AB 1326

Bill Subjects

Abstract

(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, until January 1, 2022, would enact the Digital Currency Business Enrollment Program, to be administrated by the Commissioner of Business Oversight, who would be granted authority to make rules and regulations for this purpose. The bill would prescribe various definitions in this regard and would define digital currency as a digital representation of value that can be digitally traded and is used to facilitate the sale, purchase, and exchange of goods, services, or other digital representations of value, except as specified. The bill would define digital currency business as offering or providing the service of storing, transmitting, exchanging, or issuing digital currency, subject to various exceptions. The bill would define a person to include an individual or other business entities, however organized. The bill would prohibit a person from engaging in the digital currency business without enrolling in the program and would prohibit the conduct of digital currency business through an unenrolled agent. The bill would require a person seeking enrollment to pay a nonrefundable fee of up to $5,000, not to exceed the reasonable costs of enrolling a person in the program, and would require the person to provide the commissioner specified personal and business information in a form and manner prescribed by the commissioner. The bill would also require the person to provide fingerprints and would authorize the commissioner to deliver the fingerprints to law enforcement agencies. The bill would require the commission to permit enrollment in the program unless it appears to the commissioner that the person, or related parties, are not of good character. The bill would prohibit a person from directly or indirectly acquiring control of an enrollee in the program without approval by the commissioner and would prescribe a process and a fee for applying for approval. The bill would require an application to acquire control of an enrollee to be under oath. By expanding the scope of the crime of perjury the bill would impose a state-mandated local program. The bill would require an enrollee to pay an annual fee of $2,500 to maintain enrollment in the program. The bill would require that all moneys received by the commissioner in connection with its provisions to be placed in the Digital Currency Business Enrollment Program Account, which would be created in the State Corporations Fund, to be available, upon appropriation by the Legislature, to the commissioner for expenditure for the purposes of the program. The bill would prohibit an enrollee in the program from advertising products, services, and activities without a statement regarding the program and that a government agency has not reviewed the safety or soundness of the business or digital currencies. The bill would require an enrollee to maintain advertising and marketing materials and would prohibit the materials from making false, misleading, or deceptive representations or omissions. The bill would require an enrollee to make a variety of specified disclosures in English and in any other language spoken by a majority of the enrollee's customers prior to entering into an initial transaction for, or on behalf of, a customer, when opening an account for a new customer, and prior to each transaction. The bill would also require an enrollee to provide a customer a receipt containing specified information when accepting digital currency or money. The bill would require that the English version of the receipt govern disputes over its terms and would provide that discrepancies between the English version and a translation be construed against the enrollee, as specified. The bill would prescribe a fine of $100 for each violation of the provisions relating to receipts. The bill would authorize the commissioner to require an enrollee and its agents to submit surveys, investigations, and questionnaires for the purpose of gathering information and to ascertain detailed facts about the enrollee's business model, capitalization and net worth, and cybersecurity, among other things. The bill would require an enrollee and its officers, agents, and employees to make the enrollee's accounts, books, correspondence, and other records available upon request and to facilitate the commissioner's fact-gathering. The bill would provide that these materials are not public records and shall be held in confidence. The bill would require an enrollee to provide an audit report containing specified information and prepared pursuant to prescribed standards and an annual report, the content of which would be determined by the commissioner. The bill would provide that these reports are not public records and shall be held in confidence. The bill would prescribe fines and penalties for the failure to make reports or include required information, which would include disenrollment for repeated failures. The bill would require the commissioner to prepare and make available to the public an annual report on the state of the digital currency business industry by compiling the information received pursuant to these provisions. The bill would grant the commissioner the authority to issue cease and desist orders when, in the commissioner's opinion, an unenrolled person is engaging in the digital currency business or violating provisions of the program. The bill would provide for a hearing after an order is served and a request for hearing is filed in writing within 30 days of service. If a request for a hearing is not filed within this time, the order would be deemed final and would not be subject to any judicial review. The bill would authorize the commissioner to bring actions to enjoin acts or practices in violation of its provisions and to enforce its provisions. The bill would authorize a superior court, upon proper showing, to appoint a receiver, monitor, conservator, or other designated fiduciary or officer of the court for a defendant or the defendant's assets. The bill would authorize the commissioner to include in civil actions claims for ancillary relief, including restitution and disgorgement, on behalf of a person injured, as well as attorney's fees and costs, and civil penalties of up to $25,000. The bill would provide a limitations period in this regard of four years after an act constituting a violation occurred. The bill would authorize the commissioner to disenroll an enrollee if, after notice and an opportunity for hearing, the commissioner makes specified findings. The bill would authorize the commissioner to refer evidence regarding violations of the bill's provisions to the Attorney General, the Financial Crimes Enforcement Network of the United States Department of the Treasury, or the district attorney of the county in which the violation occurred, who would be authorized, with or without this type of a reference, to institute appropriate proceedings. (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. (4) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.