropriate and to the extent applicable, certain information concerning fees and charges, risks to the consumer, and any protections or securities that are in place. The disclosures required by the bill must be displayed and individually agreed to by a consumer before any digital asset transaction at an electronic kiosk. Any fee to be charged is required to be displayed and individually agreed to by a consumer before any digital asset transaction or digital asset balance inquiry at an electronic kiosk. Under the bill, for purposes of calculating net gains or income and dividends pursuant to N.J.S.54A:5-1, gross income does not include: (1) up to $1,000 of gains or income from the sale or exchange of digital assets for other than legal tender, except that following the first taxable year that the bill is in effect, the $1,000 limit is to be increased annually by $50; or (2) up to $250 of dividend distributions in the form of digital assets arising from the ownership of digital assets, except that following the first taxable year that the bill is in effect, the $250 limit is to be increased annually by $20.

AI Summary

Committee Categories

Joe Danielsen (D)*,  Tom Kean (R)*,  Yvonne Lopez (D)*,  Nellie Pou (D)*,  Troy Singleton (D)*,  Andrew Zwicker (D)*,  Linda Greenstein (D),  Gordon Johnson (D),  Valerie Vainieri Huttle (D), 

Received in the Assembly, 2nd Reading on Concurrence (on 12/20/2021)

Official Document