Senate Commerce Committee Statement to Senate, No. 1756 — State of New Jersey (March 14, 2022)

Summary

A Senate Commerce Committee statement to the Senate on Senate Bill No. 1756 with committee amendments, State of New Jersey, dated March 14, 2022, reporting the bill favorably. As amended, the bill, the "Digital Asset and Blockchain Technology Act," bars digital asset business activity with or for a resident unless the person is licensed by the Department of Banking and Insurance or has a pending license, with a penalty of $500 per day after notice. Applications go through the Nationwide Multistate Licensing System, the department must grant or deny within 120 days, and no license may go to an individual convicted of embezzlement, forgery, fraud or theft within the five years before applying. Licensees must keep client transaction records for not less than six years and make fee and risk disclosures, including at electronic kiosks.

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SENATE COMMERCE COMMITTEE

STATEMENT TO

SENATE, No.
1756

with
committee amendments

STATE
OF NEW JERSEY

DATED: MARCH
14, 2022

The
Senate Commerce Committee reports favorably Senate Bill No. 1756, with
committee amendments.

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, 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 for 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.

COMMITTEE
AMENDMENTS

The
committee amended the bill to:

(1) add
language introducing section 2 of the bill on definitions;

(2) replace
references to “executive officer” with “key individual;” and

(3) remove
a provision on additional resources for the department to perform its work.

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