SB1705 - Relating to the regulation of virtual currency kiosks; providing an administrative penalty.

      By: Parker, et al. S.B. No. 1705     (Plesa)           A BILL TO BE ENTITLED   AN ACT   relating to the regulation of virtual currency kiosks; providing an   administrative penalty.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Subtitle E, Title 3, Finance Code, is amended by   adding Chapter 161 to read as follows:   CHAPTER 161. VIRTUAL CURRENCY KIOSKS           Sec. 161.001.  DEFINITIONS. In this chapter:                 (1)     "Blockchain analytics" means the analysis of data   from blockchains or public distributed ledgers, including   associated transaction information.                 (2)     "Blockchain analytics software" means a software   service that uses blockchain analytics data to provide   risk-specific information, including information relating to   virtual currency wallet addresses.                 (3)     "Commissioner"   means the banking commissioner of   Texas or a person designated by the banking commissioner and acting   under the banking commissioner's direction and authority.                 (4)     "Department" means the Texas Department of   Banking.                 (5)     "Transaction hash" means a unique identifier made   up of a string of characters that act as a record of and provide   proof that the transaction was verified and added to the   blockchain.                 (6)     "Virtual currency" has the meaning assigned by   Section 12.001, Business & Commerce Code.                 (7)     "Virtual currency address" means an alphanumeric   identifier associated with a virtual currency wallet identifying   the location to which a virtual currency kiosk transaction can be   sent.                 (8)     "Virtual currency business activity" means   exchanging, transferring, or storing virtual currency.                 (9)     "Virtual currency kiosk" means an electronic   terminal operated by a virtual currency kiosk operator to enable   the operator to facilitate the exchange of virtual currency for   money, bank credit, or other virtual currency, including by:                       (A)     connecting directly to a separate virtual   currency exchanger that performs the actual virtual currency   transmission; or                       (B)     drawing on the virtual currency in the   possession of the electronic terminal's operator.                 (10)     "Virtual currency kiosk operator" means a person   that engages in virtual currency business activity through a   virtual currency kiosk located in this state or a person that owns,   operates, or manages a virtual currency kiosk located in this state   through which virtual currency business activity is offered.                 (11)     "Virtual currency kiosk transaction" means a   transaction conducted or performed, wholly or partly, by electronic   means on a virtual currency kiosk, including a transaction made at a   virtual currency kiosk to purchase virtual currency with fiat   currency or to sell virtual currency for fiat currency.                 (12)     "Virtual currency wallet" means a software   application or other mechanism providing a means to hold, store, or   transfer virtual currency.           Sec.   161.002.     REGISTRATION REQUIRED. A virtual currency   kiosk operator may not locate, or allow a third party to locate, a   virtual currency kiosk in this state unless the virtual currency   kiosk operator:                 (1)  registers the kiosk with the department; and                 (2)     obtains the prior approval of the department for   the activation of the kiosk.           Sec.   161.003.     REPORT REQUIRED. Not later than the 45th day   following the date of the end of each calendar quarter, a virtual   currency kiosk operator shall file with the department a report of   the location of each virtual currency kiosk of the operator in this   state. The report required under this section must include for each   virtual currency kiosk:                 (1)  company legal name;                 (2)  any fictitious or trade name;                 (3)  physical address;                 (4)     start date of operation of the virtual currency   kiosk at a location;                 (5)     end date of operation of the virtual currency   kiosk at a location, if applicable; and                 (6)     each virtual currency address associated with the   virtual currency kiosk.           Sec.   161.004.     REQUESTS FOR CERTAIN INFORMATION.   (a)   Not   later than 72 hours after receiving a written request from a law   enforcement agency, a virtual currency kiosk operator shall provide   to the agency limited identifying information such as a virtual   currency wallet address or transaction hash.           (b)     A release of information under Subsection (a) does not   require a subpoena or court order.   A release of additional   identifying information requires a subpoena or court order.           Sec.   161.005.     DISCLOSURES ON MATERIAL RISK. (a)   A virtual   currency kiosk operator in this state shall disclose in a clear,   conspicuous, and easily readable manner all material risks   generally associated with virtual currency, including that:                 (1)     virtual currency is not legal tender and is not   backed or insured by the government;                 (2)     accounts and value balances of virtual currency   are not subject to Federal Deposit Insurance Corporation, National   Credit Union Administration, or Securities Investor Protection   Corporation protections;                 (3)     some virtual currency kiosk transactions are   deemed to be made when recorded on a public ledger that may not be   the date or time when the person initiates the transaction;                 (4)     virtual currency's value may be derived from the   continued willingness of market participants to exchange fiat   currency for virtual currency, which may result in the permanent   and total loss of a particular virtual currency's value if the   market for virtual currency disappears;                 (5)     a person who accepts a virtual currency as payment   is not required to accept the currency as payment and may decline to   accept the currency in a future transaction;                 (6)     the volatility and unpredictability of the price   of virtual currency relative to fiat currency may result in a   significant loss in value over a short period;                 (7)     the nature of virtual currency means that any   technological difficulties experienced by a virtual currency kiosk   operator may prevent access to or use of the operator's customer's   virtual currency; and                 (8)     any bond maintained by the virtual currency kiosk   operator for the benefit of customers may not cover all losses   incurred by customers.           (b)     In addition to the disclosures required under   Subsection (a), a virtual currency kiosk operator shall provide a   written disclosure that:                 (1)     is written prominently and in bold type and must be   acknowledged by the customer;                 (2)     is provided separately from the disclosures   required under Subsection (a); and                 (3)     states: "WARNING: LOSSES DUE TO FRAUDULENT OR   ACCIDENTAL TRANSACTIONS ARE NOT RECOVERABLE AND TRANSACTIONS IN   VIRTUAL CURRENCY ARE IRREVERSIBLE. VIRTUAL CURRENCY TRANSACTIONS   MAY BE USED TO STEAL YOUR MONEY BY CRIMINALS IMPERSONATING THE   GOVERNMENT, ORGANIZATIONS, OR YOUR LOVED ONES. THEY CAN THREATEN   JAIL TIME, SAY YOUR IDENTITY HAS BEEN STOLEN, ALLEGE YOUR COMPUTER   HAS BEEN HACKED, INSIST YOU WITHDRAW MONEY FROM YOUR BANK ACCOUNT TO   PURCHASE VIRTUAL CURRENCY, OR A NUMBER OF OTHER SCAMS. IF YOU   BELIEVE YOU ARE BEING SCAMMED, CALL YOUR LOCAL LAW ENFORCEMENT.".           (c)     The disclosures required under Subsection (a) must be   displayed on the screen of the virtual currency kiosk with the   ability for a customer to acknowledge the receipt of the   disclosure.           Sec.   161.006.     TRANSACTION-RELATED DISCLOSURES.   (a)   A   virtual currency kiosk operator shall disclose all relevant terms   generally associated with virtual currency and with the products,   services, and activities of the virtual currency kiosk operator,   including:                 (1)     the virtual currency kiosk operator's liability   for unauthorized virtual currency kiosk transactions;                 (2)     the customer's liability for unauthorized virtual   currency kiosk transactions;                 (3)     the customer's right to receive prior notice of a   change in the virtual currency kiosk operator's rules or policies;   and                 (4)     under what circumstances the virtual currency   kiosk operator, without a court or government order, is authorized   to disclose a customer's account information to third parties.           (b)     Before a virtual currency kiosk transaction is entered   into for, on behalf of, or with a customer, a virtual currency kiosk   operator shall disclose the terms of the transaction in a clear,   conspicuous, and easily readable manner, including:                 (1)  the amount of the transaction denominated in:                       (A)  United States dollars; and                       (B)     the applicable virtual currency involved in   the transaction;                 (2)     any transaction fees, expenses, or charges,   including applicable exchange rates;                 (3)  the type and nature of the transaction;                 (4)     a warning that once completed, the transaction may   not be reversed;                 (5)     the daily virtual currency kiosk transaction limit   prescribed by Section 161.012; and                 (6)     any other disclosures that are customarily   provided in connection with a virtual currency kiosk transaction.           Sec.   161.007.     ACKNOWLEDGMENT OF DISCLOSURES. Before   [Text truncated for display. Full text available on LegiScan.]