A2371

An Act concerning digital assets and blockchain technology, amending P.L.2005, c.199, and supplementing Title 17 of the Revised Statutes and chapter 6 of Title 54A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. This act shall be known and may be cited as the “Digital Asset and Blockchain Technology Act.”

2. “Agent” means a separate business entity from the principal that the principal authorizes, through a written agreement or otherwise, to sell its instruments or, in the case of funds transmission, to sell its send and receive transfer services.

“Control” means the ownership of, or the power to vote, 25 percent or more of the outstanding voting interest 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 person’s interest the interest of any other person controlled by that person or by any spouse, parent, or child of that person.

“Controlling person” means any person in control of a licensee.

“Department” means the Department of Banking and Insurance.

“Digital asset” means 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, and includes digital consumer assets and virtual currency. “Digital asset” shall not include securities, whether in digital form or otherwise, as defined pursuant to subsection m. of section 2 of P.L.1967, c.93 (C.49:3-49), or as defined pursuant to paragraph (1) of subsection (a) in the federal “Securities Act of 1933,” 15 U.S.C. s.77b(a)(1), or paragraph (10) of subsection (a) of the federal “Securities Exchange Act of 1934,” 15 U.S.C. s.78c(a)(10).

“Digital asset business” means a business that engages in the activities listed in subsection b. of section 3 of this act.

“Digital consumer asset” means a digital asset that is used or bought primarily for consumptive, personal, or household purposes and includes any other digital asset that does not fall within the term virtual currency.

“Issuing” means being the person who has authority over the initial creation and dissemination of a digital asset.

“Key individual” means any individual ultimately responsible for establishing or directing policies and procedures of the licensee, such as the licensee’s president, chairperson of the executive committee, senior officer responsible for the business of the licensee in the State, chief financial officer, an executive manager, director, trustee and any other person who performs similar functions.

“Licensee” means a person licensed under this act or an applicant for licensure under this act.

“Nationwide Multistate Licensing System” means the licensing system owned and operated by the State Regulatory Registry, LLC, a wholly-owned subsidiary of the Conference of State Bank Supervisors, which functions as a system of record for non-depository, financial services licensing or registration in participating state agencies, including the District of Columbia and the United States Territories of Puerto Rico, the US Virgin Islands, and Guam, where it is the official system for companies and individuals seeking to apply for, amend, renew, and surrender license authorities.

“Resident” means a person that is: domiciled in New Jersey; physically located in New Jersey for more than 183 days of the previous 365 days; or a limited partnership, limited liability partnership, limited liability company, or corporation formed or incorporated in New Jersey.

“Responsible individual” means an individual who has managerial authority with respect to a licensee’s digital asset business activity with or on behalf of a resident.

“Transmission” means to engage in the business of receiving monetary value for transmission to a location inside or outside of the United States by any means, including, but not limited to, wire, facsimile, or electronic transfer.

“Virtual currency” means a digital asset that is used as a medium of exchange, unit of account, or store of value, and is not recognized as legal tender by the United States government.

3. a. A person shall 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, or has filed a pending license with the department.

b. 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 credit union in any state or by the United States or money transmitter licensed in this State;

(3) buying and selling digital assets as a customer business;

(4) performing exchange services of digital assets as a customer business;

(5) issuing a digital asset; or

(6) borrowing or lending of, or facilitating the borrowing or lending of, customer digital assets.

c. A person who violates this section shall be 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.

4. a. An application for a license under this act shall be submitted through the Nationwide Multistate Licensing System made in the form and medium to be prescribed by the department by regulation, utilizing the Nationwide Multistate Licensing System. The department shall require each application to be accompanied by a nonrefundable fee.

b. An applicant shall provide the following information relevant to the applicant’s proposed digital asset business activity:

(1) the legal name of the applicant, each current or proposed business address of the applicant, and any fictitious or trade name the applicant uses or plans to use in conducting its digital asset business activity with or on behalf of a resident;

(2) the legal name, any former or fictitious name, and the residential and business address of each executive officer and responsible individual of the applicant, and each controlling person of the applicant;

(3) a concise description of the current and former business of the applicant for the five years before the application is submitted or if the business has operated for less than five years, for the time the business has operated, including its products and services and the digital asset business services that the applicant seeks to provide in this State;

(4) the name, address, and telephone number of a person who manages each server the applicant expects to use in conducting its digital asset business activity with or on behalf of a resident;

(5) a list of all other states in which the applicant is licensed to engage in the digital asset business and any license revocation, license suspension, or other disciplinary action taken against the licensee in another state and any license applications rejected by another state;

(6) a list of any criminal conviction, deferred prosecution agreement, and pending criminal proceeding in any jurisdiction against the applicant, any executive officer, responsible individual, and controlling person of the applicant, and each person over which the applicant has control;

(7) a list of any litigation, arbitration, or administrative proceeding in any jurisdiction in which the applicant, or an executive officer, responsible individual, or controlling person of the applicant has been a party to for the five years before the application is submitted, determined to be material in accordance with generally accepted accounting principles and, to the extent the applicant would be required to disclose the litigation, arbitration, or administrative proceeding in the applicant’s audited financial statements, reports to equity owners, and similar statements or reports;

(8) a list of any bankruptcy or receivership proceeding in any jurisdiction for the 10 years prior to the application’s submission in which the applicant, any executive officer, responsible individual, or controlling person of the applicant, or person over which the applicant has control, was a debtor;

(9) the United States Postal Service address and electronic mail address to which communications from the department may be sent;

(10) the name, United States Postal Service address, and electronic mail address of the registered agent of the applicant in this State, if applicable;

(11) a copy of any certificate of coverage for each liability, casualty, business-interruption, or cyber-security insurance policy maintained by the applicant for itself or the applicant’s users;

(12) a description of the structure or organization of the applicant, including any parent or subsidiary of the applicant, and whether any parent or subsidiary is publicly traded;

(13) if applicable, the date on which and the state in which the applicant is formed, and a copy of a current certificate of good standing issued by that state;

(14) policies and procedures to be adopted by the applicant to meet any obligations required by anti-money laundering and anti-terror financing laws;

(15) a copy of the applicant’s audited financial statements for the most recent fiscal year and, if available, for the two-year period next preceding the submission of the application;

(16) a copy of the applicant’s unconsolidated financial statements for the current fiscal year, whether audited or not, and if available, for the two-year period next preceding the submission of the application;

(17) if a corporation has control of the applicant and the corporation’s equity interests are publicly traded in the United States, a copy of the audited financial statement of the corporation for the most recent fiscal year or most recent report of the corporation filed under section 13 of the “Securities Exchange Act of 1934,” 15 U.S.C. s.78m;

(18) if a corporation has control of the applicant and the corporation’s equity interests are publicly traded outside the United States, a copy of the audited financial statement of the corporation for the most recent documentation similar to that required in paragraph (17) of this subsection, filed with the foreign regulator in the domicile of the corporation;

(19) if available, for each executive officer, responsible individual, or controlling person of the applicant, for the three years before the application is submitted, the employment history, and the history of any enforcement action against the individual or legal proceeding to which the individual was a party;

(20) a sample form of receipt for transactions that involve money received for the digital asset business;

(21) disclosure of who maintains control, ownership, or access to any private key related to a digital assets consumer’s account and information where the private key is held and the manner in which the private key is held; and

(22) a list of all agents authorized to represent or conduct business on behalf of the digital asset business.

c. At the time of application and within 45 days after the end of each calendar quarter, each digital asset business shall file with the department in writing a list of all agents that have been added or terminated by the licensee, if any. The list shall include the name and business address of each location.

d. The department may conduct a criminal history records check of the applicant, any controlling persons, executive officers, and responsible individuals of the applicant and require the applicant to submit the fingerprints of those persons as part of the application. The department is authorized to exchange fingerprint data with and receive criminal history record information from the State Bureau of Identification in the Division of State Police and the Federal Bureau of Investigation consistent with applicable State and federal laws, rules, and regulations, for the purposes of facilitating determinations concerning licensure eligibility for the applicant, any controlling persons, executive officers, and responsible individuals of the applicant. The applicant shall bear the cost for the criminal history record background check, including all costs of administering and processing the check. The Division of State Police shall promptly notify the department in the event any person who was the subject of a criminal history record background check pursuant to this section, is arrested for a crime or offense in this State after the date the background check was performed, whether the person is a prospective new licensee, or subsequently, a current license holder.

e. No license shall be issued by the department to an individual who has, within the five years preceding the submission of an application for a license, been convicted of embezzlement, forgery, fraud, or theft.

5. a. The department shall grant or deny any digital asset business license application within 120 days of completed application.

b. The department may refuse an application for a digital asset business license or license reciprocity application if:

(1) the application is incomplete in a material respect;

(2) the application includes false, misleading, or inaccurate information;

(3) any applicant, controlling person, key individual, or responsible individual of an applicant has engaged in dishonest or unethical practices in a digital asset business or in the securities commodities, banking, insurance, or investment advisory business; or

(4) any material aspect of the license application as represented by the application requirements contained in section 4 of this act.

c. A license issued pursuant to this act shall not be transferrable or assignable.

6. a. A licensee may apply for an annual renewal of a license by:

(1) paying a renewal fee in an amount determined by the department pursuant to regulation;

(2) submitting to the department through the Nationwide Multistate Licensing System the renewal report required pursuant to subsection b. of this section.

b. A license renewal report required pursuant to this section shall be submitted in a form and medium prescribed by the department by regulation. The report shall contain 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 action involving the licensee;

(5) material change in the business of the licensee; and

(6) changes to the executive officers of the licensee.

c. If a license is suspended for failure to file an annual renewal, the license shall be reinstated if the licensee files a renewal report and pays a fee, in an amount determined by the department pursuant to regulation.

7. a. The department may suspend or revoke a digital asset business license upon finding that:

(1) the department has been provided with false, misleading, or inaccurate information by or on behalf of the licensee;

(2) the clients of a licensee have been provided with false, misleading, or inaccurate information by or on behalf of the licensee;

(3) any controlling person, responsible individual, key individual, or agent of a licensee has engaged in dishonest or unethical practice in a digital asset business or in the securities, commodities, banking, insurance, or investment advisory business;

(4) the licensee fails to provide documents requested by the department;

(5) the licensee fails to renew its license; or

(6) the licensee fails safety and soundness as prescribed by the department.

c. The department may provide a warning notice to a licensee if the department suspects that a condition permitting suspension or revocation has occurred.

d. Any warning notice, suspension, or revocation issued by the department shall state the reasons for which it is given.

e. The department may issue general guidance to industry participants on how to best protect the interests of clients.

f. (1) Whenever it appears to the department that any person has violated, is violating or is about to violate any of the provisions of this act, or any regulation adopted pursuant to this act, or any licensee or any owner, director, officer, member, partner, shareholder, trustee, employee or agent of a licensee has committed any fraud, engaged in dishonest activities or made any misrepresentation, the department may bring a civil suit in a court of competent jurisdiction to enjoin the violation or potential violation, seek civil penalties pursuant to paragraph (2) of this subsection, or both.

(2) Any person who violates any provision of this act shall be liable, in a civil action brought by the department in a court of competent jurisdiction, for a penalty of not more than $10,000 for the first violation, and $20,000 for the second and each subsequent offense. The penalty shall be paid to the department to be used in accordance with this act and shall be collected pursuant to the “Penalty Enforcement Law of 1999,” P.L.1999, c.274 (C.2A:58-10 et seq.). The court shall also award court costs and reasonable attorneys' fees to the department.

g. Each licensee shall 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 licensee’s board of directors or an equivalent governing body.

8. Any denial, suspension, or revocation of a license, or warning notice issued by the department shall 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.

9. a. (1) A licensee shall provide to the department in a reasonable amount of time any document relating to the operations of the licensee upon receiving a written request from the department.

(2) Any notice requiring the production of documents pursuant to this section shall include the reasons for which it is given.

b. A licensee shall give written notice to the department within five days if there are any changes in the identities of the licensee’s executive officers, responsible individuals, or controlling persons.

c. A licensee shall maintain a record of all client transactions for a period of not less than six years from the date the transaction occurred.

10. a. The terms and conditions of a digital asset business involving a consumer’s account shall be disclosed as part of establishing a relationship with a customer and prior to entering into an initial transaction with the customer at the time the consumer contracts for a digital asset business service. A disclosure shall be full and complete, contain no material misrepresentations, be in readily understandable language and may include, as appropriate and to the extent applicable:

(1) a schedule of fees and charges the licensee may assess, the manner by which fees and charges will be calculated if they are not set in advance and disclosed, and the timing of the fees and charges;

(2) whether a consumer’s account is protected by the Federal Deposit Insurance Corporation;

(3) whether there is support for forked networks of each digital asset;

(4)that investment in digital assets is volatile and subject to market loss;

(5) that investment in digital assets may result in total loss of value;

(6) that legal, legislative and regulatory changes may impair the value of digital assets;

(7) that consumers should perform research before investing in digital assets;

(8) that transfers of digital assets are irrevocable, if applicable;

(9) how liability for an unauthorized, mistaken or accidental transfer shall be apportioned;

(10) that digital assets are not legal tender in any jurisdiction;

(11) that digital assets may be subject to cyber theft or theft and become unrecoverable;

(12) that losing private key information may result in permanent total loss of access to digital assets;

(13) under what circumstances the digital asset business will in the ordinary course of business disclose information concerning the consumer’s account to third parties; and

(14) any other material investment risks.

b. All disclosures required by this act shall be displayed and individually agreed to by a consumer before any digital asset transaction at an electronic kiosk. Any fee to be charged shall be displayed and individually agreed to by a consumer before any digital asset transaction or digital asset balance inquiry at an electronic kiosk.

c. A licensee that has custody of digital assets for one or more persons shall maintain in its custody an amount of each type of digital assets sufficient to satisfy the aggregate entitlements of the persons to the type of digital asset.

d. Each licensee shall establish and maintain written policies and procedures to fairly and timely resolve customer complaints.

e. Each licensee shall provide, in a clear and conspicuous manner, on its website or websites, and in all physical locations the following disclosures:

(1) the licensee’s mailing address, e-mail address, and telephone number for the receipt of complaints;

(2) a statement that the complainant may also bring a complaint to the attention of the department; and

(3) the department’s mailing address, website, and telephone number.

f. The department may audit a licensee’s compliance with this section.

11. Authority of department.

a. The department shall have the authority to conduct investigations and examinations as follows:

(1) for purposes of initial licensing, license renewal, license suspension, license conditioning, license revocation or termination, or general or specific inquiry or investigation to determine compliance with this act, the department may access, receive and use any books, accounts, records, files, documents, information or evidence including, but not limited to:

(a) criminal, civil, and administrative history information:

(b) financial statements and any other records of financial condition of the licensee, any control person of the licensee, and any business entity exerting control over the licensee;

(c) personal history and experience information, including independent credit reports obtained from a consumer reporting agency described in section 603(p) of the “Fair Credit Reporting Act,” 15 U.S.C. s.1681a(p); and

(d) any other documents,, information or evidence the department deems relevant to the inquiry or investigation regardless of the location, possession, control or custody of the documents, information or evidence; and

(2) for the purposes of investigating violations or complaints arising under this act, or for the purposes of examination, the department may review, investigate, or examine any digital asset business licensee or person subject to this act as often as necessary in order to carry out the purposes of this act. The commissioner may direct, subpoena, or order the attendance of and examine under oath all persons whose testimony may be required about digital assets, digital consumer assets, virtual currency, or the business or subject matter of any examination or investigation, and may direct, subpoena or order the person to produce books, accounts, records, files and any other documents the department deems relevant to the inquiry.

b. A digital asset business licensee or any person subject to this act shall make or compile reports or prepare other information as directed by the department in order to carry out the purposes of this section including accounting compilations, information lists, and data concerning digital asset, digital consumer asset, or virtual currency transactions in a format prescribed by the commissioner or any other information the department deems necessary to carry out the purposes of this act.

c. In making an examination or investigation authorized by this section, the department may control access to any documents and records of the digital asset business or person under examination or investigation. The commissioner may take possession of the documents and records or place a person in exclusive charge of the documents and records in the place where they are usually kept. During the period of control, no person shall remove or attempt to remove any of the documents and records except pursuant to a court order or with the consent of the department. Unless the commissioner has reasonable grounds to believe the documents or records of the digital asset business or person have been, or are at risk of being, altered or destroyed for purposes of concealing a violation of this act, the digital asset business or owner of the documents and records shall have access to the documents or records as necessary to conduct its ordinary business affairs.

d. For purposes of conducting the authority of the department, addition of required resources as follows: 4 examiners, 2 licensing investigators and 2 enforcement investigators.

12. a. Notwithstanding any other provision of law, all information or reports obtained by the department from an applicant, licensee or agent, whether obtained through reports, applications, examinations, audits, investigations, or otherwise, including, but not limited to, (1) all information contained in or related to examination, investigation, operating or condition reports prepared by, or on behalf of, or for the use of the department; or (2) financial statements, balance sheets, or authorized delegate information, are confidential and may not be disclosed or distributed outside the department by the department or any officer or employee of the department. The department, however, may provide for the release of information to representatives of state or federal agencies and foreign countries having regulatory or supervisory authority over the activities of the licensee or similar licensees if those representatives, upon request of the commissioner, disclose similar information respecting those licensees under their regulation or supervision, or to those representatives who state in writing under oath that they shall maintain the confidentiality of that information.

b. The department may:

(1) disclose the fact of filing of applications with the department pursuant to this act, give notice of a hearing, if any, regarding those applications, and announce an action thereon;

(2) disclose final decisions in connection with proceedings for the suspension or revocation of licenses issued pursuant to this act;

(3) prepare and circulate reports reflecting the assets and liabilities of digital asset businesses in general, including other information considered pertinent to the purpose of each report for general statistical information; and

(4) prepare and circulate reports as provided by law.

c. Every official report of the department is prima facie evidence of the facts therein stated in any action or proceeding wherein the department is a party.

d. Nothing in this section shall be construed to prevent the disclosure of information that is admissible in evidence in any civil or criminal proceeding brought by or at the request of the department or this State to enforce or prosecute violations of this act or the rules, regulations or orders issued or promulgated pursuant to this act.

13. Section 2 of P.L.2005, c.199 (C.17:1C-34) is amended to read as follows:

2. For the purposes of this act:

"Assessment" means the assessment imposed pursuant to section 3 of this act for the special functions of the division as provided in that section.

"Commissioner" means the Commissioner of Banking and Insurance.

"Department" means the Department of Banking and Insurance.

"Depository institution" means any entity holding a state charter for a bank, savings bank, savings and loan association or credit union, irrespective of whether the entity accepts deposits.

"Division" means the Division of Banking in the Department of Banking and Insurance.

["Nationwide Mortgage Licensing System and Registry" means the mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, or their successors, and utilized in this State pursuant to the provisions of the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 et seq.).]

"Nationwide Multistate Licensing System” means the licensing system owned and operated by the State Regulatory Registry, LLC, a wholly-owned subsidiary of the Conference of State Bank Supervisors, which functions as a system of record for non-depository, financial services licensing or registration in participating state agencies, including the District of Columbia and the United States Territories of Puerto Rico, the US Virgin Islands, and Guam, where it is the official system for companies and individuals seeking to apply for, amend, renew, and surrender license authorities.

"Other financial entity" means a person who is licensed or registered pursuant to: the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.); the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 et seq.), other than a financial entity with respect to the payment of required fees to the Nationwide [Mortgage] Multistate Licensing System [and Registry] as set forth by that nationwide system and registry; "The Check Cashers Regulatory Act of 1993," P.L.1993, c.383 (C.17:15A-30 et seq.); the "New Jersey Money Transmitters Act," P.L.1998, c.14 (C.17:15C-1 et seq.); the "Insurance Premium Finance Company Act," P.L.1968, c.221 (C.17:16D-1 et seq.); the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.); the "Door-to-Door Retail Installment Sales Act of 1968," P.L.1968, c.223 (C.17:16C-61.1 et seq.); the "Home Repair Financing Act," P.L.1960, c.41 (C.17:16C-62 et seq.); the "Door-to-Door Home Repair Sales Act of 1968," P.L.1968, c.224 (C.17:16C-95 et seq.); P.L.1979, c.16 (C.17:16G-1 et seq.); the "Foreclosure Rescue Fraud Prevention Act," P.L.2011, c.146 (C.46:10B-53 et al.); the “Mortgage Servicers Licensing Act,” P.L.2019, c.65 (C.17:16F-27 et al.); the provisions of P.L.2019, c.200 (C.17:16ZZ-1 et al.); or the "pawnbroking law," R.S.45:22-1 et seq; or the “Digital Asset and Blockchain Technology Act” P.L. , c. (C. ) (pending before the Legislature as this bill).

"Regulated entity" means a depository institution, other financial entity or person chartered, licensed or registered by the Division of Banking or who should be chartered, licensed or registered.

(cf: P.L.2019, c.200, s.17)

14. This act shall take effect on the first day of the sixth month next following enactment, except the commissioner may take any anticipatory administrative action in advance as shall be necessary for the implementation of this act.

STATEMENT

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. “Digital asset” does not include securities, whether in digital form or otherwise, as defined pursuant to subsection m. of section 2 of P.L.1967, c.93 (C.49:3-49), or as defined pursuant to paragraph (1) of subsection (a) in the federal “Securities Act of 1933,” 15 U.S.C. s.77b(a)(1), or paragraph (10) of subsection (a) of the federal “Securities Exchange Act of 1934,” 15 U.S.C. s.78c(a)(10).

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 (department), or has filed a pending license with the department.

The bill provides the department may license a person to carry on one or more digital asset business activities described in the bill.

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 is to be submitted through the Nationwide Multistate Licensing System, and made in the form and medium to be prescribed by the department by regulation. Each application is to be accompanied by a nonrefundable fee.

Applicants are to provide certain information relevant to the applicant’s proposed digital asset business activity, submitting the information through the Nationwide Multistate Licensing System. The bill provides that no license may be issued by the department to an individual who has, within the five years preceding the submission of an application for a license, been convicted of embezzlement, forgery, fraud, or theft.

The bill requires the department to grant or deny any digital asset business license application or license reciprocity application within 120 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.

Licensees are required to submit a renewal report, through the Nationwide Multistate Licensing System, that contains an update of all information required at initial licensing and a description of certain information described in the bill.

The bill provides that the department may audit any digital asset business licensee. The bill stipulates that each licensee is to maintain and enforce confidential, written compliance policies which are to be reviewed and approved by the licensee’s board of directors or an equivalent governing body. The department may suspend or revoke a digital asset business license upon certain findings that are provided in the bill.

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 that 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 department may issue written requests for information to a licensee regarding the operations of the licensee. A record on all client transactions is to be maintained by the licensee for not less than six years.

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 is to 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 are to 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.