Amended in Senate August 8, 2016

Amended in Senate August 18, 2015

Amended in Senate July 6, 2015

Amended in Assembly June 1, 2015

Amended in Assembly April 20, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 1326

Introduced by Assembly Member Dababneh

February 27, 2015

An act to repeal Section 107 of the Corporations Code, begin delete and to add Section 2178 to, end delete begin insert and to amend, repeal, and add Section 2003 of, end insert and to add Division 11 (commencing with Section 26000) to, the Financial Code, relating to begin insert digital end insert currency.

LEGISLATIVE COUNSEL’S DIGEST

AB 1326, as amended, Dababneh. begin delete Virtual end delete begin insert Digital end insert currency.

(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.

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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, 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.

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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.

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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.

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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.

end delete begin delete

This bill would authorize the commissioner to impose a civil penalty for a violation of these provisions.

end delete begin delete

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.

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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.

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This bill would require a licensee to provide a specified consumer protection disclosure and receipt to its consumers.

end delete begin delete

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.

end delete begin delete

This bill would authorize a person or entity conducting virtual currency business with less than $1,000,000 in outstanding obligations, as defined, and whose business model, as determined by the commissioner, represents low or no risk to consumers to 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.

end delete begin delete

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.

end delete begin delete

This bill would make these aforementioned provisions, including the Virtual Currency Act, operative on July 1, 2016.

end delete begin insert

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.

end insert begin insert

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.

end insert begin insert

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.

end insert begin insert

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.

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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.

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(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.

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(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.

end insert begin insert

This bill would provide that no reimbursement is required by this act for a specified reason.

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Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program:  begin delete no end delete begin insert yes end insert .

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

end insert

begin insert (a) end insert begin insert   end insert begin insert The Legislature finds and declares the
following: end insert

begin insert

(1) Digital currency is a new technology that, some predict, will
increase the speed and reduce the costs of payment transmission.

end insert begin insert

(2) Along with digital currency, a new industry has emerged
that specializes in providing digital currency-related services.

end insert begin insert

(3) Both the digital currency technology and the industry of
related services are in their developmental stages and evolving
rapidly.

end insert begin insert

(4) It is appropriate for the state to play a role in the
development of the new industry, for example by encouraging
compliance with law, preventing illicit finance, and ensuring that
users receive appropriate risk disclosures.

end insert begin insert

(5) At the same time, it is appropriate for the state to nurture,
rather than stifle, these ongoing innovations in payment technology.

end insert begin insert

(b) In light of the findings and declarations above, the
Legislature intends for the Digital Currency Business Enrollment
Program, created by this act, to do all of the following:

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(1) Enable the Department of Business Oversight to identify all
of the businesses providing digital currency services in the state.

end insert begin insert

(2) Enable businesses to provide digital currency services in
the state in a lawful and transparent manner.

end insert begin insert

(3) Enable the Department of Business Oversight to gather from
businesses providing digital currency services any information
helpful to determining whether and how the industry should be
licensed and regulated in the future.

end insert begin insert

(4) Ensure that consumers receive appropriate risk disclosures
and information about digital currency and digital currency-related
services.

end insert

begin delete SECTION 1. end delete

begin insert SEC. 2. end insert   

Section 107 of the Corporations Code is repealed.

begin delete

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
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 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 [e-mail], 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) (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 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) 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 examine the provisional licensee as needed to further
consumer protection, enhance safety and 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 in 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.

end delete

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 2003 of the end insert begin insert Financial Code end insert begin insert is amended to
read: end insert

2003.  

For purposes of this division, the following definitions
shall apply:

(a) “Affiliate,” when used with respect to a specified person,
means any person controlling, controlled by, or under common
control with, that specified person, directly or indirectly through
one or more intermediaries. For purposes of subdivisions (s) and
(x), a specified person is affiliated with another person if that
person controls, is controlled by, or under common control through
the ownership directly or indirectly of shares or equity securities
possessing more than 50 percent of the voting power of that
specified person.

(b) “Agent” means a person that is not itself licensed as a money
transmitter in California and provides money transmission in
California on behalf of the licensee, provided that the licensee
becomes liable for the money transmission from the time money
or monetary value is received by that person. However, “agent”
does not include any officer or employee of the licensee when
acting as such at an office of a licensee.

(c) “Applicant” means a person that files an application for a
license or for acquisition of control of a licensee under this division.

(d) “Average daily outstanding” means the amount of
outstanding money transmission obligations in California at the
end of each day in a given period of time, added together, and
divided by the total number of days in that period of time.

(e)  “Branch office” means any office in this state of a licensee
or agent at which the licensee receives money or monetary value
to provide money transmission, either directly or through an agent.

(f) “Business day” means one of the following:

(1) When used with respect to any act to be performed in this
state, any day other than Saturday, Sunday, or any other day that
is provided for as a holiday in the Government Code.

(2) When used with respect to any act to be performed in any
jurisdiction other than this state, any day other than a day that is
a legal holiday under the laws of that jurisdiction.

(g) “Commissioner” means the Commissioner of Business
Oversight.

(h) “Control” has the meaning set forth in Section 1250.

(i) “Day” means calendar day.

(j) “E-commerce” means any transaction where the payment
for goods or services is initiated via a mobile application or an
Internet Web site.

(k) “In California” or “in this state” means physically located
in California, or with, to, or from persons located in California.

(l) “Issue” and “issuer” mean, with regard to a payment
instrument, the entity that is the maker or drawer of the instrument
in accordance with the California Commercial Code and is liable
for payment. With regard to stored value, “issue” and “issuer”
mean the entity that is liable to the holder of stored value and has
undertaken or is obligated to pay the stored value. Only a licensee
may issue stored value or payment instruments.

(m) “Licensee” means a corporation or limited liability company
licensed under this division.

(n) “Material litigation” means litigation that according to United
States generally accepted accounting principles is significant to
an applicant’s or a licensee’s financial health and would be required
to be disclosed in the applicant’s or licensee’s annual audited
financial statements, report to shareholders, or similar records.

(o) “Monetary value” means a medium of exchange, whether
or not redeemable in money. begin insert Monetary value does not include any
form of value that qualifies as a digital currency under Division
11 (commencing with Section 26000). end insert

(p) “Money” means a medium of exchange that is authorized
or adopted by the United States or a foreign government. The term
includes a monetary unit of account established by an
intergovernmental organization or by agreement between two or
more governments.

(q) “Money transmission” means any of the following:

(1) Selling or issuing payment instruments.

(2) Selling or issuing stored value.

(3) Receiving money for transmission.

(r) “Outstanding,” with respect to payment instruments and
stored value, means issued or sold by the licensee in the United
States and not yet paid or refunded by the licensee, or issued or
sold on behalf of the licensee in the United States by its agent and
reported as sold, but not yet paid or refunded by the licensee.
“Outstanding,” with respect to receiving money for transmission
means all money or monetary value received in the United States
for transmission by the licensee or its agents but not yet paid to
the beneficiaries or refunded to the person from whom the money
or monetary value was received. All outstanding money
transmission of a licensee is and shall remain a liability of the
licensee until it is no longer outstanding.

(s) “Payment instrument” means a check, draft, money order,
traveler’s check, or other instrument for the transmission or
payment of money or monetary value, whether or not negotiable.
The term does not include a credit card voucher, letter of credit,
or any instrument that is redeemable by the issuer for goods or
services provided by the issuer or its affiliate.

(t) “Person” means an individual, corporation, business trust,
estate, trust, partnership, proprietorship, syndicate, limited liability
company, association, joint venture, government, governmental
subdivision, agency or instrumentality, public corporation or joint
stock company, or any other organization or legal or commercial
entity, provided, however, that “person,” when used with respect
to acquiring control of or controlling a specified person, includes
any combination of two or more persons acting in concert.

(u) “Receiving money for transmission” or “money received
for transmission” means receiving money or monetary value in
the United States for transmission within or outside the United
States by electronic or other means. The term does not include sale
or issuance of payment instruments and stored value.

(v) “Record” means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.

(w) “State” means a state of the United States, the District of
Columbia, Puerto Rico, the United States Virgin Islands, or any
territory or insular possession subject to the jurisdiction of the
United States.

(x) “Stored value” means monetary value representing a claim
against the issuer that is stored on an electronic or digital medium
and evidenced by an electronic or digital record, and that is
intended and accepted for use as a means of redemption for money
or monetary value or payment for goods or services. The term does
not include a credit card voucher, letter of credit, or any stored
value that is only redeemable by the issuer for goods or services
provided by the issuer or its affiliate, except to the extent required
by applicable law to be redeemable in cash for its cash value.

(y) “Traveler’s check” means an instrument that meets all of
the following:

(1) Is designated on its face by the term “traveler’s check” or
by any substantially similar term or is commonly known and
marketed as a traveler’s check.

(2) Contains a provision for a specimen signature of the
purchaser to be completed at the time of purchase.

(3) Contains a provision for a countersignature of the purchaser
to be completed at the time of negotiation.

begin insert

This section shall remain in effect only until January 1, 2022,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2022, deletes or extends that date.

end insert

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 2003 is added to the end insert begin insert Financial Code end insert begin insert , to read: end insert

begin insert

begin insert 2003. end insert   

For purposes of this division, the following definitions
shall apply:

(a)    “Affiliate,” when used with respect to a specified person,
means any person controlling, controlled by, or under common
control with, that specified person, directly or indirectly through
one or more intermediaries. For purposes of subdivisions (s) and
(x), a specified person is affiliated with another person if that
person controls, is controlled by, or under common control through
the ownership directly or indirectly of shares or equity securities
possessing more than 50 percent of the voting power of that
specified person.

(b) “Agent” means a person that is not itself licensed as a money
transmitter in California and provides money transmission in
California on behalf of the licensee, provided that the licensee
becomes liable for the money transmission from the time money
or monetary value is received by that person. However, “agent”
does not include any officer or employee of the licensee when
acting as such at an office of a licensee.

(c) “Applicant” means a person that files an application for a
license or for acquisition of control of a licensee under this
division.

(d) “Average daily outstanding” means the amount of
outstanding money transmission obligations in California at the
end of each day in a given period of time, added together, and
divided by the total number of days in that period of time.

(e) “Branch office” means any office in this state of a licensee
or agent at which the licensee receives money or monetary value
to provide money transmission, either directly or through an agent.

(f) “Business day” means one of the following:

(1) When used with respect to any act to be performed in this
state, any day other than Saturday, Sunday, or any other day that
is provided for as a holiday in the Government Code.

(2) When used with respect to any act to be performed in any
jurisdiction other than this state, any day other than a day that is
a legal holiday under the laws of that jurisdiction.

(g) “Commissioner” means the Commissioner of Business
Oversight.

(h) “Control” has the meaning set forth in Section 1250.

(i) “Day” means calendar day.

(j) “E-commerce” means any transaction where the payment
for goods or services is initiated via a mobile application or an
Internet Web site.

(k) “In California” or “in this state” means physically located
in California, or with, to, or from persons located in California.

(l) “Issue” and “issuer” mean, with regard to a payment
instrument, the entity that is the maker or drawer of the instrument
in accordance with the California Commercial Code and is liable
for payment. With regard to stored value, “issue” and “issuer”
mean the entity that is liable to the holder of stored value and has
undertaken or is obligated to pay the stored value. Only a licensee
may issue stored value or payment instruments.

(m) “Licensee” means a corporation or limited liability
company licensed under this division.

(n) “Material litigation” means litigation that according to
United States generally accepted accounting principles is
significant to an applicant’s or a licensee’s financial health and
would be required to be disclosed in the applicant’s or licensee’s
annual audited financial statements, report to shareholders, or
similar records.

(o) “Monetary value” means a medium of exchange, whether
or not redeemable in money.

(p) “Money” means a medium of exchange that is authorized
or adopted by the United States or a foreign government. The term
includes a monetary unit of account established by an
intergovernmental organization or by agreement between two or
more governments.

(q) “Money transmission” means any of the following:

(1) Selling or issuing payment instruments.

(2) Selling or issuing stored value.

(3) Receiving money for transmission.

(r) “Outstanding,” with respect to payment instruments and
stored value, means issued or sold by the licensee in the United
States and not yet paid or refunded by the licensee, or issued or
sold on behalf of the licensee in the United States by its agent and
reported as sold, but not yet paid or refunded by the licensee.
“Outstanding,” with respect to receiving money for transmission
means all money or monetary value received in the United States
for transmission by the licensee or its agents but not yet paid to
the beneficiaries or refunded to the person from whom the money
or monetary value was received. All outstanding money
transmission of a licensee is and shall remain a liability of the
licensee until it is no longer outstanding.

(s) “Payment instrument” means a check, draft, money order,
traveler’s check, or other instrument for the transmission or
payment of money or monetary value, whether or not negotiable.
The term does not include a credit card voucher, letter of credit,
or any instrument that is redeemable by the issuer for goods or
services provided by the issuer or its affiliate.

(t) “Person” means an individual, corporation, business trust,
estate, trust, partnership, proprietorship, syndicate, limited liability
company, association, joint venture, government, governmental
subdivision, agency or instrumentality, public corporation or joint
stock company, or any other organization or legal or commercial
entity, provided, however, that “person,” when used with respect
to acquiring control of or controlling a specified person, includes
any combination of two or more persons acting in concert.

(u) “Receiving money for transmission” or “money received
for transmission” means receiving money or monetary value in
the United States for transmission within or outside the United
States by electronic or other means. The term does not include
sale or issuance of payment instruments and stored value.

(v) “Record” means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.

(w) “State” means a state of the United States, the District of
Columbia, Puerto Rico, the United States Virgin Islands, or any
territory or insular possession subject to the jurisdiction of the
United States.

(x) “Stored value” means monetary value representing a claim
against the issuer that is stored on an electronic or digital medium
and evidenced by an electronic or digital record, and that is
intended and accepted for use as a means of redemption for money
or monetary value or payment for goods or services. The term
does not include a credit card voucher, letter of credit, or any
stored value that is only redeemable by the issuer for goods or
services provided by the issuer or its affiliate, except to the extent
required by applicable law to be redeemable in cash for its cash
value.

(y) “Traveler’s check” means an instrument that meets all of
the following:

(1) Is designated on its face by the term “traveler’s check” or
by any substantially similar term or is commonly known and
marketed as a traveler’s check.

(2) Contains a provision for a specimen signature of the
purchaser to be completed at the time of purchase.

(3) Contains a provision for a countersignature of the purchaser
to be completed at the time of negotiation.

This section shall become operative January 1, 2022.

end insert

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Division 11 (commencing with Section 26000) is added
to the end insert begin insert Financial Code end insert begin insert , to read: end insert

begin insert

 

Division  begin insert 11. end insert   Digital Currency Business
Enrollment Program

 

Chapter   begin insert 1. end insert General Provisions

 

begin insert 26000. end insert   

This division shall be known and may be cited as the
Digital Currency Business Enrollment Program.

begin insert 26002. end insert   

For purposes of this division, the following definitions
shall apply:

(a) “Circulation” means the capacity for transfer between
persons.

(b) “Commissioner” means the Commissioner of Business
Oversight.

(c) “Digital currency” means any 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 among its users. Digital currency does
not include fiat currency, e-money, or currency value of which
was fixed by its issuer to the value of a fiat currency.

(d) “Digital currency business” means the business of offering
or providing the service of storing, transmitting, exchanging, or
issuing digital currency. “Digital currency business” does not
include the following:

(1) Transmission of digital currency where the transaction is
undertaken for nonfinancial purposes and does not involve the
transfer of more than a nominal amount of digital currency
necessary to complete the transaction.

(2) Online games or gaming platforms that use digital currency
that (A) have no market or application outside of those games or
gaming platforms, (B) cannot be converted into, or redeemed for,
fiat currency or digital currency, and (C) are not redeemable for
real-world goods, services, discounts, or purchases.

(3) Customer affinity or rewards programs that use digital
currency 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 or digital currency
that is not part of the customer affinity or rewards program.

(4) Issuance of a credit card voucher, letter of credit, or any
value that is redeemable only by the issuer for goods and services
provided by the issuer or its affiliate, except to the extent required
by applicable law to be redeemable in cash for its cash value.

(5) A person or entity developing, distributing, or servicing
digital currency network software.

(6) A person or entity contributing software, connectivity, or
computing power to a digital currency network.

(7) A person or entity providing data storage or cybersecurity
services for an enrolled digital currency business, if the data
storage or cybersecurity services do not store digital currency.

(e) “E-money” means a digital representation of fiat currency
used to electronically transfer value denominated in fiat currency.

(f) “Exchanging,” with reference to digital currency, means
converting or exchanging fiat currency into digital currency,
converting or exchanging digital currency into fiat currency, or
converting or exchanging one form of digital currency into another
form of digital currency.

(g) “Fiat currency” means government-issued currency that is
designated as legal tender or lawful money, through government
decree, regulation, or law, of a government or intergovernmental
organization, or by agreement between two or more governments,
and customarily refers to paper money and coin and that is
circulated, used, and accepted as money.

(h) “In this state” or “in California” means physically located
in California, or with, from, and to a person located in California.

(i) “Issuing,” with reference to digital currency, means creating,
introducing into circulation, controlling, and administering digital
currency.

(j) “Person” means an individual, partnership, corporation,
association, joint stock association, trust, or other business
combination or entity, however organized.

(k) “Program” means the Digital Currency Business Enrollment
Program established by this division.

(l) “Storing,” with reference to digital currency, means to have
custody or control of digital currency on behalf of others. For the
purposes of this subdivision, custody or control of digital currency
includes having access to a customer’s digital currency credentials,
the ability to execute a digital currency transaction on behalf of
a customer, or the ability to prevent a customer from effecting a
desired transaction of digital currency.

(m) “Transmitting,” with reference to digital currency, means
the transfer of digital currency, by or through a third party, from
one person to another person, or from one storage repository of
digital currency to another storage repository of digital currency.

begin insert 26004. end insert   

(a) The Digital Currency Business Enrollment Program
is hereby established. The commissioner shall administer the
program as required by this division.

(b) The commissioner may make general rules and regulations
and specific rulings, demands, and findings for the enforcement
of this division, in addition to, and within the general purposes of,
this division.

 

Chapter   begin insert 2. end insert Enrollment

 

begin insert 26010. end insert   

(a) A person shall not engage in any digital currency
business in this state or offer to engage in digital currency business
in this state unless the person is enrolled in the program. An
enrollee shall not conduct any digital currency business through
an agent or agency arrangement if the agent is not an enrollee.

(b) A person seeking enrollment in the program shall pay to the
commissioner a nonrefundable fee of up to five thousand dollars
($5,000), which shall not exceed the reasonable costs of enrolling
a person in the program.

(c) A person seeking enrollment in the program shall provide
all of the following information to the commissioner in a form and
in a medium prescribed by the commissioner by order or
regulation:

(1) Legal name of the subject person.

(2) A description of the structure or organization of the subject
person, including any parent or subsidiary, and whether any parent
or subsidiary is publicly traded.

(3) Fictitious, trade, or business names of the subject person.

(4) Residential and business address of the subject person.

(5) All other physical addresses and locations of the subject
person.

(6) A list of any criminal convictions of the person seeking
enrollment and any material litigation in which that person has
been involved in the past 10-year period.

(7) Any Internet Web site connected with the subject person

(8) Detailed information about the type of digital currency
service to be provided, for example storing, transmitting,
exchanging, or issuing.

(9) The legal name, any fictitious or trade name, business and
residential addresses, and the employment, in the last 10-year
period, of each executive officer, manager, director, or person
that has control of the subject person.

(10) A list of any criminal convictions and material litigation
in which any executive officer, manager, director, or person in
control of the subject person has been involved in the past 10-year
period.

(11) The number of employees of the subject person, and their
titles and responsibilities.

(12) A contact person and his or her e-mail address and
telephone number.

(13) Any other license held by the enrollee in California or any
other state.

(14) Whether the subject person is a money services business
under the regulations adopted pursuant to the federal Bank Secrecy
Act (31 C.F.R. Chapter X) or its successor.

(15) Any other information that the commissioner may require
by order or regulation.

(d) A person seeking enrollment in the Enrollment Program
shall provide to the commissioner, in a form acceptable to the
commissioner, fingerprints of the subject person, and of any
executive officer, manager, director, or person in control of the
subject person. The commissioner may deliver, or cause to be
delivered, these fingerprints to local, state, or federal law
enforcement agencies.

(e) The commissioner shall permit enrollment in the program
unless it appears to the commissioner that the subject person, the
directors and officers of the subject person, any person that
controls the subject person, and the directors and officers of any
person that controls the subject person, are not of good character.

(f) Following enrollment, the enrollee shall notify the
commissioner, as soon as practicable, of any changes to the facts
provided to the commissioner prior to enrollment pursuant to
subdivision (d). The enrollee shall provide the information
identified in paragraphs (8) and (9) of subdivision (c) with respect
to any new executive officer, manager, or director of the enrollee.
Upon receiving this information, the commissioner may disenroll
an enrollee if he or she determines that such person or persons
are not of good character.

begin insert 26012. end insert   

A person shall not, directly or indirectly, acquire control
of an enrollee unless the commissioner has first approved, in
writing, the acquisition of control. An application to acquire
control of an enrollee shall be in writing, under oath, and in a
form prescribed by the commissioner. The application shall contain
information about the proposed controlling person identified in
paragraphs (8) and (9) of subdivision (c) of Section 26010. The
fee for filing an application for approval to acquire control of an
enrollee shall be two thousand five hundred dollars ($2,500), which
shall not exceed the costs associated with the approval. For
purposes of this section, “control” has the meaning set forth in
Section 1250.

begin insert 26014. end insert   

Persons seeking to engage in both money transmission,
as defined in Section 2003, and digital currency business shall
obtain both a license under the Money Transmission Act (Division
1.2 (commencing with Section 2000)) and be enrolled in the
program.

begin insert 26016. end insert   

An enrollee shall immediately notify the commissioner
in writing if it no longer engages in any digital currency business
in this state or offers to engage in digital currency business in this
state, or if any other circumstances exist that would otherwise
make enrollment in the program no longer applicable.

 

Chapter   begin insert 3. end insert Advertising, Disclosures, and Receipts

 

begin insert 26020. end insert   

(a) An enrollee engaged in digital currency business
shall not advertise its products, services, or activities without
including the name of the enrollee and the following statement:
“Our digital currency business in California is conducted pursuant
to the Digital Currency Business Enrollment Program that is
administered by the Department of Business Oversight (“DBO”).
However, neither the DBO nor any other government agency has
reviewed the safety and soundness of our business or the digital
currencies in which we transact. For more information about the
Enrollment Program, visit: [www.dbo.ca.gov/dc].”

(b) An enrollee shall maintain, for examination by the
commissioner, all advertising and marketing materials, including,
but not limited to, print media, Internet media, which includes
Internet Web sites and podcasts, radio and television advertising,
road show materials, presentations, and brochures. An enrollee
shall maintain hard copy, Internet Web site captures, and audio
and video recordings of its advertising and marketing materials,
as applicable.

(c) An enrollee’s advertising and marketing materials shall
comply with all disclosure requirements applicable under federal
and state laws, rules, and regulations.

(d) In advertising and marketing materials, an enrollee, and
any person or entity acting on an enrollee’s behalf, shall not make
any false, misleading, or deceptive representations or omissions.
Any representation or omission that is contrary to any of the
disclosures required under this division is presumptively false,
misleading, and deceptive.

begin insert 26022. end insert   

(a) Prior to entering into an initial transaction for, on
behalf of, or with a customer, an enrollee shall disclose clearly
and conspicuously in writing in English and in any other language
that may be spoken by the majority of the customers of the enrollee,
all material risks associated with its products, services, and
activities and with digital currency generally. The disclosures shall
include, but are not limited to, the following:

(1) A statement that, unlike traditional financial institutions,
neither the Department of Business Oversight nor any other
government agency has licensed, sanctioned, endorsed, or
otherwise reviewed the operations of the enrollee or reviewed the
enrollee for safety or soundness.

(2) A statement that, unlike some other financial institutions,
accounts and value balances are not covered by Federal Deposit
Insurance Corporation guarantees or Securities Investor Protection
Corporation protections.

(3) A statement that the customer may not be protected if the
enrollee becomes insolvent.

(4) A statement that digital currency is not legal tender and is
not backed by the government.

(5) A statement that legislative and regulatory changes or
actions at the state, federal, or international level may adversely
affect the use, transfer, exchange, or value of digital currency.

(6) A statement that transactions in digital currency generally
are irreversible and that, accordingly, losses due to fraudulent or
accidental transactions may not be recoverable.

(7) A statement that some digital currency transactions are
deemed completed when recorded on a centralized ledger, which
is not necessarily the date or time that the customer initiates the
transaction.

(8) A statement that the value of digital currency is usually
derived from the continued willingness of market participants to
exchange fiat currency for digital currency, which may result in
the potential for permanent and total loss of value of a particular
digital currency should the market for that digital currency
disappear.

(9) A statement that there is no assurance that a person who
accepts a digital currency as payment today will continue to do
so in the future.

(10) A statement that the volatility and unpredictability of the
price of digital currency relative to fiat currency may result in
significant loss or tax liability over a short period of time.

(11) A statement that the nature of digital currency may lead
to an increased risk of fraud or cyberattack.

(12) A statement that any technological difficulties experienced
by the enrollee may prevent the access or use of a customer’s
digital currency.

(13) A statement that any bond or trust account for the benefit
of customers may not be sufficient to fully cover all losses incurred
by customers.

(14) Any other disclosures the commissioner deems are
necessary to adequately inform consumers about the risks
associated with digital currency.

(b) When opening an account for a new customer, and prior to
entering into an initial transaction for, on behalf of, or with the
customer, an enrollee shall disclose clearly and conspicuously in
writing in English and in any other language that may be spoken
by the majority of the customers of the enrollee, all relevant general
terms and conditions associated with its products, services, and
activities. At minimum, if applicable, the disclosures shall include:

(1) The customer’s liability for unauthorized digital currency
transactions.

(2) The customer’s right to stop payment of a preauthorized
digital currency transfer and the procedure to initiate a
stop-payment order.

(3) The enrollee’s liability to the customer under any applicable
federal or state laws, rules, or regulations.

(4) The circumstances under which the enrollee will, absent a
court or government order, disclose information concerning the
customer’s account to third parties.

(5) The customer’s right to receive periodic account statements
and valuations from the enrollee.

(6) The customer’s right to receive a receipt, trade ticket, or
other evidence of a transaction.

(7) The customer’s right to prior notice of a change in the
enrollee’s rules or policies.

(8) Any other disclosures that are customarily given in
connection with the opening of a customer account.

(9) A statement of the following: “The digital currency business
of [Enrollee’s legal name] in California is conducted pursuant to
the Digital Currency Business Enrollment Program that is
administered by the Department of Business Oversight (“DBO”).
[Enrollee’s legal name] conducts digital currency business in
California under the name(s) [a listing of all trade names enrollee
does business under in California]. If you have complaints with
respect to any aspect of the digital currency business conducted
by [Enrollee’s legal name], you may contact the Department of
Business Oversight at its toll-free telephone number,
1-800-622-0620, by e-mail at [e-mail], or
by mail at the Department of Business Oversight, Consumer
Services, 1515 K Street, Suite 200, Sacramento, CA 95814. For
more information about the Digital Currency Business Enrollment
Program visit: [www.dbo.ca.gov/dc].”

(c) Prior to each transaction in digital currency, for, on behalf
of, or with a customer, an enrollee shall furnish to the customer
a written disclosure clearly and conspicuously in writing in English
and in any other language that may be spoken by the majority of
the customers of the enrollee, containing the terms and conditions
of the transaction. At minimum, if applicable, the disclosures shall
include:

(1) The amount of the transaction.

(2) Any fees, expenses, and charges borne by the customer,
including applicable exchange rates.

(3) The type and nature of the digital currency transaction.

(4) A warning if the transaction, once executed, cannot be
reversed.

(5) Any other disclosures that are customarily given in
connection with a transaction of this nature.

(d) The disclosures required by this section may be provided to
the customer electronically and shall in be in minimum 10-point
font.

(e) An enrollee shall ensure that all disclosures required by this
section are acknowledged as received by customers.

begin insert 26024. end insert   

(a) When an enrollee accepts digital currency or fiat
currency from a customer, the enrollee shall provide the customer
a receipt containing the following information:

(1) The name and contact information of the enrollee, including
a telephone number and California mailing address established
by the enrollee to answer questions and register complaints.

(2) The type, value, date, and precise time of the transaction.

(3) The fee charged.

(4) The exchange rate, if applicable.

(5) A statement of the liability of the enrollee for nondelivery
or delayed delivery.

(6) A statement of the refund policy of the enrollee.

(7) Any additional information the commissioner may require.

(b) Before a new enrollee issues its first receipt to a customer,
it shall file with the commissioner a certified copy of the receipt
forms to be used. An enrollee shall not use a receipt form if a
certified copy of it has not been filed with the commissioner and
approved by it or use a receipt form that the commissioner has
deemed not to be in compliance pursuant to subdivision (c).

(c) If the commissioner determines, within 30 business days of
the filing date of a receipt, that the receipt does not comply with
the requirements of this section, the commissioner shall notify the
enrollee in writing that the receipt is not in compliance with these
requirements.

(d) If a receipt is required by this division to be in English and
another language, the English version of the receipt shall govern
any dispute concerning the terms of the receipt. However, any
discrepancies between the English version and any other version
due to the translation of the receipt from English to another
language including errors or ambiguities shall be construed
against the enrollee and the enrollee shall be liable for any
damages caused by these discrepancies.

(e) An enrollee violating the requirements of this section shall
be subject to a fine of one hundred dollars ($100) for each
violation. This fine shall be in addition to any other enforcement
provisions that may apply to the violation.

(f) The receipt required by subdivision (a) may be transmitted
to the customer electronically, including by electronic mail or text
message. Disclosures in the receipt required by subdivision (a)
shall be in a minimum 8-point font, except for receipts provided
via mobile telephone or text message.

begin insert 26026. end insert   

The commissioner may by order or regulation modify
the content of the notices and disclosures required under Sections
26020, 26022, and 26024.

 

Chapter   begin insert 4. end insert Fact Gathering

 

begin insert 26030. end insert   

(a) The commissioner may, at any time, require an
enrollee and agents of an enrollee to submit to surveys,
investigations, questionnaires, and other items for
information-gathering in order to ascertain detailed facts about,
without limitation, the enrollee’s:

(1) Business model.

(2) Revenue.

(3) Volume of business activity.

(4) Capitalization and net worth.

(5) Bonding and insurance.

(6) Liquidity.

(7) Investment activity in connection with digital currency stored
or deposited with the digital currency business.

(8) Cybersecurity and breaches of cybersecurity.

(9) Compliance with the federal Bank Secrecy Act and
associated regulations.

(10) Operational safety, including, but not limited to, the proper
accounting of an enrollee’s digital currency stored, exchanged,
transmitted, or issued by the enrollee.

(11) Advertising materials.

(12) Complaints by the enrollee’s customers and their
resolution.

(b) The directors, officers, and employees of any enrollee or
agent of an enrollee shall exhibit to the commissioner, on request,
any or all of the enrollee’s accounts, books, correspondence,
memoranda, papers, and other records and shall otherwise
facilitate the commissioner’s fact-gathering so far as it may be in
their power to do so. These materials shall be received in
confidence by the commissioner and are not public records under
the California Public Records Act (Chapter 3.5 (commencing with
Section 6250) of Division 7 of Title 1 of the Government Code)
and any regulations adopted thereunder.

(c) An enrollee shall file within 90 days after the end of each
fiscal year, or within any extended time as the commissioner may
prescribe, an audit report with the commissioner for the fiscal
year that shall comply with all of the following provisions:

(1) The audit report shall be based upon an audit of the enrollee
conducted in accordance with generally accepted auditing
standards and any other requirements as the commissioner may
prescribe.

(2) The audit report shall contain audited financial statements
of the enrollee for, or as of, the end of the fiscal year, prepared in
accordance with generally accepted accounting principles and
any other information as the commissioner may require.

(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 enrollee to take any
action as the commissioner may find necessary to enable the
independent certified public accountant or independent public
accountant to remove the qualification.

(5) The audit report shall be accompanied by financial
statements, including balance sheet, income statement, statement
of changes in shareholders’ equity, and statement of cash flow,
for each calendar year quarter, verified by two of the enrollee’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.

(d) An enrollee shall file an annual report with the
commissioner, on or before March 15, providing the relevant
information that the commissioner reasonably requires concerning
the business and operations conducted by the enrollee within the
state during the preceding calendar year. An enrollee shall also
make other special reports to the commissioner that may be
required by the commissioner from time to time.

(e) The reports required by this section shall be received in
confidence by the Commissioner and are not public records under
the California Public Records Act (Chapter 3.5 (commencing with
Section 6250) of Division 7 of Title 1 of the Government Code)
and any regulations adopted thereunder.

(f) (1) If any enrollee fails to do any of the following, the
enrollee shall be liable for a sum of up to one hundred dollars
($100) for every day up to the 10th day:

(A) To make any report required by the commissioner within
10 days from the day designated for the making of the report or
within any extension of time granted by the commissioner.

(B) To include in a report any matter required by law or by the
commissioner.

(2) Any subsequent failure to perform an act following
imposition of a penalty under paragraph (1) shall constitute
grounds for immediate disenrollment from the program.

(g) The commissioner shall annually prepare and make available
to the public a report on the state of the digital currency business
industry compiling the information obtained pursuant to this
section.

 

Chapter   begin insert 5. end insert Bank Secrecy Act

 

begin insert 26036. end insert   

(a) An enrollee that is a money services business under
the regulations adopted pursuant to the federal Bank Secrecy Act
(31 C.F.R. Chapter X) or its successor shall comply with those
regulations.

(b) The commissioner may, at any time, and from time to time,
examine the business and any office, within or outside this state,
of any enrollee or any agent of an enrollee in order to ascertain
compliance with this rule.

 

Chapter   begin insert 6. end insert Fees

 

begin insert 26040. end insert   

Following enrollment in the program, an enrollee shall
pay thereafter an annual fee of two thousand five hundred dollars
($2,500) to maintain enrollment in the program.

begin insert 26042. end insert   

All moneys received by the commissioner in connection
with this division shall be placed in the Digital Currency Business
Enrollment Program Account, which is hereby 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.

 

Chapter   begin insert 7. end insert Enforcement

 

begin insert 26046. end insert   

(a) Whenever, in the opinion of the commissioner, any
person who is not enrolled in the program engages in any digital
currency business in this state or is offering to engage in digital
currency business in this state, or is violating any provision of this
division or any regulation or order adopted or issued pursuant to
the division, the commissioner may issue an order directing the
person to desist and refrain from engaging in the act, practice, or
course of business, or take other action necessary or appropriate
to comply with this division. If, after an order has been served, a
request for hearing is filed in writing within 30 days of the date
of service of the order, a hearing shall be held. If that person fails
to file a written request for a hearing within 30 days from the date
of service of the order, the order shall be deemed a final order of
the commissioner and is not subject to review by any court or
agency, notwithstanding that every official act of the commissioner
is subject to judicial review in accordance with law.

(b) Whenever the commissioner believes from the evidence
satisfactory to the commissioner that any person who is not
enrolled in the program is engaging in any digital currency
business in this state or is offering to engage in digital currency
business in this state, or is violating any provision of this division
or any regulation or order adopted or issued pursuant to the
division, the commissioner may, in the commissioner’s discretion,
bring an action in the name of the people of the State of California
in superior court to enjoin the act or practice or to enforce
compliance with this division or any rule or order hereunder. Upon
a proper showing, a permanent or preliminary injunction,
restraining order, or writ of mandate shall be granted and a
receiver, monitor, conservator, or other designated fiduciary or
officer of the court may be appointed for the defendant or the
defendant’s assets, or any other ancillary relief may be granted
as appropriate. A receiver, monitor, conservator, or other
designated fiduciary or officer of the court appointed by the
superior court pursuant to this section may, with the approval of
the court, exercise any or all of the powers of the defendant’s
officers, directors, partners, trustees, or persons who exercise
similar powers and perform similar duties, including the filing of
a petition for bankruptcy. No action at law or in equity may be
maintained by any party against the commissioner, or a receiver,
monitor, conservator, or other designated fiduciary or officer of
the court, by reason of their exercising these powers or performing
these duties pursuant to the order of, or with the approval of, the
superior court.

(c) (1) If the commissioner determines it is in the public interest,
the commissioner may include in any civil action authorized by
subdivision (b) a claim for ancillary relief, including, but not
limited to, a claim for restitution or disgorgement or damages on
behalf of a person injured by the act or practice constituting the
subject matter of the action and attorney fees and costs, and the
court shall have jurisdiction to award additional relief.

(2) In any civil action taken by the commissioner pursuant to
subdivision (b), the commissioner may include a claim for civil
penalties not to exceed twenty-five thousand dollars ($25,000) for
each violation.

(3) No action shall be maintained to enforce any liability created
under subdivision (b) unless brought before the expiration of four
years after the act or transaction constituting the violation.

(d) The remedies provided by this section and by other sections
of this division are not exclusive and may be sought and employed
in any combination to enforce the provisions of this division.

begin insert 26048. end insert   

The commissioner may issue an order disenrolling an
enrollee if, after notice and an opportunity for hearing, the
commissioner finds that:

(a) The enrollee has failed to cooperate with examinations,
investigations, surveys, questionnaires, or other fact-gathering
efforts by the commissioner, including failing to submit its books,
papers, and affairs to the inspection of any examiner.

(b) The enrollee has failed to submit to the commissioner any
information, documents, updates, or reports required by this
division or by regulation or order of the commissioner.

(c) The enrollee has willfully made or caused to be made in any
document submitted to the commissioner under this division, or
in any proceeding before the commissioner, or in any
communication to the commissioner, any statement that was at the
time, and in the light of the circumstances under which it was
made, false or misleading with respect to any material fact, or has
willfully omitted to state any material fact that was required to be
stated therein.

(d) The enrollee has failed to pay to the commissioner any fees,
penalties, or other sums required by this division.

(e) The enrollee has failed to provide the disclosures and
receipts required by Section 26022 or 26024 or has failed to
comply with the prohibitions on advertising set forth in Section
26020.

(f) The enrollee has failed to comply with Section 26036.

(g) The enrollee has been permanently or temporarily enjoined
by order, judgment, or decree of any court of competent jurisdiction
from engaging in or continuing a digital currency business.

(h) The enrollee is or has been subject to an order, judgment,
or decree of any court of competent jurisdiction finding that the
enrollee has engaged in fraud, deceit, or other unfair and abusive
business practices or finding there to be substantial evidence, a
likelihood, or a probability of success on the claim, that the
enrollee has engaged in fraud, deceit, or other unfair and abusive
business practices.

begin insert 26049. end insert   

The commissioner may refer evidence available
concerning any violation of this division or of any rule or order
hereunder 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 may, with or without this type of a
reference, institute appropriate proceedings under this division.
The commissioner and his or her counsel, deputies, or assistants
may, upon request of the Attorney General or the district attorney,
assist the prosecuting attorney in presenting the law or facts at
the trial.

 

Chapter   begin insert 8. end insert Operative Dates

 

begin insert 26050. end insert   

This division shall remain in effect only until January
1, 2022, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2022, deletes or extends
that date.

end insert

begin delete SEC. 4. end delete

begin insert SEC. 6. end insert   

The Legislature finds and declares that Section begin delete 3 end delete begin insert 4 end insert of
this act, which adds begin delete Sections 26023 and 26032 end delete begin insert Section 26030 end insert 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.

begin insert

begin insert SEC. 7. end insert   

end insert begin insert

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.

end insert