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On May 23, the Florida governor signed SB 1024, which establishes the “Florida Blockchain Task Force” within the Department of Financial Services to “explore and develop a master plan for fostering the expansion of the blockchain industry in the state, to recommend policies and state investments to help make this state a leader in blockchain technology, and to issue a report to the Governor and the Legislature.” Within 90 days of signing, the bill requires that a majority of the 13 required members of the task force must be appointed and the task force must hold its first meeting. The task force is required to, among other things, study blockchain technology and submit a report to the Governor and the Legislature with recommendations for implementing blockchain technology in the state and recommendations for specific implementations to be developed by relevant state agencies. The bill took effect on May 23.
On April 26, the Washington state governor signed SB 5638, which recognizes the validity of distributed ledger technology. Intending to expand the scope of the existing federal ESIGN Act, the bill adds a new chapter to the Revised Code of Washington, defining distributed ledger technology as “any distributed ledger protocol and supporting infrastructure, including blockchain, that uses a distributed, decentralized, shared, and replicated ledger.” The bill prohibits an electronic record from being denied “legal effect, validity, or enforceability solely because it is generated or stored using distributed ledger technology.” The bill is effective July 28.
On April 16, the Arkansas governor signed HB 1944, which defines blockchain technology under the state’s Uniform Electronic Transactions Act (UETA). Under the act, “blockchain technology” is defined as “a shared, immutable ledger that facilitates the process of recording one or more transactions and tracking one or more tangible or intangible assets in a business network.” The act also provides definitions for “blockchain distributed ledger technology” and “smart contract” under the UETA. The act takes effect 90 days after adjournment of the legislature.
On March 26, the Utah governor signed SB 213, which, among other things, defines and clarifies blockchain technology-related terms and exempts from the state’s Money Transmitter Act certain persons who facilitate the “creation, exchange, or sale of certain blockchain technology-related products.” Specifically, the amendments state that blockchain tokens are not money transmissions. The amendments take effect 60 days after adjournment of the legislature.
On February 19, the Wyoming Governor signed HB 57, which creates a fintech sandbox program in the state for companies to test innovative financial products and services. Wyoming is the second state to introduce a regulatory sandbox program, following Arizona’s sandbox introduction last March. (Previously covered by InfoBytes here.) Under the “Financial Technology Sandbox Act” (the Act), the state’s sandbox will be open to innovative financial products and services, including those focused on blockchain and cryptocurrencies, and will allow testing of these products for up to two years with the possibility of an additional 12 month extension before requiring participants to apply for formal licensure. Additionally, under certain conditions, the Act—which grants various supervisory and enforcement power to the state banking commissioner and the secretary of state, including revocation and suspension rights—will authorize (i) limited waivers of specified statutes or rules, and (ii) reciprocity agreements with other regulators. The Act takes effect January 1, 2020.
On February 11, the District of Columbia Department of Insurance, Securities and Banking announced the formation of the District of Columbia Financial Services Regulatory Sandbox and Innovation Council. The Council, which will examine the feasibility of implementing a financial services regulatory sandbox in the District, will also “develop a blockchain and innovation regulatory framework to facilitate financial services innovation in the District.” D.C. Mayor Bowser, who established the Council in January, has directed the advisory group to review barriers that fintech, insurtech, regtech, and other technology companies face when attempting to bring innovative services to the District, and to evaluate how these impediments can be mitigated or eliminated to foster innovation, including making recommendations for ways to reduce the regulatory burden on financial services providers that impede innovation. Among other things, the Mayor also has tasked the Council with studying the potential dangers regulatory sandboxes pose to consumers and the possible safeguards to such dangers. The Council—whose membership will include a cross section of professionals from the insurance, securities, banking, and lending industries; consumer representatives; technology industry members; and individuals specializing in financial services regulation and the captive insurance industry—will report legislative, programmatic, and policy recommendations to the Mayor within the first six months after its initial meeting.
On December 21, the New York governor signed A08783, which creates a digital currency task force to conduct a comprehensive review related to the regulation of cryptocurrencies in the state. The act requires the task force to issue a report by December 15, 2020, with recommendations to “increase transparency and security, enhance consumer protections, and to address the long-term impact related to the use of cryptocurrency.” The report will also contain a review of laws and regulations on digital currency, including those used by other states, the federal government, and foreign countries.
On November 1, the Arizona Attorney General announced the approval of two more participants in the state’s fintech sandbox program. The first company, which is based in New York, will test a savings and credit product, enabling Arizona consumers to obtain a small line of credit aimed at providing overdraft protection. If a consumer agrees to a repayment plan recommended by the company’s proprietary technology, the APR may be as low at 12 percent; if a consumer adopts a different repayment plan, the line of credit will have a standard APR of 15.99 percent. The company intends to report transactions under the payment plan to national credit bureaus to enable the building of credit histories. The second company, an Arizona-based non-profit, will test a lending product using proprietary blockchain technology, which has an APR cap of 20 percent.
As previously covered by InfoBytes, the Arizona governor signed legislation in March creating the first state sandbox program for companies to test innovative financial products or services without certain regulatory requirements. In October, the Attorney General announced the first sandbox participant, a mobile platform company (InfoBytes coverage available here).
On October 18, the SEC announced the launch of its Strategic Hub for Innovation and Financial Technology (FinHub). According to the SEC, FinHub will assist in facilitating public engagement on fintech-related topics, including blockchain/distributed ledger technology, digital marketplace financing, automated investment advice, and artificial intelligence/machine learning. Through FinHub, industry participants and the public will have the opportunity to engage directly with the SEC to discuss and test innovative ideas and technological developments. FinHub will also act as a clearinghouse for SEC staff to access and disseminate fintech-related information throughout the agency, and will “[s]erve as a liaison to other domestic and international regulators regarding emerging technologies in financial, regulatory, and supervisory systems.”
“FinHub provides a central point of focus for our efforts to monitor and engage on innovations in the securities markets that hold promise, but which also require a flexible, prompt regulatory response to execute our mission,” SEC Chairman Jay Clayton announced.
On September 28, the California governor signed AB 2658, which requires the Secretary of the Government Operations Agency to appoint a blockchain working group by July 1, 2019. (The act defines blockchain as “a mathematically secured, chronological, and decentralized ledger or database.”) The working group is charged with evaluating, among other things, (i) the risks and benefits associated with the use of blockchain by state government and California-based businesses; (ii) the legal implications of the use of blockchain; and (iv) best practices for enabling blockchain technology to benefit the state and its businesses and residents. The act, which has a sunset date of January 1, 2022, requires the working group to provide a report to the legislature by July 1, 2020.
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- Amanda R. Lawrence to discuss "Navigating the challenges of the latest data protection regulations and proven protocols for breach prevention and response" at the ACI National Forum on Consumer Finance Class Actions and Government Enforcement
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Brandy A. Hood to discuss "RESPA Section 8/referrals: How do you stay compliant?" at the New England Mortgage Bankers Conference
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference