H1089

	SECTION 1 The General Laws are hereby amended by inserting after chapter 169A the following chapter:-
	Chapter 169C Regulation of Virtual Currency Kiosk Operators
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	Section 1. The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise:
	“Bank Secrecy Act” means the Bank Secrecy Act, 31 U.S.C. 5311, et seq. and its implementing rules and regulations, as amended and recodified from time to time.
	“Blockchain.” A distributed digital ledger or database which is chronological, consensus-based, decentralized, and mathematically verified in nature; 
	“Blockchain analytics.” A software service that uses data from various virtual currencies and their applicable blockchains to provide a risk rating specific to digital wallet addresses from users of virtual currency kiosks.
	“Commissioner” The Commissioner of the Massachusetts Division of Banks.
	“Digital wallet.” Hardware or software that enables individuals to store and use virtual currency.
	“Digital wallet address.” An alphanumeric identifier representing a destination on a blockchain for a virtual currency transfer that is associated with a digital wallet.
	“Division” The Massachusetts Division of Banks.
	“Federal Deposit Insurance Corporation or Securities Investor Protection Corporation.” A bank, credit union, savings and loan association, trust company, savings association, savings bank, industrial bank, or industrial loan company organized under the laws of the United States or any state of the United States, if the bank, credit union, savings and loan association, trust company, savings association, savings bank, industrial bank, or industrial loan company has federally insured deposits.
	“Fiat currency.” A medium of exchange that is authorized or adopted by the United States government as part of its currency and is not backed by a commodity.
	“Individual.” A natural person.
	"NMLS." The Nationwide Multistate Licensing System and Registry developed by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators and owned and operated by the State Regulatory Registry, LLC, or any successor or affiliated entity, for the licensing and registration of persons in financial services industries.
	“United States PATRIOT Act.” The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 and its implementing rules and regulations, as amended and recodified from time to time. 
	“Secretary.” The Secretary of the Illinois Department of Financial and Professional Responsibility, the acting Secretary of the Illinois Department of Financial and Professional Responsibility, or a person authorized by the Illinois Department of Financial and Professional Responsibility.
	“Virtual currency.” Any type of digital unit that is used as a medium of exchange or a form of digitally stored value or that is incorporated into payment system technology. Virtual currency shall be construed to include digital units of exchange that (A) have a centralized repository or administrator; (B) are decentralized and have no centralized repository or administrator; or (C) may be created or obtained by computing or manufacturing effort. Virtual currency shall not be construed to include digital units that are used (i) solely within online gaming platforms with no market or application outside such gaming platforms, or (ii) exclusively as part of a consumer affinity or rewards program, and can be applied solely as payment for purchases with the issuer or other designated merchants, but cannot be converted into or redeemed for fiat currency.
	“Virtual currency kiosk.” An electronic terminal of the virtual currency kiosk operator that enables the owner or operator to facilitate the exchange of fiat currency for virtual currency or virtual currency for fiat currency or other virtual currency, including, but not limited to, (A) connecting directly to a separate virtual currency exchange that performs the actual virtual currency transmission, or (B) drawing upon the virtual currency in the possession of the owner or operator of the electronic terminal.
	“Virtual currency kiosk operator.” A corporation, limited liability company, limited liability partnership, or foreign entity qualified to do business in the State of Illinois which operates a virtual currency kiosk within the State of Illinois. 
	 
	Section 2. (1) Except as otherwise provided in this Section, all information or reports obtained by the Department from a virtual currency kiosk operator, and all information contained in or related to an examination, investigation, operating report, or condition report prepared by, on behalf of, or for the use of the Department, are confidential and are not subject to disclosure under the Freedom of Information Act.
	(2) Information contained in the records of the Department that is not confidential and may be available to the public either on the Department’s website, upon receipt by the Department of a written request, or in NMLS shall include:
	(a) the name, business address, telephone number, and unique identifier of a virtual currency kiosk operator;
		(b) the business address of a virtual currency kiosk operator’s registered agent for service; and
		(c) copies of any final orders of the Department relating to any violation of this Act or regulations implementing this Act.
	Section 3.  If anything in this Act is inconsistent with Federal law, including but not limited to the Bank Secrecy Act or the United States PATRIOT Act, the applicable Federal law shall govern to the extent of any inconsistency.
	 
	Section 4.  (1) The Secretary may request evidence of compliance with this Act or a rule adopted or order issued under this Act as reasonably necessary or appropriate to administer and enforce this Act, and other applicable law, including the Bank Secrecy Act and the USA PATRIOT Act.  
	(2) A virtual currency kiosk operator shall provide the Commissioner all records the Commissioner may reasonably require to ensure compliance with this Act. 
	 
	Section 5.  As part of establishing a relationship with a customer, and prior to entering into an initial transaction for, on behalf of, or with such customer, each virtual currency kiosk operator shall disclose in clear, conspicuous, and legible writing in the English language, whether in accessible terms of service or elsewhere, all material risks associated with its products, services, and activities and virtual currency generally, including disclosures substantially similar to the following:
	(1) virtual currency is not legal tender, is not backed by the government, and accounts and value balances are not subject to Federal Deposit Insurance Corporation or Securities Investor Protection Corporation protections;
	(2) legislative and regulatory changes or actions at the State, Federal, or international level may adversely affect the use, transfer, exchange, and value of virtual currency;
	(3) transactions in virtual currency may be irreversible, and, accordingly, losses due to fraudulent or accidental transactions may not be recoverable;
	(4) some virtual currency transactions shall be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that the customer initiates the transaction;
	(5) the value of virtual currency may be derived from the continued willingness of market participants to exchange fiat currency for virtual currency, which may result in the potential for permanent and total loss of value of a particular virtual currency should the market for that virtual currency disappear;
	(6) there is no assurance that a person who accepts a virtual currency as payment today will continue to do so in the future;
	(7) the volatility and unpredictability of the price of virtual currency relative to fiat currency may result in significant loss over a short period of time;
	(8) the nature of virtual currency may lead to an increased risk of fraud or cyber-attack;
	(9) the nature of virtual currency means that any technological difficulties experienced by the virtual currency kiosk operator may prevent the access or use of a customer’s virtual currency; and
	(10) any bond or trust account maintained by the virtual currency kiosk operator for the benefit of its customers may not be sufficient to cover all losses incurred by customers.
	Section 6.  When opening an account for a new customer, and prior to entering into an initial transaction for, on behalf of, or with such customer, each virtual currency kiosk operator shall disclose in clear, conspicuous, and legible writing in the English language, whether in accessible terms of service or elsewhere, all relevant terms and conditions associated with its products, services, and activities and virtual currency generally, including disclosures substantially similar to the following: 
	(1) the customer’s liability for unauthorized virtual currency transactions;
	(2) under what circumstances the virtual currency kiosk operator will, absent a court or government order, disclose information concerning the customer’s account to third parties;
	(3) the customer’s right to receive periodic account statements and valuations from the virtual currency kiosk operator;
	(4) the customer’s right to receive a receipt, trade ticket, or other evidence of a transaction;
	(5) the customer’s right to prior notice of a change in the virtual currency kiosk operator’s rules or policies; and
	(6) such other disclosures as are customarily given in connection with the opening of customer accounts.
	Section 7.  Prior to entering into a virtual currency transaction with a customer, each virtual currency kiosk operator shall ensure a warning is disclosed to a customer substantially similar to the following: 
	Customer Notice. Please Read Carefully. 
	Did you receive a phone call from your bank, software provider, the police, or were you directed to make a payment for social security, utility bill, investment, warrants, or bail money at this kiosk? STOP
	Is anyone on the phone pressuring you to make a payment of any kind? STOP
	I understand that the purchase and sale of cryptocurrency is a final irreversible and non-refundable transaction. 
	I confirm I am sending funds to a wallet I own or directly have control over.  I confirm that I am using funds gained from my own initiative to make my transaction. 
	 
	Section 8.  Upon completion of any virtual currency kiosk transaction, each virtual currency kiosk operator shall provide to a customer a digital or physical receipt containing the following information:
	(a)	the name and contact information of the virtual currency kiosk operator, including a telephone number established by the virtual currency kiosk operator to answer questions and register complaints;
	(b)	the type, value, date, and precise time of the transaction in the local time zone;
	(c)	the fee charged;
	(d)	the exchange rate, if applicable;
	(e)	a statement of the liability of the virtual currency kiosk operator for non-delivery or delayed delivery; and
	(f)	a statement of the refund policy of the virtual currency kiosk operator.
	Section 9. All virtual currency kiosk operators must use blockchain analytics software to assist in the prevention of sending purchased virtual currency from a virtual currency kiosk operator to a digital wallet known to be affiliated with fraudulent activity at the time of a transaction.  The Department may request evidence from any virtual currency kiosk operator of current use of blockchain analytics.
	Section 10.  All virtual currency kiosk operators performing business in the Commonwealth of Massachusetts must provide live customer service at a minimum on Monday through Friday between 8AM EST and 10PM CST.  The customer service toll free number must be displayed on the virtual currency kiosk or the virtual currency kiosk screens.
	Section 11.  All virtual currency kiosk operators shall take reasonable steps to detect and prevent fraud, including establishing and maintaining a written anti-fraud policy.  The anti-fraud policy shall, at a minimum, include:
	(1)	the identification and assessment of fraud related risk areas; 
	(2)	procedures and controls to protect against identified risks; 
	(3)	allocation of responsibility for monitoring risks; and 
	(4)	procedures for the periodic evaluation and revision of the anti-fraud procedures, controls, and monitoring mechanisms.
	Section 12.  (1) Each virtual currency kiosk operator shall maintain, implement, and enforce a written Enhanced Due Diligence Policy.  Such a policy must be reviewed and approved by the virtual currency kiosk operator’s board of directors or an equivalent governing body of the virtual currency kiosk operator.  
	(2) The Enhanced Due Diligence Policy shall identify at minimum individuals who are at risk of fraud based on age or mental capacity.  
	Section 13.  (1) Each virtual currency kiosk operator is required to comply with the provisions of this Act, any lawful order, rule, or regulation made or issued under the provisions of this Act, and all applicable Federal and State laws, rules, and regulations. 
	(2) Each virtual currency kiosk shall maintain, implement, and enforce written compliance policies and procedures.  Such policies and procedures must be reviewed and approved by the virtual currency kiosk operator’s board of directors or an equivalent governing body of the virtual currency kiosk operator.  
	Section 14.  (1) Each virtual currency kiosk operator must designate and employ a compliance officer with the following requirements: 
	(a) the individual must be qualified to coordinate and monitor compliance with this Act and all other applicable Federal and State laws, rules, and regulations;
	(b) the individual must be employed full-time by the virtual currency kiosk operator; and 
	(c) the designated compliance officer cannot be any individual who owns more than 20% of the virtual currency kiosk operator by whom the individual is employed.
	(2) Compliance responsibilities required under Federal and State laws, rules, and regulations shall be completed by full-time employees of the virtual currency kiosk operator.
	
	Section 15.  (1) Each virtual currency kiosk operator must designate and employ a consumer protection officer with each of the following requirements: 
	(a) the individual must be qualified to coordinate and monitor compliance with this Act and all other applicable Federal and State laws, rules, and regulations;
	(b) the individual must be employed full-time by the virtual currency kiosk operators; and
	(c) the designated consumer protection officer cannot be an individual who owns more than 20% of the virtual currency kiosk operator by whom the individual is employed. 
	 
	Section 16.  (1) Each virtual currency kiosk operator shall submit a report of the location of each virtual currency kiosk located within the Commonwealth of Massachusetts within 45 days of the end of the calendar quarter.  The Commissioner shall formulate a system for virtual currency kiosk operators to submit such locations that is consistent with the requirements of this Section.
	(2) The location report shall include, at a minimum, the following regarding the location where a virtual currency kiosk is located: 
		(a) company legal name;
		(b) any fictitious or trade name;
		(c) physical address; 
		(d) start date of operation of virtual currency kiosk at location; and
		(e) end date of operate of virtual currency kiosk at location, if applicable;
	
	Section 17.  (1) Any virtual currency kiosk operator who owns, operates, solicits, markets, advertises, or facilitates virtual currency kiosks in this state shall be deemed to be engaged in money transmission and require licensure pursuant to this Act. 
	(2) All unlicensed virtual currency kiosk operators must apply for a money transmitter license within 60 days after this Act goes into effect. Virtual currency kiosk operators who apply within this time will be allowed to continue operations while the Commonwealth reviews their application.  Any virtual currency kiosk operators whose application is denied by the Commonwealth of Massachusetts will have to cease operations until they are granted a money transmitter license.