PRINTER'S NO. 2657
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
2081
Session of
2024
INTRODUCED BY WAXMAN, KHAN, HILL-EVANS AND DALEY, MARCH 5, 2024
REFERRED TO COMMITTEE ON COMMERCE, MARCH 5, 2024
AN ACT
Providing for collateral requirements for virtual currency
lenders and for segregation of funds; and imposing penalties.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Digital Asset
Regulation Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Cash equivalent." Securities, including treasury bills,
commercial paper, marketable securities, money market funds,
short-term government bonds, a certificate of deposit or a
banker's acceptance.
"Client." A third party, other than the virtual currency
lender or a virtual currency, that uses a virtual currency
lender for the lending of virtual currency.
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"Collateral." Money or an item of value pledged as security
for repayment in the event of a default.
"Department." The Department of Banking and Securities of
the Commonwealth.
"Digital asset." A representation of economic, proprietary
or access rights that is stored in a machine-readable format and
has a transaction history that is recorded in a distributed,
digital ledger or digital data structure in which consensus is
achieved through a mathematically verifiable process. The term
includes digital consumer assets and virtual currency.
"Digital consumer asset." A digital asset that is used or
bought primarily for consumptive, personal or household
purposes. The term includes any other digital asset that is not
virtual currency.
"Lending." Engaging in the business of receiving monetary
value for transmission to a location inside or outside of the
United States by any means, including wire, facsimile or
electronic transfer.
"Money." As defined in section 1 of the act of September 2,
1965 (P.L.490, No.249), referred to as the Money Transmission
Business Licensing Law.
"Virtual currency." A digital asset that is used as a medium
of exchange, unit of account or store of value and is not
recognized as legal tender by the Federal Government.
"Virtual currency lender." A person that is regularly
engaged in the lending of virtual currency, digital consumer
assets or digital assets.
Section 3. Applicability.
This act shall apply to any virtual currency lender,
institution or any other person that lends virtual currency to a
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third party in this Commonwealth.
Section 4. Notice of intent to conduct business.
No later than 90 days before conducting business in this
Commonwealth, a virtual currency lender shall send a letter to
the department notifying the department that the virtual
currency lender intends to conduct virtual currency lending in
this Commonwealth. The virtual currency lender shall include all
of the following information in the letter:
(1) The virtual currency lender's name.
(2) Parent companies and subsidiaries of the virtual
currency lender.
(3) A statement explaining the virtual currency lender's
intention on lending virtual currency in this Commonwealth
and include any Internet websites or branding that the
virtual currency lender wishes to offer.
(4) A statement that the virtual currency lender is in
compliance with applicable Federal and State laws.
(5) Any other information deemed relevant and as
specified by the department.
Section 5. Collateral requirements for virtual currency
lenders.
(a) Collateral required.--A virtual currency lender shall
require collateral, in connection with the services provided as
a virtual currency lender, to be held in a trust for all digital
consumer assets.
(b) Collateral amount.--A virtual currency lender shall
secure a minimum of 100% of the value of the virtual currency
exchanged in money or cash equivalents to serve as collateral
under subsection (a). The money or cash equivalent may be
increased or decreased depending on the market price of the
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virtual currency.
(c) Use of collateral.--In the event of a default or other
circumstance that results in a client losing access to any
account with the virtual currency lender, the client's virtual
currency or the client's money, through fraud or other
malfeasance or through a technical failure, a virtual currency
lender shall use collateral to reimburse a client.
(d) Agreement required.--A virtual currency lender shall
require an agreement to be signed by both a client and the
virtual currency lender regarding the collateral required under
this section.
(e) Penalties.--
(1) Failure by a virtual currency lender to establish
policies in accordance with the requirements under this
section shall constitute a violation of this section, and the
virtual currency lender shall be subject to the following
fines imposed by the department:
(i) $5,000 for the first violation.
(ii) $10,000 for a second violation.
(iii) $20,000 for a third and each subsequent
violation.
(2) After a third violation of this section, the
department may conduct a review of the virtual currency
lender and may prohibit the virtual currency lender from
operating within this Commonwealth.
Section 6. Segregation of funds.
(a) Segregation required.--A virtual currency lender shall,
in connection with the services provided as a virtual currency
lender, manage a consumer's money and digital consumer assets
separately from the virtual currency lender's own money and
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digital assets in accordance with the regulations promulgated
under section 7.
(b) Penalties.--
(1) Failure by a virtual currency lender to establish
policies in accordance with the requirements under this
section shall constitute a violation of this section, and the
virtual currency lender shall be subject to the following
fines imposed by the department:
(i) $5,000 for the first violation.
(ii) $10,000 for a second violation.
(iii) $20,000 for a third and each subsequent
violation.
(2) After a third violation of this section, the
department may conduct a review of the virtual currency
lender and may prohibit the virtual currency lender from
operating within this Commonwealth.
Section 7. Regulations
The department shall promulgate regulations necessary to
implement and enforce this act.
Section 8. Effective date.
This act shall take effect in 60 days.
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