Senate Commerce Committee Statement — Senate Bill No. 3132 (New Jersey, May 13, 2021)

Summary

Senate Commerce Committee statement dated May 13, 2021, reporting Senate Bill No. 3132 of the State of New Jersey favorably and with committee amendments. The bill, the "Digital Asset and Blockchain Technology Act," regulates digital asset business activity and requires the Department of Banking and Insurance to grant or deny a license application within 30 days of its receipt. A person who violates the licensure provisions is liable for a penalty of $500 per day. Among the committee amendments listed are a change in the period a licensee must maintain a record of all client transactions from not less than one year to not less than six years, and removal of language to exclude certain income and dividends from gross income for tax purposes.

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     SENATE COMMERCE COMMITTEE

                     STATEMENT TO

                   SENATE, No. 3132
                    with committee amendments



 STATE OF NEW JERSEY
                       DATED: MAY 13, 2021

     The Senate Commerce Committee reports favorably and with
committee amendments Senate Bill No. 3132.
     As amended, 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, regulated by the Bureau of Securities in the Division of
Consumer Affairs in the Department of Law and Public Safety.
     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, or licensed in another state to conduct digital asset
business activity by a state with which this State has a reciprocity
agreement.
     The bill provides the department may license a person to carry on
one or more 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
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an application for a license, been convicted of embezzlement, forgery,
fraud, or theft.
     The bill provides that a person licensed by another state to engage
in digital asset business activity in that state may engage in digital
asset business activity with or on behalf of a resident of New Jersey to
the same extent as a licensee if certain criteria are met pursuant to the
bill. An application for such a person is to be submitted through the
National Multistate Licensing System.
     The bill requires the department to grant or deny any digital asset
business license application or license reciprocity application within
30 days of its receipt. The department may refuse an application for a
digital asset business license or license reciprocity application if a
licensee or applicant fails to meet certain standards specified in the
bill.
     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 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.
     As amended and reported, this bill is identical to Assembly Bill
No. 2891 (1R) as also amended and reported by the committee.
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COMMITTEE AMENDMENTS
    The committee amendments:
    (1) remove the definition of and references to “digital security”
from the bill;
    (2) add language to the definition of “digital asset” to exempt
securities, whether in digital form or otherwise, regulated by the
Bureau of Securities in the Division of Consumer Affairs in the
Department of Law and Public Safety;
    (3) remove a provision allowing the Department of Banking and
Insurance to waive certain information requirements of applicants for
licenses under the bill;
    (4) require that submission of an application for an initial license,
of a renewal report for licensure renewal, and of documents for an out-
of-State individual to be licensed in New Jersey is to be conducted
through the Nationwide Multistate Licensing System;
    (5) provide 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;
    (6) change the period in which a licensee must maintain a record
of all client transactions from not less than one year from the date the
transaction occurred to not less than six years from that date; and
    (7) remove language to exclude certain income and dividends from
gross income for tax purposes.


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