BILL NUMBER: AB 1326 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 18, 2015
AMENDED IN SENATE JULY 6, 2015
AMENDED IN ASSEMBLY JUNE 1, 2015
AMENDED IN ASSEMBLY APRIL 20, 2015
INTRODUCED BY Assembly Member Dababneh
FEBRUARY 27, 2015
An act to repeal Section 107 of the Corporations Code, and to add
Section 2178 to, and to add Division 11 (commencing with Section
26000) to, the Financial Code, relating to currency.
LEGISLATIVE COUNSEL'S DIGEST
AB 1326, as amended, Dababneh. Virtual currency.
Existing
(1) Existing law, the Money
Transmission Act, prohibits a person from engaging in the business of
money transmission in this state, or advertising, soliciting, or
holding itself out as providing money transmission in this state,
unless the person is licensed by the Commission of Business Oversight
or exempt from licensure under the act. Existing law requires
applicants for licensure to pay the commissioner a specified
nonrefundable fee and to complete an application form requiring
certain information. As security, existing law requires each licensee
to deposit and maintain on deposit with the Treasurer cash in an
amount not less than, or securities having a market value not less
than, such amount as the commissioner may find and order from time to
time as necessary to secure the faithful performance of the
obligations of the licensee with respect to money transmission in
this state. Existing law requires a licensee at all times to own
eligible securities, as defined, in a specified aggregate amount not
less than the amount of all of its outstanding money received for
transmission, as specified.
This bill would enact the Virtual Currency Act. The bill would
prohibit a person from engaging in any virtual currency business, as
defined, in this state unless the person is licensed by the
Commissioner of Business Oversight or is exempt from the licensure
requirement, as provided. The bill would require applicants for
licensure, including an applicant for licensure and approval to
acquire control of a licensee, to pay the commissioner a specified
nonrefundable application fee and complete an application form
required to include, among other things, information about the
applicant, prior previous virtual
currency services provided by the applicant, a sample form of receipt
for transactions involving the business of virtual currency, and
specified financial statements. The bill would make these licenses
subject to annual renewal and would require a renewal fee paid to the
commissioner in a specified amount. The bill would require licensees
to annually pay the commissioner a specified amount for each
licensee branch office. The bill would require applicants and
licensees to pay the commissioner a specified hourly amount for the
commissioner's examination costs, as provided. The bill would also
require the commissioner to levy an assessment each fiscal year, on a
pro rata basis, on licensees in an amount sufficient to meet the
commissioner's expenses in administering these provisions and to
provide a reasonable reserve for contingencies.
This bill would require each licensee to maintain at all times
such capital as the commissioner determines, subject to specified
factors, is sufficient to ensure the safety and soundness of the
licensee, its ongoing operations, and maintain consumer protection.
The bill would require each licensee to maintain a bond or trust
account in United States dollars for the benefit of its consumers in
the form and amount as specified by the commissioner.
This bill would authorize the commissioner to examine the business
and any branch office of any licensee to ascertain whether the
business is being conducted in a lawful manner and all virtual
currency is properly accounted for. The bill would require a licensee
to file a report with the commissioner within a specified period of
time after the licensee knows about the occurrence of certain events
relating to the virtual currency business and those persons connected
to that business, and to also maintain records as required by the
commissioner for a specified period of time.
With regard to enforcement, among other things, this bill would,
if it appears that a licensee is violating or failing to comply with
these provisions or conducting business in an unsafe or injurious
manner, authorize the commissioner to order the licensee to comply or
discontinue those practices. The bill would also authorize the
commissioner to issue an order suspending or revoking a license, or
placing a licensee in receivership, if after notice and an
opportunity for a hearing, the commissioner makes a specified
finding. The bill would provide that every order, decision, or other
official act of the commissioner is subject to review.
This bill would authorize the commissioner to impose a civil
penalty for a violation of these provisions.
Within a specified period after the fiscal year, the bill would
require a licensee to file with the commissioner a specified audit
report. Within a specified period after the end of each calendar
quarter, the bill would require a licensee to file with the
commissioner a report containing financial statements verified by 2
of the licensee's principal officers.
By a specified date, the bill would require each licensee to file
an annual report with the commissioner providing information
regarding the licensee's business and operations within the state, as
specified. The bill would also require each licensee to make other
special reports to the commissioner. The bill would require these
reports to be kept confidential. The bill would require the
commissioner to prepare a report for publication on his or her
Internet Web site summarizing the information from those reports and
enforcement action information.
This bill would require a licensee to provide a specified consumer
protection disclosure and receipt to its consumers.
This bill would authorize a virtual currency licensee in good
standing that plans to engage in activities permitted under the Money
Transmission Act to request that the commissioner convert his or her
license into a license under the Money Transmission Act, as
specified. The
This bill would authorize a person or entity conducting
virtual currency business with less than $1,000,000 in outstanding
obligations obligations, as defined,
and whose business model, as determined by the commissioner,
represents low or no risk to consumers to register with a
$500 license fee pay a $500 application fee to the
commissioner and, if approved, receive a provisional license to
conduct virtual currency business. The bill would authorize the
commissioner to request reports and documents, to examine the
provisional licensee, and gather information regarding the business
and operations of provisional licensees. The bill would require
reports and documents concerning the business and operations of
provisional licensees to be kept confidential.
This bill would require a licensee, under the Money Transmission
Act, to report to the commissioner its plan to engage in any virtual
currency business and request permission to engage in that business
subject to specified requirements and conditions, as determined by
the commissioner.
This bill would make these provisions
aforementioned provisions, including the Virtual Currency
Act Act, operative on July 1, 2016.
(2) Existing law, the General Corporation Law, prohibits a
corporation, social purpose corporation, association, or individual
from issuing or putting in circulation, as money, anything but the
lawful money of the United States.
This bill would delete that prohibition.
(3) Existing constitutional provisions require that a statute that
limits the right of access to the meetings of public bodies or the
writings of public officials and agencies be adopted with findings
demonstrating the interest protected by the limitation and the need
for protecting that interest.
This bill would make legislative findings to that effect.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 107 of the Corporations Code is repealed.
SEC. 2. Section 2178 is added to the Financial Code, to read:
2178. (a) Nothwithstanding any other law and consistent with
subdivision (e) of Section 26004, a licensee shall report to the
commissioner its plan to engage in any virtual currency business as
described in Division 11 (commencing with Section 26000) and request,
on a form provided by the commissioner, permission to engage in any
virtual currency business without the issuance of a virtual currency
license issued under Division 11 (commencing with Section 26000).
However, the commissioner may require the licensee to increase its
surety bond or eligible securities amounts in an amount necessary to
ensure the consumer protection of the additional business. The
commissioner may also place, as a condition on the authorization to
engage in any virtual currency business pursuant to Division 11
(commencing with Section 26000), any condition authorized by Section
2036.
(b) This section shall become operative on July 1, 2016.
SEC. 3. Division 11 (commencing with Section 26000) is added to
the Financial Code, to read:
DIVISION 11. Virtual Currency
CHAPTER 1. GENERAL PROVISIONS
26000. For purposes of this division, the following definitions
shall apply:
(a) "Commissioner" means the Commissioner of Business Oversight.
(b) (1) "Virtual currency" means any type of digital unit that is
used as a medium of exchange or a form of digitally stored value.
(2) Virtual currency does not include the following:
(A) Digital units that are used solely within online gaming
platforms with no market or application outside of those gaming
platforms.
(B) Digital units that are used exclusively as part of a consumer
affinity or rewards program.
(C) Digital units that can be redeemed for goods, services, or for
purchases with the issuer or other designated merchants, but cannot
be converted into, or redeemed for, fiat currency.
(c) "Virtual currency business" means maintaining full custody or
control of virtual currency in this state on behalf of others.
(d) "Fiat currency" means government-issued currency that is
designated as legal tender through government decree, regulation, or
law, that customarily refers to paper money and coin and is
circulated, used, and accepted as money.
26001. For the purposes of carrying out the provisions of this
division, the commissioner may adopt regulations pursuant to the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code).
26001.5. This division shall be known and may be cited as the
Virtual Currency Act.
CHAPTER 2. LICENSES
26002. A person shall not engage in any virtual currency business
in this state unless the person is licensed or exempt from licensure
under this division.
26004. The following are exempt from the licensing requirement
described in Section 26002:
(a) The United States or a department, agency, or instrumentality
thereof, including any federal reserve bank and any federal home loan
bank.
(b) Money transmission by the United States Postal Service or by a
contractor on behalf of the United States Postal Service.
(c) A state, city, county, city and county, or any other
governmental agency or governmental subdivision of a state.
(d) A commercial bank or industrial bank, the deposits of which
are insured by the Federal Deposit Insurance Corporation or its
successor, or any foreign (other nation) bank that is licensed under
Chapter 20 (commencing with Section 1750) of Division 1.1 or that is
authorized under federal law to maintain a federal agency or federal
branch office in this state; a trust company licensed pursuant to
Section 1042 or a national association authorized under federal law
to engage in a trust banking business; an association or federal
association, as defined in Section 5102, the deposits of which are
insured by the Federal Deposit Insurance Corporation or its
successor; and any federally or state chartered credit union, with an
office in this state, the member accounts of which are insured or
guaranteed as provided in Section 14858.
(e) Subject to Section 2178, an entity licensed as a money
transmitter under the Money Transmission Act described in Division
1.2 (commencing with Section 2000).
(f) A merchant or consumer that utilizes virtual currency solely
for the purchase or sale of goods or services.
(g) (1) A transaction in which the recipient of virtual currency
is an agent of the payee pursuant to a preexisting written contract
and delivery of the virtual currency to the agent satisfies the payor'
s obligation to the payee.
(2) For purposes of this subdivision, the following shall apply:
(A) "Agent" has the same meaning as that term is defined in
Section 2295 of the Civil Code.
(B) "Payee" means the provider of goods or services, who is owed
payment of money or other monetary value from the payor for the goods
or services.
(C) "Payor" means the recipient of goods or services, who owes
payment of money or monetary value to the payee for the goods or
services.
(h) A person or entity developing, distributing, or servicing a
virtual currency network software.
(i) A person or entity contributing software, connectivity, or
computing power to a virtual currency network.
(j) A person or entity providing data storage or cyber security
services for a licensed virtual currency business.
26006. (a) An applicant for licensure under this division shall
pay to the commissioner a nonrefundable application fee of five
thousand dollars ($5,000).
(b) An applicant for a license shall do so in a form and in a
medium prescribed by the commissioner by order or regulation. The
application shall state or contain all of the following:
(1) The legal name and residential business address of the
applicant and any fictitious or trade name used by the applicant in
conducting its business.
(2) A list of any criminal convictions of the applicant and any
material litigation in which the applicant has been involved in the
10-year period next preceding the submission of the application.
(3) A description of any virtual currency services previously
provided by the applicant and the virtual currency services that the
applicant seeks to provide in this state.
(4) A list of other states in which the applicant is licensed to
engage in the business of virtual currency and any license
revocations, suspensions, or other disciplinary action taken against
the applicant in another state.
(5) Information concerning any bankruptcy or receivership
proceedings affecting the licensee.
(6) A sample form of receipt for transactions that involve money
received for the business of virtual currency.
(7) The name and address of any bank through which the applicant's
business will be conducted.
(8) A description of the source of money and credit to be used by
the applicant to provide virtual currency services.
(9) The date of the applicant's incorporation or formation and the
state or country of incorporation or formation.
(10) A certificate of good standing from the state or country in
which the applicant is incorporated or formed.
(11) 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.
(12) The legal name, any fictitious or trade name, all business
and residential addresses, and the employment, in the 10-year period
next preceding the submission of the application, of each executive
officer, manager, director, or person that has control, of the
applicant, and the educational background for each person.
(13) A list of any criminal convictions and material litigation in
which any executive officer, manager, director, or person in
control, of the applicant has been involved in the 10-year period
next preceding the submission of the application.
(14) 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.
(15) 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.
(16) If the applicant is publicly traded, a copy of the most
recent report filed with the United States Securities and Exchange
Commission under Section 13 of the federal Securities Exchange Act of
1934 (15 U.S.C. Sec. 78m).
(17) If the applicant is a wholly owned subsidiary of:
(A) A corporation publicly traded in the United States, a copy of
audited financial statements for the parent corporation for the most
recent fiscal year or a copy of the parent corporation's most recent
report filed under Section 13 of the federal Securities Exchange Act
of 1934 (15 U.S.C. Sec. 78m) and, if available, for the two-year
period next preceding the submission of the application.
(B) A corporation publicly traded outside the United States, a
copy of similar documentation filed with the regulator of the parent
corporation's domicile outside the United States.
(18) The applicant's plan for engaging in the business of virtual
currency, including without limitation three years of pro forma
financial statements.
(19) Any other information the commissioner requires with respect
to the applicant.
(c) The commissioner may waive any of the information required
under subdivision (b) or permit an applicant to submit other
information instead of the required information.
(d) The nonrefundable application fee for filing an application
for licensure and approval to acquire control of a licensee is three
thousand five hundred dollars ($3,500). An applicant for licensure
and approval shall comply with subdivision (b).
(e) A licensee, including a licensee described in subdivision (b),
shall pay annually on or before July 1, a license renewal fee of two
thousand five hundred dollars ($2,500).
(f) A licensee shall pay annually on or before July 1, one hundred
twenty-five dollars ($125) for each licensee branch office in this
state.
(g) Whenever the commissioner examines a licensee, the licensee
shall pay, within 10 days after receipt of a statement from the
commissioner, a fee of seventy-five dollars ($75) per hour for each
examiner engaged in the examination plus, if it is necessary for any
examiner engaged in the examination to travel outside this state, the
travel expenses of the examiner.
(h) Whenever the commissioner examines an applicant, the applicant
shall pay, within 10 days after receipt of a statement from the
commissioner, a fee of seventy-five dollars ($75) per hour for each
examiner engaged in the examination plus, if it is necessary for any
examiner engaged in the examination to travel outside this state, the
travel expenses of the examiner.
(i) Each fee for filing an application shall be paid at the time
the application is filed with the commissioner. No fee for filing an
application shall be refundable, regardless of whether the
application is approved, denied, or withdrawn.
26008. (a) Each licensee shall maintain at all times such capital
as the commissioner determines is sufficient to ensure the safety
and soundness of the licensee and maintain consumer protection and
its ongoing operations. In determining the minimum amount of capital
that must be maintained by a licensee, the commissioner shall
consider a variety of factors, including, but not limited to:
(1) The composition of the licensee's total assets, including the
position, size, liquidity, risk exposure, and price volatility of
each type of asset.
(2) The composition of the licensee's total liabilities, including
the size and repayment timing of each type of liability.
(3) The actual and expected volume of the licensee's virtual
currency business activity.
(4) Whether the licensee is already licensed or regulated by a
state or federal entity, and whether the licensee is in good standing
in such capacity.
(5) The amount of leverage employed by the licensee.
(6) The liquidity position of the licensee.
(7) The financial protection that the licensee provides for its
consumers through its trust account or bond.
(b) Each licensee shall maintain a bond or trust account in United
States dollars for the benefit of its consumers in the form and
amount specified by the commissioner.
CHAPTER 3. EXAMINATIONS AND RECORDS
26009. (a) The commissioner may at any time and from time to time
examine the business and any branch office, within or outside this
state, of any licensee in order to ascertain whether that business is
being conducted in a lawful manner and whether all virtual currency
held or exchanged is properly accounted for.
(b) The directors, officers, and employees of any licensee being
examined by the commissioner shall exhibit to the commissioner, on
request, any or all of the licensee's accounts, books,
correspondence, memoranda, papers, and other records and shall
otherwise facilitate the examination so far as it may be in their
power to do so.
26010. The commissioner may consult and cooperate with other
state or federal regulators in enforcing and administering this
division. They may jointly pursue examinations and take other
official action that they are otherwise empowered to take.
26011. A licensee shall file a report with the commissioner
within five business days after the licensee has reason to know of
the occurrence of any of the following events:
(a) The filing of a petition by or against the licensee under the
United States Bankruptcy Code (11 U.S.C. Secs. 101-110, incl.) for
bankruptcy or reorganization.
(b) The filing of a petition by or against the licensee for
receivership, the commencement of any other judicial or
administrative proceeding for its dissolution or reorganization, or
the making of a general assignment for the benefit of its creditors.
(c) The commencement of a proceeding to revoke or suspend its
virtual currency business license in a state or country in which the
licensee engages in such business or is licensed to engage in such
business.
(d) The cancellation or other impairment of the licensee's bond or
trust account as required by subdivision (b) of Section 26008.
(e) A charge or conviction of the licensee or of an executive
officer, manager, director, or person in control of the licensee for
a felony.
26012. A licensee shall maintain any records as required by the
commissioner for determining its compliance with this division for at
least three years.
CHAPTER 4. ENFORCEMENT
26013. Any licensee may surrender its license by filing with the
commissioner the license and a report with any information as the
commissioner requires. The voluntary surrender of the license shall
become effective at the time and upon the conditions as the
commissioner specifies by order.
26014. (a) The commissioner may prepare written decisions,
opinion letters, and other formal written guidance to be issued to
persons seeking clarification regarding the requirements of this
division.
(b) The commissioner shall make public on the commissioner's
Internet Web site all written decisions, opinion letters, and other
formal written guidance issued to persons seeking clarification
regarding the requirements of this division. The commissioner may, at
his or her discretion or upon request by an applicant or licensee,
redact proprietary or other confidential information regarding an
applicant or licensee from any decision, letter, or other written
guidance issued in connection with an applicant or licensee.
26015. The commissioner may offer informal guidance to any
prospective applicant for a license under this division, regarding
the conditions of licensure that may be applied to that person. The
commissioner shall inform any applicant that requests that guidance
of the licensing requirements that will be required of that
applicant, based on the information provided by the applicant
concerning its plan to conduct business under this division, and the
factors used to make that determination.
26016. At any time, if the commissioner deems it necessary for
the general welfare of the public, he or she may exercise any power
set forth in this division with respect to a virtual currency
business, regardless of whether an application for a license has been
filed with the commissioner, a license has been issued, or, if
issued, the license has been surrendered, suspended, or revoked.
(a) If it appears to the commissioner that a licensee is violating
or failing to comply with this division, the commissioner may direct
the licensee to comply with the law by an order issued under the
commissioner's official seal, or if it appears to the commissioner
that any licensee is conducting its business in an unsafe or
injurious manner, the commissioner may in like manner direct it to
discontinue the unsafe or injurious practices. The order shall
require the licensee to show cause before the commissioner, at a time
and place to be fixed by the commissioner, as to why the order
should not be observed.
(b) If, upon any hearing held pursuant to subdivision (a), the
commissioner finds that the licensee is violating or failing to
comply with any law of this state or is conducting its business in an
unsafe or injurious manner, the commissioner may make a final order
directing it to comply with the law or to discontinue the unsafe or
injurious practices. A licensee shall comply with the final order
unless, within 10 days after the issuance of the order, its
enforcement is restrained in a proceeding brought by the licensee.
26017. (a) The commissioner may issue an order suspending or
revoking a license, or taking possession of and placing a licensee in
receivership, if after notice and an opportunity for hearing, the
commissioner finds any of the following:
(1) The licensee is violating this division or a regulation
adopted or an order issued under this division, or a condition of
approval issued under this division.
(2) The licensee does not cooperate with an examination or
investigation by the commissioner.
(3) The licensee engages in fraud, intentional misrepresentation,
or gross negligence.
(4) The competence, experience, character, or general fitness of
the licensee, or any director, officer, employee, or person in
control of a licensee, indicates that it is not in the public
interest to permit the person to provide virtual currency services.
(5) The licensee engages in an unsafe or unsound practice.
(6) The licensee is insolvent, suspends payment of its
obligations, or makes a general assignment for the benefit of its
creditors.
(7) The licensee has applied for an adjudication of bankruptcy,
reorganization, arrangement, or other relief under any bankruptcy,
reorganization, insolvency, or moratorium law, or any person has
applied for any such relief under that law against the licensee and
the licensee has by any affirmative act approved of or consented to
the action or the relief has been granted.
(8) Any fact or condition exists that, if it had existed at the
time when the licensee applied for its license,
would have been grounds for denying the application.
(b) In determining whether a licensee is engaging in an unsafe or
unsound practice, the commissioner may consider the size and
condition of the licensee's provision of virtual currency services,
the magnitude of the loss, the gravity of the violation of this
division, and the previous conduct of the person involved.
26018. (a) Every order, decision, or other official act of the
commissioner is subject to review in accordance with law.
(b) Whenever the commissioner has taken possession of the property
and business of any licensee, the licensee, within 10 days after
that taking, if it deems itself aggrieved thereby, may apply to the
superior court in the county in which the head office of the licensee
is located to enjoin further proceedings. The court, after citing
the commissioner to show cause why further proceedings should not be
enjoined and after a hearing and a determination of the facts upon
the merits, may dismiss the application or enjoin the commissioner
from further proceedings and direct the commissioner to surrender the
property and business to the licensee.
26019. (a) If the commissioner finds that any of the factors set
forth in Section 26017 is true with respect to any licensee and that
it is necessary for the protection of the public interest, the
commissioner may issue an order immediately suspending or revoking
the licensee's license.
(b) Within 30 days after the license is suspended or revoked
pursuant to subdivision (a), the licensee may file with the
commissioner an application for a hearing on the suspension or
revocation.
(c) If the commissioner fails to commence a hearing within 15
business days after the application is filed with the commissioner
pursuant to subdivision (b) or within a longer period of time agreed
to by the licensee, the suspension or revocation shall be deemed
rescinded.
(d) Within 30 days after the hearing, the commissioner shall
affirm, modify, or rescind the suspension or revocation. Otherwise,
the suspension or revocation shall be deemed rescinded.
(e) The right of the licensee to petition for judicial review of
the suspension or revocation shall not be affected by the failure of
the licensee to apply to the commissioner for a hearing on the
suspension or revocation pursuant to subdivision (b).
26020. The commissioner may assess a civil penalty against a
person that violates this division or a regulation adopted or an
order issued under this division in an amount not to exceed one
thousand dollars ($1,000) for each violation or, in the case of a
continuing violation, one thousand dollars ($1,000) for each day or
part thereof during which the violation continues, plus this state's
costs and expenses for the investigation and prosecution of the
matter, including reasonable attorney's fees.
26022. The enforcement provisions of this division are in
addition to any other enforcement powers that the commissioner may
have under law.
26023. (a) The commissioner may by order or regulation grant
exemptions from this section in cases where the commissioner finds
that the requirements of this section are not necessary or may be
duplicative.
(b) A licensee shall, within 90 days after the end of each fiscal
year, or within any extended time as the commissioner may prescribe,
file with the commissioner an audit report for the fiscal year that
shall comply with all of the following provisions:
(1) The audit report shall contain audited financial statements of
the licensee for or as of the end of the fiscal year prepared in
accordance with United States generally accepted accounting
principles and any other information as the commissioner may require.
(2) The audit report shall be based upon an audit of the licensee
conducted in accordance with United States generally accepted
auditing standards and any other requirements as the commissioner may
prescribe.
(3) The audit report shall be prepared by an independent certified
public accountant or independent public accountant who is not
unsatisfactory to the commissioner.
(4) The audit report shall include or be accompanied by a
certificate of opinion of the independent certified public accountant
or independent public accountant that is satisfactory in form and
content to the commissioner. If the certificate or opinion is
qualified, the commissioner may order the licensee to take any action
as the commissioner may find necessary to enable the independent or
certified public accountant or independent public accountant to
remove the qualification.
(c) Each licensee shall, not more than 45 days after the end of
each calendar year quarter, or within a longer period as the
commissioner may by regulation or order specify, file with the
commissioner a report containing all of the following:
(1) Financial statements, including balance sheet, income
statement, statement of changes in shareholders' equity, and
statement of cashflows, for, or as of the end of, that calendar year
quarter, verified by two of the licensee's principal officers. The
verification shall state that each of the officers making the
verification has a personal knowledge of the
matters in the report and that each of them believes that each
statement in the report is true.
(2) Other information as the commissioner may by regulation or
order require.
(d) Each licensee shall file an annual report with the
commissioner, on or before the 15th day of March, providing the
relevant information that the commissioner reasonably requires
concerning the business and operations conducted by the licensee
within the state during the preceding calendar year. Each licensee
shall also make other special reports to the commissioner that may be
required by the commissioner from time to time. The reports required
by this subdivision shall be kept confidential pursuant to Chapter
3.5 (commencing with Section 6250) of Division 7 of Title 1 of the
Government Code and any regulations adopted thereunder.
(e) The commissioner shall annually prepare a report for
publication on his or her Internet Web site, summarizing consolidated
information gained from the reports required pursuant to subdivision
(d), documenting the number of licenses, including provisional
licenses as described in Section 26032, outstanding during the prior
calendar year, and summarizing the numbers and types of enforcement
actions brought by the commissioner pursuant to this division during
the prior calendar year.
26024. In addition to the fees provided in Section 26006, the
commissioner shall levy an assessment each fiscal year, on a pro rata
basis, on those licensees that at any time during the preceding
calendar year engaged in this state in the virtual currency business
in an amount that is, in his or her judgment, sufficient to meet the
commissioner's expenses in administering the provisions of this
division and to provide a reasonable reserve for contingencies.
CHAPTER 5. MISCELLANEOUS PROVISIONS
26025. A licensee shall disclose to consumers the following
disclosure in a form and manner prescribed by the commissioner:
"Once submitted to the network, a virtual currency transaction
will be unconfirmed for a period of time (usually less than one hour,
but up to one day or more) pending sufficient confirmation of the
transaction by the network. A transaction is not complete while it is
in a pending state. Virtual currency associated with transactions
that are in a pending state will be designated accordingly, and will
not be included in your account balance or be available to conduct
transactions.
The risk of loss in trading or holding virtual currency can be
substantial. You should therefore carefully consider whether trading
or holding virtual currency is suitable for you in light of your
financial condition. In considering whether to trade or hold virtual
currency, you should be aware that the price or value of virtual
currency can change rapidly, decrease, and potentially even fall to
zero.
(Insert company name) is licensed by the Department of Business
Oversight to do business in California. If you have complaints with
respect to any aspect of the virtual currency business conducted by
(company name), you may contact the California Department of Business
Oversight at its toll-free telephone number, 1-800-622-0620, by
email at consumer.services@dbo.ca.gov, or by mail at the Department
of Business Oversight, Consumer Services, 1515 K Street, Suite 200,
Sacramento, CA 95814."
26026. (a) Upon completion of a transaction subject to this
division, the licensee shall provide to the consumer a receipt
containing the following information:
(1) The name and contact information of the licensee including a
telephone number of the licensee where consumers can contact the
licensee for questions or to register complaints.
(2) The type, value, date, and time of the transaction.
(3) The type and amount of any fees charged.
(4) The exchange rate, if applicable.
(5) A statement of the refund policy of the licensee.
(6) Additional information the commissioner may require.
(b) The receipt required by this section shall be made in English
and in the language principally used by that licensee to advertise,
solicit, or negotiate, either orally or in writing, if other than
English.
(c) The receipt required by this section may be provided
electronically for transactions that are initiated electronically or
in which a consumer agrees to receive an electronic receipt.
26029. The commissioner may, by regulation or order, either
unconditionally or upon specified terms and conditions or for
specified periods, exempt from all or part of this division any
person or transaction or class of persons or transactions, if the
commissioner finds such action to be in the public interest and that
the regulation of such persons or transactions is not necessary for
the purposes of this division. The commissioner shall post on the
commissioner's Internet Web site a list of all persons, transactions,
or classes of person or transactions exempt pursuant to this
section, and the provision or provisions of this division from which
they are exempt.
26031. Notwithstanding any other law, a licensee in good standing
under this division that plans to engage in activities permitted
under the Money Transmission Act (Division 1.2 (commencing with
Section 2000)) may request from the commissioner in a form specified
by the commissioner to convert their license into a license under
Division 1.2 (commencing with Section 2000). A licensee's request to
convert its license shall be accompanied by documentation or other
evidence as determined by the commissioner that the licensee meets
the requirements for licensure under Division 1.2 (commencing with
Section 2000). If a licensee's request for a converted license is
granted, the licensee shall be subject to Section 2178 in order to
thereafter engage in any virtual currency business.
26032. (a) A (1) In
lieu of Section 26006, a person or entity conducting virtual
currency business with less than one million dollars ($1,000,000) in
outstanding obligations and whose business model, as determined by
the commissioner, represents low or no risk to consumers may
register with a five-hundred-dollar ($500) license fee with the
pay an application fee of five hundred dollars ($500)
to the commissioner and, if approved, receive a provisional
license to conduct virtual currency business. A person or entity that
receives such a license shall also register with FinCEN as a money
services business, if applicable.
(2) For the purposes of this section, "outstanding obligations"
means the value under the full custody and control of the person or
entity.
(b) In determining whether to issue a provisional license, the
commissioner shall consider a variety of factors, including, but not
limited to:
(1) The nature and scope of the applicant's business.
(2) The anticipated volume of business to be transacted by the
applicant in California.
(3) The nature and scope of the risks that the applicant's
business presents to consumers.
(4) The measures which the applicant has taken to limit or
mitigate the risks its business presents.
(5) Whether the applicant is regulated or otherwise authorized by
another governmental entity to engage in financial services or other
business activities.
(c) The Sections 26006, 26008,
26023, 26024, and 26031 shall not apply to a person or entity to
which a provisional license has been issued. However, the
commissioner may require a provisional licensee to certify adherence
to certain risk based performance standards related to safety,
soundness, and consumer protection as prescribed by the commissioner.
(d) Based upon the factors identified in subdivision (b) and the
provisional licensee's history as a holder of a provisional license,
the commissioner may at any time renew such license for an additional
length of time or remove the provisional status from the license if
the licensee meets all the requirements of this division. Unless the
commissioner otherwise removes the provisional status of or renews
such license, a provisional license shall expire two years after the
date of issuance. If the commissioner renews a provisional license,
the licensee shall pay a five-hundred-dollar ($500) renewal fee.
(e) The commissioner may request reports and documents and may
audit examine the provisional licensee
as needed to further consumer protection and
protection, enhance safety and soundness.
soundness, and gather information regarding the business and
operations of provisional licensees. Reports and documents concerning
the business and operations of provisional licensees shall be kept
confidential pursuant to Chapter 3.5 (commencing with Section 6250)
of Division 7 of Title 1 of the Government Code and any regulations
adopted thereunder. The commissioner shall include aggregated
information about the business and operations of provisional
licensees i n the report required by and subject to
subdivision (e) of Section 26023.
(f) A provisional licensee shall notify the commissioner within 15
days of surpassing the threshold in subdivision (a) and shall,
within 30 days from that notice, apply for a license pursuant to
Chapter 2 (commencing with Section 26002).
(g) A provisional license may be suspended or revoked pursuant to
Section 26017.
CHAPTER 6. OPERATIVE DATE
26040. This division shall become operative on July 1, 2016.
SEC. 4. The Legislature finds and declares that
Section 3 of this act, which adds Sections 26023 and 26032 to the
Financial Code, imposes a limitation on the public's right of access
to the meetings of public bodies or the writings of public officials
and agencies within the meaning of Section 3 of Article I of the
California Constitution. Pursuant to that constitutional provision,
the Legislature makes the following findings to demonstrate the
interest protected by this limitation and the need for protecting
that interest:
In order to allow the Commissioner of Business Oversight of the
Department of Business Oversight to fully accomplish his or her
goals, it is imperative to protect the interests of those persons
submitting information to the department to ensure that any personal
or sensitive business information that this act requires those
persons to submit is protected as confidential information.
SEC. 2. No reimbursement is required by this
act pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.