Legislature(2023 - 2024)BARNES 124
03/08/2023 03:15 PM House LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB86 | |
| HB85 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 86 | TELECONFERENCED | |
| *+ | HB 85 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 86-MONEY TRANSMISSION; VIRTUAL CURRENCY
3:16:45 PM
CHAIR SUMNER announced that the first order of business would be
HOUSE BILL NO. 86, "An Act relating to the business of money
transmission; relating to money transmission licenses, licensure
requirements, and registration through the Nationwide Multistate
Licensing System and Registry; relating to the use of virtual
currency for money transmission; relating to authorized
delegates of a licensee; relating to acquisition of control of a
license; relating to record retention and reporting
requirements; authorizing the Department of Commerce, Community,
and Economic Development to cooperate with other states in the
regulation of money transmission; relating to permissible
investments; relating to violations and enforcement of money
transmission laws; relating to money transmission license
exemptions; relating to payroll processing services; repealing
currency exchange licenses; and providing for an effective
date."
3:17:00 PM
ROBERT SCHMIDT, Director, Division of Banking and Securities,
Department of Commerce, Community, and Economic Development, on
behalf of the sponsor, House Rules by request of the governor,
introduced HB 86 and gave a PowerPoint presentation, titled
"Alaska Uniform Money Transmission Modernization Act House Bill
86" [hard copy included in committee packet]. On slide 2, he
stated that HB 86 would modernize the Alaska Uniform Money
Services Act. He gave a summary of the history of money
transfers. He continued to slide 3 and slide 4 and stated that
the 2008 act included money transmitters, currency exchanges,
stored value cards, traveler's checks, and money orders. He
gave the definition of virtual currency, also known as
cryptocurrency, and explained how it has changed the way money
is transferred.
3:19:53 PM
CHAIR SUMNER asked why cryptocurrency is not considered to be
money, as it can be exchanged for goods and services.
MR. SCHMIDT answered that cryptocurrency is not backed by any
government; a trait commonly used to determine the definition of
money.
3:21:17 PM
MR. SCHMIDT continued with slide 4 through slide 6. He stated
that to have a medium of exchange outside of the global banking
system, cryptocurrencies were adopted in 2008 after the global
financial crisis. He explained that only a limited number of
Bitcoins can be "mined." He stated that there has been a 51
percent increase in licensed money transmitters since 2008, and
the number of money transmission transactions has increased from
approximately 10.5 million in 2019 to 31 million in 2022.
3:24:04 PM
REPRESENTATIVE SADDLER asked for a definition of "money
transmission transaction."
MR. SCHMIDT answered that an example would be buying something
from someone and using Venmo. In response to a follow-up
question, he said that the same transaction using cash instead
of Venmo would not be considered a money transmission
transaction.
3:25:34 PM
MR. SCHMIDT, in response to Representative Wright, answered that
if someone were to travel out of state and use Venmo, this
transaction would be tracked by both states, as it involves
people from both states.
3:26:25 PM
MR. SCHMIDT, in response to Representative Carrick, answered
that the definition of "money transmitter" is an organization
that sends money outside of the banking system. In response to
a follow-up question, he stated that a service such as Zelle is
not a money transmission service because it transfers directly
from bank to bank.
3:29:13 PM
MR. SCHMIDT continued to slide 7 and stated that the number of
cryptocurrency transactions in Alaska increased from
approximately 84,000 in 2019 to a peak of over 3.2 million in
2021. In 2022, the number was over 1.9 million.
3:29:53 PM
REPRESENTATIVE SADDLER asked what a cryptocurrency transaction
would look like.
MR. SCHMIDT answered that if two people agree to buy and sell
something using Bitcoin instead of cash or a service, such as
Venmo, this would be a cryptocurrency transaction. He added
that some countries have weaker currencies than the U.S. and
sending and receiving money outside this country may be
preferable using cryptocurrencies rather than the local
currency.
3:31:18 PM
MR. SCHMIDT continued slide 7 and stated that some people buy
cryptocurrencies not to buy goods or services but treat it as a
security where its value may increase over time. He continued
to slide 8 and slide 9 and gave an overview of money
transmission volume, including cryptocurrency. He stated that
in 2021, money transmission to, from, and within Alaska reached
a high of over 7.1 billion dollars. Just under 2 billion
dollars of these transactions were made using cryptocurrency.
He stated that the amount of money transferred using these
services, not including the cryptocurrency transactions, is
roughly equal to the amount of money being held in chartered
banks within the state.
3:34:23 PM
MR. SCHMIDT, in response to Chair Sumner, stated that a
breakdown of the specific cryptocurrencies used is not
available.
3:34:49 PM
MR. SCHMIDT, in response to a request from Representative
Saddler for definitions, explained that "peer to peer" would be
buying something from a place such as Facebook Marketplace; a
"money transfer instrument" would be something such as a
traveler's cheque; and a "stored value card" is another name for
a gift card for a place such as a restaurant.
3:35:57 PM
MR. SCHMIDT, in response to a question from Representative
Fields concerning the biggest money transmitters, stated that he
has been asked not to name these providers.
3:37:09 PM
MR. SCHMIDT continued to slide 10 and stated that there were
three major cryptocurrency bankruptcies in 2022. Over 2,000
accounts owned by Alaskans, worth approximately $19 million,
were affected by the Voyager and Celsius bankruptcies, although
no complaints were received by the Division of Banking and
Securities.
3:38:22 PM
REPRESENTATIVE SADDLER asked if using cryptocurrencies as an
investment is similar to other forms of currency speculation.
MR. SCHMIDT answered that cryptocurrencies work in much the same
way, although the volatility of cryptocurrency is generally
greater than normal currency.
3:39:53 PM
MR. SCHMIDT continued to slide 11 through slide 13 and stated
that there is not yet reliable data available on how the FTX
bankruptcy affected Alaskans. He stated that HB 86 contains a
fiscal note which would add five additional staff members to
keep pace with the increasing number of money transmission
transactions. He stated that the revenue generated from the
bill will likely cover the cost of the fiscal note. He stated
that at the time of the original bill's passing, services, such
as PayPal, were very new and cryptocurrency did not exist. He
highlighted the need to update certain aspects of the original
bill.
MR. SCHMIDT continued to slide 14 and stated that HB 86 would
harmonize Alaska's laws with those of other states, allowing for
better coordination on money transaction licensing, regulation,
and supervision. In response to the recent cryptocurrency
bankruptcies, he pointed out the provision in the bill which
would provide that a buyer of a cryptocurrency, and not a
holding service, owns the cryptocurrency.
3:46:08 PM
MR. SCHMIDT continued that the proposed bill would bring
regulations in line with the FBI's requirements to have
automated background checks. He suggested that the bill would
strengthen the regulations regarding those delegated to do
business on behalf of a money transmitting service. Guidelines
would be set for permissible investments for money transmitters
and would allow the Division of Banking and Securities to set
fees by regulation, rather than statute. He called HB 86 a
model law created with input from the industry and other states.
3:51:26 PM
REPRESENTATIVE FIELDS asked if there were any differences
between the proposed legislation and what has been passed in
other states.
MR. SCHMIDT answered there would be some natural differences
because of the variations in drafting standards between states.
He added that he is unsure about any changes being made
comprehensively, although for example some minor changes were
made in Arizona.
3:52:51 PM
REPRESENTATIVE SADDLER asked for clarification on what
transactions would be covered by the bill.
MR. SCHMIDT answered that transactions within, to, and from
Alaska would be covered. In response to a follow-up question,
he stated that fees are collected from licenses from banks,
payday lenders, mortgage brokers, money transmitters, and
others.
CHAIR SUMNER announced that HB 86 was held over.