Legislature(2025 - 2026)BARNES 124
02/21/2025 09:00 AM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB60 | |
| HB99 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 99 | TELECONFERENCED | |
| + | HB 60 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 99-MONEY TRANSMISSION; VIRTUAL CURRENCY
9:21:00 AM
CO-CHAIR HALL announced that the final order of business would
be HOUSE BILL NO. 99, "An Act relating to the business of money
transmission; relating to licenses for money transmission,
licensure requirements, and registration through a nationwide
multistate licensing system; 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 exemptions to money transmission
licensure requirements; relating to payroll processing services;
relating to currency exchange licenses; amending Rules 79 and
82, Alaska Rules of Civil Procedure; and providing for an
effective date."
9:21:08 AM
The committee took an at-ease from 9:21 a.m. to 9:23 a.m.
9:23:25 AM
REPRESENTATIVE ZACK FIELDS, Alaska State Legislature, as prime
sponsor, gave introductory remarks on HB 99. He read the first
paragraph of the prepared sponsor statement [included in the
committee file], which read as follows [original punctuation
provided]:
House Bill 99 amends and modernizes the Alaska Uniform
Money Services Act ("Act") (AS 06.55). The Act
provides the legal framework for money transmission
functions, including currency exchange, transfer (or
wiring) of money, and loading and reloading of payment
instruments including stored-value cards.
CO-CHAIR FIELDS explained that he is carrying HB 99 on behalf of
the administration and gave a brief overview of the bill's
history. He reported that, while HB 99 addresses all virtual
transactions, in recent years, crime organizations have utilized
cryptocurrency to launder money, facilitate illegal drug-
trading, engage in human trafficking, and undermine national
security. He noted that there are well-documented cases of drug
cartels using cryptocurrencies. He reported that of 120 Chinese
drug manufacturers, 97 percent offer payments in the form of
cryptocurrency. He stated that HB 99 is essentially a "crime-
fighting" bill and gives the State tools to stop criminal
activity. He asked his staff to continue with the sectional
narrative.
9:25:17 AM
CO-CHAIR FIELDS had a discussion with Representative Carrick on
the history of similar legislation from 2024. He stated it was
his goal to introduce HB 99 early to "get it across the finish
line."
9:26:22 AM
EVAN ANDERSON, Staff, Representative Zack Fields, Alaska State
Legislature, on behalf of Representative Fields, prime sponsor
of HB 99, gave the sectional analysis narrative [included in the
committee file], which read as follows [original punctuation
provided]:
The proposed bill is not a simple repeal and
reenactment of AS 06.55. Instead, it is a line-by-line
overhaul of the Act carefully considering the Model
Law and selectively adopting and revising the
statutes. The bill repeals the currency exchange
license and includes that activity in the definition
of money transmission so only one license type will be
required in AS 06.55 going forward.
??Sections 1 through 6 are related to licensing. Adds
a section of uncodified law explaining the purpose of
the bill and amends language related to licensing
application and license renewal requirements. Adds
criminal background check report requirements for
individuals who are senior management and control the
company. Allows the department to utilize the
Nationwide Multi-State Licensing System (NMLS) for all
aspects of licensing.
??Section 7. Amends AS 06.55 to add new sections to
Article 1A concerning virtual currency (VC) derived
from the Model Law. Virtual Currency Business Activity
replaces Currency Exchange Licenses as the heading for
Article 1A. AS 06.55.150 06.55.170 provide the
details of what is considered and what is not
considered licensed activity for companies engaging in
VC business activity.
??Section 8. Repeals and reenacts AS 06.55.301
creating a requirement that a licensee adopt policies
and procedures consistent with applicable state and
federal law prior to using an authorized delegate and
provides details stating that a licensee must enter
into a contract with an authorized delegate with a
list of provisions.
??Section 9. Amends AS 06.55.302 concerning
unauthorized activities and liability provisions that
apply to persons engaging in MT on behalf of an
unlicensed person.
??Section 10. Amends AS 06.55.401 relating to
supervision and the department's powers with respect
to examination. It allows the department to accept
examination reports from other states, the federal
government, or an independent accounting firm. This
section requires licensees to pay all costs associated
with examinations, references confidentiality
requirements, and eliminates the existing requirement
to notify a licensee 45 days prior to an examination.
??Sections 11 - 14. Repeals and reenacts or amends
subsections of AS 06.55.403 for consistency with the
Model Law. It requires quarterly reports of condition
for a licensee's activities and their authorized
delegates. It maintains existing requirements for
immediate reporting knowledge of filing a bankruptcy
petition, a proceeding to revoke or suspend a license
in another state or country, bond cancellation and
criminal charges. Allows the department to utilize the
NMLS for reporting required by AS 06.55.403.
Executive officer is replaced and repealed utilizing
key individual, a term introduced by the Model Law
which means "any individual ultimately responsible for
establishing or directing policies and procedures of
the licensee, including an executive officer, manager,
or trustee."
??Section 15. Repeals and reenacts AS 06.55.404
regarding acquisition of control of a MT licensee
containing procedural and reporting requirements for
the acquisition or transfer of control of licensees.
It allows exceptions for acquisition of control and
contains discretionary provisions for the department
for ease and flexibility of administration and the
utilization of the NMLS. It adds details for
aggregation of interest of ownership for family
members for consistency with the Model Law.
??Sections 16 through 22. Amends language consistency
with the Model Law. Increases the record keeping
requirements of licensees from 3 years to 5 years.
Removes the requirement that certain money laundering,
record keeping, and suspicious transaction reporting
requirements be filed with the Attorney General.
Includes an amendment that provides guidance that is
helpful regarding when a licensee or authorized
delegate may disclose financial information provided
to the licensee or authorized delegate by a customer.
??Section 23. Adds a new subsection (f) to AS
06.55.407 stating when department records may be made
public and what information is confidential.
??Section 24. Amends AS 06.55 to add new sections to
article 4 from the Model Law. Provides details when
licensees are required to submit an annual audited
financial statement to the department within 90 days
after the end of the licensee's fiscal year. Grants
the department discretion to enter into agreements
with other state and federal agencies to improve
efficiencies and reduce regulatory burden and to adopt
rules and regulations, and to recover its costs
through imposition and collection of fees. Provides
that in the event of an inconsistency between state
and federal law, the federal law governs to the extent
of the inconsistency.
??Sections 25 29. Revises article 5 of AS 06.55 to
rename and broaden its scope from Permissible
Investments to Prudential Standards. Details the level
of permissible investments required by a and provides
details on what specific investments can be held by
licensees due to risk concerns and adds language to
protect beneficiaries of statutory trusts from actions
by creditors of licensees. Provides details regarding
Automated Clearing House (ACH), letters of credit, and
security bonds. Expands net worth requirements from
$25,000 to a new net worth based on a tiered level of
total assets held. Allows the department to exempt
applicants or licensees from net worth requirements.
Provides a requirement to maintain at all times a
tangible net worth in tiers and that it must be
demonstrated at initial application.
??Section 30 through 36. Amends language for
consistency with the Model Law regarding the
suspension and revocation of a license by deleting
unnecessary language and inserting new terms such as
key individual and the replacement of transmission for
services. Allows an authorized delegate to apply for
relief from a suspension or revocation of a license.
??Section 37. Amends AS 06.55.605 regarding civil
penalties allowing the department to assess its costs
and expenses for investigation.
??Section 38 and 39. Amends language for consistency
with the Model Law conforming language such as
deleting money services and inserting money
transmission.
??Sections 40 and 41. Amends subsections of AS
06.55.607 to remove citations to AS 06.55.201, which
is repealed. The existing AS 06.55.201 contains the
currency exchange license requirements and this
license is being eliminated in the bill in favor of
one license type including currency exchange as a
money transmission activity.
??Section 42. Amends AS 06.55.702(a) concerning
hearings for consistency with the Model Law deleting
money services and a citation to AS 06.55.702(b) which
is repealed in the bill.
??Section 43 and 44. Amends language for consistency
with the Model Law revising licensing exclusions and
renames the section to exemptions. It adds new
exemption types and would allow the department to add
additional exemptions if it is in the public interest
creating consistency from state-to-state. It also adds
the term federally insurance depository financial
institution for consistency with other statutes the
division regulates under AS 06.60.990(9). Allows the
department to require a person who claims an exemption
to provide information and documentation demonstrating
the claimed exemption.
??Sections 45 through 48. Amends language regarding
notices and receipts requiring licensees and
authorized delegates to provide customers with notices
of how to file a complaint and allows the department
to establish the format and content required in the
notices n the licensee's website or mobile
application, the name and phone number of the
department and a statement on how customers can
contact the department with questions or complaints.
Includes in-state determination of the location of a
person requesting a transaction and provides a
definition of receipt.
??Sections 49 and 50. Provides details on timely
transmission requiring licensees to forward money
received for transmission in accordance with the
agreement between the licensee and sender unless the
licensee determines there may be fraud involved or
another crime. The licensee is required to respond to
inquiries from the sender with the reason for the
failure to forward money unless doing so violates a
state or federal law. Provides information concerning
refunds for consistency with the Model Law.
??Sections 51 and 52. Amends language for consistency
with the Model Law and states the department shall
establish fee levels including an annual renewal fee
based on a licensee's total volume of money
transmission in the state.
??Sections 53 through 61. Amends definitions found in
AS 06.55.990 for consistency with the Model Law.
Changes include the incorporation of the words in this
state to ensure AS 06.55 protects Alaska consumers and
insuring revisions are made to align the language of
the Act with the model law. It also includes an
exception for a loyalty reward card, amends the
definition of control and renumbers the definitions.
??Section 62. Amends AS 06.55.995 Short title to refer
to the Act or Chapter as the Alaska Uniform Money
Transmission Modernization Act instead of the Alaska
Uniform Money Services Act.
??Section 63. Amends AS 12.62.400(b) to read that an
applicant under AS 06.55 may submit fingerprints to
the registry.
??Section 64. Repeals several sections in AS 06.55. AS
06.55.104 and AS 06.55.107 are repealed and reenacted
in Article 5 concerning prudential standards. All
statutes in Article 2 regarding currency exchange
licenses are repealed as the activity was added to the
definition of money transmission. AS 06.55.890 and AS
06.55.990 contains definitions that are no longer
necessary.
??Section 65 67. Amends by adding a new section for
INDIRECT RULE AMENDMENT and transitional provisions
amending uncodified law to avoid interference with
existing contracts, to allow a transitional period for
holders of existing money services licenses.
??Section 68. Adds a new section "CONDITIONAL EFFECT"
to allow adoption of transitional regulations by
DCCED.
??Section 69. Provides for an effective date of
January 1, 2026.
9:36:30 AM
TRACY RENO, Chief of Examination, Division of Banking and
Securities, Department of Commerce, Community and Economic
Development, gave a PowerPoint, titled "Alaska Uniform Money
Transmission Modernization Act HB 99," on behalf of Co-Chair
Fields, prime sponsor of HB 99. She gave a history of what
happened to prior legislation similar to HB 99.
MS. RENO began her presentation on the second slide and gave an
overview of the proposed legislation. The second slide read as
follows [original punctuation provided]:
HB 99:
• Is a generational update to financial laws to
accommodate new technologies and ensure uniformity. It
is a model law developed by the Conference of State
Bank Supervisors (CSBS) in collaboration with industry
stakeholders and state regulators, adopted by 22
states.
• Reduces regulatory burden by streamlining licensing,
renewal, and examinations.
• Facilitates innovative financial products and
services, such as virtual currency and digital assets,
while broadly strengthening consumer protection around
those assets.
• Ensures DBS can coordinate with other states in all
areas of regulation, licensing, and supervision to
reduce regulatory burden on the industry and more
effectively utilize regulator resources.
MS. RENO moved to the third slide and gave an overview of the
history of money transmission in America. She stated that money
transmission "took hold in America" during the era of Western
expansion. She explained that institutions such as the Western
Union would accept money on the east coast and send a telegram
to the west coast with instructions to give money to the
intended recipient at a local office. She stated that
physically going to a money transmitter was the dominant pathway
for over 100 years. She stated that the advent of smartphones
has revolutionized sending and receiving money, reporting that,
in Alaska, billions of dollars are transferred annually with
smartphones. She said the Division of Banking & Securities
enforces the Alaska Uniform Money Servies Act, which was passed
in 2007 and enacted in 2008. She explained that the Alaska
Uniform Money Services Act provides legal framework for money
transmission functions, including currency exchange,
transfer/wire of money, and loading/reloading of payment
instruments, including stored-value cards. She reported that
the first PayPal application ("app") for smartphones was
released in July 2008 and cryptocurrencies emerged during 2007
and 2009 - years after Alaska's current statutes were written,
she asserted. Further, she reported that mobile payments like
Google Pay, Apply Pay, and Cash App constitute the largest area
of money transmission in Alaska. Ms. Reno reported that
cryptocurrency did not exist when the current statutes regarding
money transmission were written in Alaska. She explained that
HB 99 would update "the licensing, record-keeping, and
enforcement provisions to support these business activities and
protect Alaska consumers."
MS. RENO moved to the fourth slide, drawing committee members'
attention to a bar graph representative of the annual Alaska
money transmission volume from 2020 to 2023. She noted that,
from 2019 to 2021, money transmissions grew from $1.6 billion to
over $7 billion. She further noted that, in 2023, the annual
money transmission volume was $4.5 billion. She explained that
the totals include money transmission, payment instruments,
stored value, and cryptocurrency. She further explained that
Bitcoin [a form of cryptocurrency] rebounded in 2024, after a
dip in 2022 and 2023 due to the volatile crypto market and
bankruptcies of several crypto exchanges. She stated that
Bitcoin is currently hitting record highs as the most widely
traded cryptocurrency. She asserted that, regardless of
crypto's future, the sector would continue to grow with more
people utilizing mobile payment systems. She stated that many
people in Alaska live in communities without a "brick-and-
mortar" bank, and mobile payment systems allow Alaskans to pay
for/be paid for business services as long as they have access to
cellular data or the Internet.
MS. RENO moved to the fifth slide, drawing committee members'
attention to a bar graph, representative of the total number of
money transmission transactions annually in Alaska from 2020 to
2023. She said that the graph illustrates the growth of people
in Alaska utilizing money transmissions and noted there were
over 25 million transactions in 2023. She further noted that,
in Alaska, in 2023, there was a money transmission transaction
48.6 times a minute. She asserted that the growth of the mobile
payment industry has been driven by mobile payment apps on
smartphones and the increasing utilization of cryptocurrencies.
9:41:56 AM
MS. RENO moved to the sixth slide, drawing committee members'
attention to a horizontal bar graph, representative of the
number of money transmission licensees annually in Alaska from
2019 to 2023. She stated that, of the 180 money transmission
licensees [in Alaska], 35 transmit cryptocurrency. She further
stated that the number of companies [in Alaska] obtaining money
transmission licenses has seen a 59-percent increase over the
past five years.
MS. RENO moved to the seventh slide, drawing committee members'
attention to a bar graph, representative of the annual Alaska
money transmission volume for cryptocurrency from 2020 to 2023.
She stated that companies licensed to conduct money transmission
in Alaska and additionally conduct cryptocurrency activity
recorded the data in the graph. She further reported that the
data is aggregated through all of Alaska and does not include
any transaction-level data or region-specific data. She
reported that recorded cryptocurrency transmission in Alaska
grew 5,789 percent from 2019 to 2021, from $33.6 million to $1.9
billion. She stated that Alaska did not regulate virtual
currency activity until 2023, when cryptocurrency was added to
the definition of money transmission and requiring additional
companies to acquire licenses. She reported that, in 2023,
Alaskans conducted $1.7 million worth of cryptocurrency
transactions daily. She projected that the numbers for 2024 and
2025 will be significantly higher than previous years.
MS. RENO moved to the eighth slide, drawing committee members'
attention to a pie graph, representative of the types of money
transmissions in Alaska during 2023. She noted that almost 70
percent of money transmissions were mobile payments or "sending
money." She further noted that the use of stored-value cards
[15 percent] and cryptocurrency [14 percent] in Alaska were
roughly equal. She reported that virtual currency
[cryptocurrency] and mobile payments accounted for about two-
thirds of money transmission in Alaska, despite, she maintained,
neither form of money transmission existing when the current law
was written.
MS. RENO moved to the ninth slide, titled "Why regulate money
transmissions at all?" The ninth slide read as follows
[original punctuation provided]:
• 49 states and six territories regulate money
transmission.
• Industry wants this bill adopted.
• No industry stakeholder or state regulator wants
federal pre-emption.
• DBS is uniquely qualified to protect Alaskans.
• States have licensed and regulated transmitters of
money for over 100 years.
• States have the expertise and examination
infrastructure that the feds completely lack. States
can pivot and react more quickly as events transpire.
MS. RENO further explained that the United States has a dual-
banking system, meaning that financial services are regulated by
both federal and state agencies. She stated that many banking
institutions in Alaska have chosen to be regulated principally
by the state government, not the federal government.
Furthermore, she stated that there is currently no federal
regulation of money transmission akin to state regulation. She
asserted that, when Alaska has an issue with a money
transmitter, HB 99 would put the state in a much better position
to investigate the issue and intervene, if necessary, on behalf
of Alaska consumers.
MS. RENO moved to the tenth slide, titled "Why is this bill
important?" She explained that many cryptocurrency exchanges
have contractual terms stating that "customer balances are the
asset of the exchange." Ms. Reno clarified that in the event of
a bankruptcy, such as the bankruptcy of FTX (Futures Exchange)
and Voyager [Digital] in 2022, the costumer balances shall be
paid to secured creditors. She reported that people in Alaska
lost millions of dollars due to crypto-bankruptcies and HB 99
would protect future losses as a result of bankrupt
cryptocurrencies by classifying cryptocurrency as property of
the customer.
MS. RENO further read from the bullet points on the tenth slide,
which read as follows [original punctuation provided]:
This bill will:
•Foster innovation and reduce regulatory burden
•Protect consumers
•Adopt a Model Law that industry drafted with state
regulators
•Prevent federal pre-emption by creating uniform
statutes across the country
•Allow the division to have the ability to update fees
and activities that require a license in regulation to
keep up with technology and innovation with this ever-
evolving financial industry
MS. RENO emphasized that recent events have highlighted the need
for modernization of Alaska's money transmission laws. She
concluded by arguing that it is the state's responsibility to
ensure that money, physical or virtual, moves "where and when it
is supposed to." She thanked the committee members and invited
questions from the committee.
9:47:55 AM
REPRESENTATIVE SADDLER queried what types of transactions
constitute billions of dollars of transactions in money
transmission in 2023.
MS. RENO referred to the eighth slide, titled "What types of
transmissions happen in Alaska? 2023 Money Transmitted Based on
Value." She replied that money transmission refers to basic
cash transfers. She explained that stored value refers to cards
that can be purchased in-store and loaded with currency. She
noted that, in past years, the percentage of virtual currency
represented in the pie chart on the eighth slide had been higher
due to its higher market value. She explained that the
cryptocurrency market is very volatile.
9:49:48 AM
REPRESENTATIVE CARRICK requested examples of each type of
transmission in Alaska, referring to the eighth slide.
MS. RENO deferred to Mr. Fleer.
9:51:09 AM
DEAN FLEER, Financial Examiner 3, Division of Banking and
Securities, Department of Commerce, Community and Economic
Development, replied that stored value refers to prepaid and
reloadable cards that can be purchased at grocery stores and
loaded with currency. He gave some examples of virtual
currencies: Bitcoin, Ethereum, and Dogecoin. He gave some
examples of money transmission: PayPal, Cash App, and Venmo.
9:53:03 AM
REPRESENTATIVE COULOMBE referred to Section 8 of the proposed
legislation, quoting that "[the] licensee adopt policies and
procedures consistent with applicable state and federal law
prior to using an authorized delegate", and asked for a
definition of authorized delegate.
9:53:31 AM
MS. RENO answered that the authorized delegate would be the
agent that verifies identification and takes money from
consumers, for example, the actual person facilitating the
transaction. Ms. Reno further clarified that the money
transmitter would be the company, such as Western Union or
PayPal.
9:54:10 AM
REPRESENTATIVE SADDLER remarked that the new federal
administration made announcements to deregulate cryptocurrency.
He wondered if HB 99 was therefore obsolete.
9:54:43 AM
CO-CHAIR FIELDS responded that the proposed legislation was not
obsolete. He further stated that another executive directive
designated drug cartels as terrorist organizations, whose use of
cryptocurrencies illustrate the need for HB 99.
9:55:10 AM
MS. RENO stated that the primary focus of HB 99 was money
transmission, or the movement of money or cryptocurrency, "from
point A to point B."
9:56:06 AM
ROBERT SCHMIDT, Director, Division of Banking and Securities,
Department of Commerce, Community and Economic Development,
stated that there were talks of the Consumer Financial
Protection Bureau (CFPB) taking on a greater role in the
regulation of money transmission. Further, he remarked that the
regulation of the financial industry is typically left to the
states.
9:56:40 AM
REPRESENTATIVE SADDLER questioned why the states, not the
federal government, were better positioned to regulate "national
markets."
9:56:54 AM
MR. SCHMIDT replied that history set a precedent, noting that
money transmission has been regulated by the states since the
1850s.
9:57:13 AM
CO-CHAIR HALL thanked the invited testifiers.
CO-CHAIR HALL announced that HB 99 was held over.