Digital Assets: New Jersey’s Proposed Regulation of Cryptos Referred to Committee
New Jersey’s regulation of digital business activities has been referred to the Assembly’s Financial Institutions and Insurance Committee.
New Jersey Assemblywoman Yvonne Lopez introduced the “Digital Asset and Blockchain Technology Act” in the New Jersey General Assembly in February 2020. The Assembly’s Financial Institutions and Insurance Committee will now review the ‘crypto’ bill. (The National Law Review)
The proposed legislation intends to regulate digital businesses such as crypto exchanges and custodians. It also covers other entities offering any services relating to digital assets including issuing, exchanging, borrowing or lending of crypto assets.
At the time of its introduction, Assemblywoman Lopez said the bill would protect the interests of consumers as well as promote the development of the crypto industry in New Jersey.
Licensing of a crypto business
The Bill makes it obligatory for any digital business to apply for a license from the New Jersey Department of Banking and Insurance (DBI).
The applicant for a license must provide exhaustive information relating to the business. It includes details of the following:
- Any disciplinary action by another state, or any license suspension or revocation
- Any criminal conviction or proceeding
- Any bankruptcy or receivership proceeding
- Policies and procedures to be adopted in respect of anti-money laundering and anti-terror financing laws.
The bill also requires the digital business to make several disclosures to customers including terms and conditions applicable to their accounts. This would include a schedule of fees and the available protection from the Federal Deposit Insurance Cooperation. Furthermore, the applicant must also share information on potential market risks with the customer.
Penalties and period of approval
Any person engaging in an unlicensed digital asset business activity will suffer a penalty of $500 per day.
The DBI has 30 days to reject or approve a license application for a crypto business.
Moreover, if the bill becomes law, New Jersey will become the second state after New York to enact a licensing regulation for crypto businesses.
The New York Department of Financial Services (NYDFS) published its final rules for licensing of virtual currency business activities in June 2015.
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