Legislature(2025 - 2026)ADAMS 519
05/06/2025 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB99 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 57 | TELECONFERENCED | |
| + | HB 99 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
May 6, 2025
1:41 p.m.
1:41:36 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:41 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Andy Josephson, Co-Chair
Representative Calvin Schrage, Co-Chair
Representative Jamie Allard
Representative Jeremy Bynum
Representative Alyse Galvin
Representative Sara Hannan
Representative Nellie Unangiq Jimmie
Representative DeLena Johnson
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
None
ALSO PRESENT
Representative Zach Fields, Sponsor; Evan Anderson, Staff,
Representative Fields; Brodie Anderson, Staff,
Representative Neal Foster.
PRESENT VIA TELECONFERENCE
Robert Schmidt, Director, Division of Banking and
Securities, Department of Commerce, Community and Economic
Development; Kathy Tomasofsky, Executive Director, Money
Services Business Association, New Jersey; Tracy Reno,
Chief of Examinations, Division of Banking and Securities,
Department of Commerce, Community and Economic Development.
SUMMARY
HB 99 MONEY TRANSMISSION; VIRTUAL CURRENCY
HB 99 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the meeting agenda.
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."
1:42:44 PM
REPRESENTATIVE ZACH FIELDS, SPONSOR, introduced the bill.
Co-Chair Foster asked for more details on the bill.
EVAN ANDERSON, STAFF, REPRESENTATIVE FIELDS, provided a
narrative of the sectional analysis (copy on file):
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.
1:46:27 PM
Mr. Evan Anderson continued reading from the sectional
analysis narrative:
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.
1:48:38 PM
Mr. Evan Anderson continued reviewing the sectional
analysis narrative:
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. Raises the maximum
civil penalty to $10,000.
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.
1:50:29 PM
Mr. Evan Anderson continued reviewing the sectional
analysis narrative:
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. Inserts transition regulations giving
DCCED the authority to adopt regulations to implement
this act.
Section 69. Adds a new section "CONDITIONAL EFFECT" to
allow adoption of transitional regulations by DCCED.
Section 70. Provides for an immediate effective date
for Section 68.
Section 71. Provides for an effective date of July 1,
2026.
1:53:03 PM
Co-Chair Foster recognized Representative Johnson and
Representative Jimmie had joined the meeting. He moved to
invited testimony.
ROBERT SCHMIDT, DIRECTOR, DIVISION OF BANKING AND
SECURITIES, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT (via teleconference), addressed the bill with
prepared remarks:
Members of the House Finance Committee, thank you for
the opportunity to testify before you today about HB
99 on money transmission. This bill is a generational
update to Alaska's financial services laws to
accommodate new technologies, to attract innovative
businesses to Alaska, protect Alaska consumers, and
harmonize Alaska law with that of 30 other states.
Originally money transmission was going into a
business like Western Union or Money Gram, giving them
cash to send to a family member, and the business
would send a telegram to a local office instructing
that office to deliver the money. In the 1980's,
stored value cards were introduced. You will see these
at, for example, a Fred Meyer where you can buy a card
labeled, for example, Visa, and you pay a cashier at
Fred Meyer the amount of money to load onto the card.
Stored value cards are also money transmission.
Alaska's current law is the Uniform Money Services
Act. This Act was drafted in 2004, adopted by the
Legislature in 2007, and took effect in 2008.
In the 21 years since the uniform act was written,
there have been two key developments in money
transmission. In 2008, the first beta version of the
PayPal app was introduced for the Blackberry phone.
Now smart phones are nearly universal. Every smart
phone has either Apple Pay or Google Pay embedded in
it. Both of these companies are among the largest
money transmitters sending and receiving Alaskan's
money. The second major development was in 2007, when
a person using the pseudonym Satoshi Nakamoto
theorized virtual currency, now commonly called
cryptocurrency. This would be a representation of
value that, unlike "normal" money, would exist only on
digital ledgers and would not be backed or issued by
any government or central bank.
Mobile payment applications and cryptocurrency now
represent the majority of what money transmission is
in Alaska. That is to say, these technologies did not
exist when our current law was written.
HB 99 is a generational update to modernize Alaska's
money transmission laws to address these technological
innovations. HB 99 is based on the Money Transmission
Modernization Act, which was written by the Conference
of State Bank Supervisors with the money transmission
industry. You will see there are numerous letters of
support from money transmission trade groups and the
Alaska Bankers Association. Over $6.3 billion was sent
in money transmission to, from, or within Alaska in
2024 by 173 licensed money transmitters.
What does HB 99 do? It harmonizes Alaska law with the
thirty states that, to date, have adopted the Money
Transmission Modernization Act. It creates a single
set of rules for licensing, examination, and
supervision. Because we still use the antiquated
uniform act, Alaska is increasingly becoming a round
peg in a nation of square holes. Having similar laws
as other states keeps Alaska open for business and
reduces burden on industry and the regulator. The bill
allows full utilization of the online Nationwide
Multistate Licensing System (NMLS). One example of
efficiencies from fully using NMLS will be saving
hundreds of hours of staff time on manual background
checks. These will become automated under HB 99.
The bill will improve consumer protection. As one
example, in 2022 during the "crypto winter" when FTX,
Voyager, and Celsius all failed, Alaskans lost or had
frozen millions of dollars of currency because the
user agreement for these companies provided that
users' cryptocurrency was, in the event of insolvency,
an asset of the company and not the customer. This
bill eliminates the ability of cryptocurrency
exchanges to claim customer assets as an asset of the
business in a bankruptcy.
1:59:21 PM
Mr. Schmidt continued providing prepared remarks:
HB 99 contains a fiscal note. The committee should
know that, first, all funds in the fiscal note are DGF
funds. Our division's receipts pay for our operations.
The committee should also be aware that DBS has a
budget of $4.8 million dollars, and in FY 24 had
receipts of $22.5 million. Last year the Division of
Banking and Securities made a nearly $18 million
contribution to the General Fund, and that amount will
continue to grow. DBS receipts have increased every
year for the last eight years and receipts have
increased more than 30% over the last decade. However,
our money transmission program area as it exists now
does not generate sufficient revenue to cover the cost
of supervision. The reason for this is, under the
current uniform act, every licensee pays the same
$3,000 renewal fee, whether they transmit zero dollars
in Alaska or over a billion dollars. Alaska currently
has two, billion-dollar plus money transmitters, and
the top ten money transmitters range from hundreds of
millions of dollars to high tens of millions of
dollars transmitted to, from, and within Alaska. Yet
all of these companies pay the same $3,000 as our
thirty money transmitters who transmit zero dollars
to, from, or within Alaska.
HB 99 allows the state to adopt "fee tiers" based on
the total amount of money transmitted to, from, or
within a state. The states that have adopted the Money
Transmission Modernization Act have set tiers where
there is a base fee, and then apply a formula based on
the business's total volume of money transmitted to,
from, or within the state. Current revenue under
existing law is about $300,000. If Alaska utilizes, as
one example, Texas's tiered fee model, that revenue
will increase to almost $1 million. That is to say, if
HB 99 becomes law, there will be significant
additional revenues that will exceed the fiscal impact
of the bill. Please note, there will be no additional
cost to Alaska's consumers. PayPal, Venmo, Cash App,
Apple Pay, Google Pay, Robinhood, and Coinbase do not
charge customers any more or less based on where they
live. Stated another way, Alaskans pay no less than,
for example, a Texan, despite having vastly lower fees
on the business. The tiered fee model will be designed
to cover the cost to regulate the money transmission
industry in Alaska and be the right fit for small
businesses and not a barrier to entry.
Finally, I would like to mention the recent opposition
submitted by ADP Payroll Services. ADP was formerly
licensed as a money transmitter in Alaska. It is no
longer licensed as a money transmitter in Alaska.
Rather, it operates under a trust company license
issued by the federal government. ADP asserts that
payroll processors should have to register as money
transmitters.
This issue was raised when the Money Transmission
Modernization Act was first introduced as a governor's
bill in 2022. That bill received opposition from the
Independent Payroll Processors Association. That
organization argued that most payroll processors in
Alaska were small, "mom and pop" local shops with few
employees, if not a sole proprietorship. The division
researched the issue and determined that there were
100 or more local payroll processors. Including those
businesses as money transmitters would impose on these
small local businesses the burden of annual license
renewal fees, background checks, quarterly reporting,
and, notably, having liquid assets ("cash in the
bank") equal to the amount of their money transmission
obligations.
2:04:11 PM
Mr. Schmidt continued providing prepared remarks:
The division also noted that it had never received a
complaint about payroll processors and could find no
history of criminality involving an Alaska payroll
processor. The division also noted that payroll
processor's work is scrutinized by the employees being
paid and by the employer who has payroll obligations
regardless of who gives employees their wages. The
division also noted indirect supervision by the IRS by
virtue of payroll processors filing and submitting W-
2's, 1099's, 941's, and other tax documentation. The
division has also determined that, of the thirty
states that have adopted the modernization act,
fourteen have excluded payroll processors, and nine
states' law is silent on money transmitters.
Based on all the foregoing, in 2022 the division
recommended exempting payroll processors from the
scope of the Money Transmission Modernization Act.
Three years have gone by since that effort and the
bill has been introduced, without including payroll
processors, two more times. In those three years,
utilization of mobile payment applications and
cryptocurrency continues to increase, and the existing
law is becoming more of a relic as other states adopt
the new law. The Division of Banking and Securities
continues to recommend that payroll processors be
exempted from HB 99.
Mr. Schmidt thanked the committee and was available for
questions.
2:06:09 PM
Co-Chair Foster asked for an official review of the fiscal
note.
BRODIE ANDERSON, STAFF, REPRESENTATIVE NEAL FOSTER,
reviewed the new fiscal impact note from the Department of
Commerce, Community and Economic Development (DCCED)
allocated to Banking and Securities. He reported that the
first page showed a cost of $15,000 for a service fee for
the Department of Law's (DOL) regulation review in FY 26.
Beginning in FY 27, the cost increased to $432,500 in
personal services for three positions. In addition, $12,000
was for out of state travel for training the positions;
$75,000 for statewide core services for the positions; and
a $36,000 commodity line for one-time equipment cost and
set up. In FY 28, there would be an additional two
positions and travel for out of state training would
increase to $20,000, an increase to $125,000 for statewide
core services for the positions, and commodities would drop
to $10,000. In FY 26, the total cost was $15,000, in FY 27
it increased to $555, 000, and in FY 28 the full cost was
$899,300.
2:09:34 PM
Co-Chair Foster OPENED public testimony.
KATHY TOMASOFSKY, EXECUTIVE DIRECTOR, MONEY SERVICES
BUSINESS ASSOCIATION, NEW JERSEY (via teleconference),
testified in support of the bill. She read from a prepared
statement:
The Money Services Business Association ("MSBA") is
grateful to have the opportunity to write in support
of HB 99, entitled "Money Transmission; Virtual
Currency". The MSBA is one of the nation's largest
trade associations focused on the non-bank money
services industry. Its membership includes licensed
money transmitters and their agents and/or authorized
delegates, payment card issuers, and distributors,
payment processors, international remittance
companies, bill payment companies, mobile payment
application providers, payment aggregators, virtual
currency exchanges and administrators, money orders,
eWallet providers and other similar money services
providers that are engaged in payments. For additional
information about our membership, please see:
www.msbassociation.org.
The MSBA worked alongside other industry
representatives and State regulators to create the
Uniform Money Transmission Modernization Act, also
known as the Money Transmitter Model Law. HB 99 is key
to implementing Money Transmitter Model Law. It will
clarify the rules around licensing and regulation for
money transmitters, which include companies that
handle several trillion dollars annually and offer
many of the most essential financial services.
Specifically, HB 99's provisions create a national
standard for customer protections, clarify and
standardize definitions of regulated activity, and
streamline a states' ability to license and examine
money transmitters through the Nationwide Multistate
Licensing System. All these efforts will ensure
customers are protected, and payments companies are
regulated in the same manner across all jurisdictions.
Overall MSBA believes that HB99 will not only benefit
customers by ensuring a consistent framework of robust
protections but will also assist industry with greater
clarity in operations and supervision. We appreciate
your support of HB 99 and are happy to answer any
questions you have may have.
2:13:17 PM
Representative Stapp asked about the regulatory, payroll,
or processors aspects of the legislation. He wondered what
issues she could provide information on. Ms. Tomasofsky
replied that she may be able to help with all three
depending on the detail. Representative Stapp asked about
the purpose of the records compliance change from three to
five years. Ms. Tomasofsky answered that as a matter of
compromise some states had longer retention records and
chose that timeframe. Representative Stapp asked if it was
the industry standard nationwide. He asked whether it
worked with Alaska's existing law. Ms. Tomasofsky deferred
the Alaska question to Mr. Schmidt. Representative Stapp
asked about payroll processing. He provided an example of a
seafood processing plant with foreign workers where some
worker's pay was remitted directly to their home country in
crypto currency. He asked about the reason for exempting
payroll processors. Ms. Tomasofsky replied that she would
provide a response in writing because the answer was very
technical. She repeated her understanding of the question.
Representative Stapp wondered why they would exempt payroll
processors when he could think of many reasons why an
employer would pay foreign workers in crypto currency. Ms.
Tomasofsky replied that payroll processing was exempted
from the licensing and mainstream regulations of money
transmission. When considering virtual currency there may
be other regulations that supersede a simple payroll
processor exemption.
2:18:19 PM
Representative Fields suggested Mr. Schmidt could answer
the question. He related that the reason for the exemption
was to provide a level playing field for both small and
large payroll processors and not make it more difficult for
small processors when engaged in traditional processing.
Representative Stapp referenced a tiered fee structure in
regulations. He asked how domestic versus international
processors were being charged. Ms. Tomasofsky did not know
the fee structure for NMLS. She deferred to Mr. Schmidt.
Co-Chair Foster wanted to hold off the questions for the
division until they were finished with questions for Ms.
Tomasofsky.
Representative Stapp asked what license individuals would
be applying for. Ms. Tomasofsky answered that they were
applying for a money transmission license on a company
level license (not individuals) to transmit funds and to
prove the funds were safeguarded and maintained a one to
one relationship. There were also surety bonding
requirements that protected the consumers' funds.
Representative Stapp asked if employees of the companies
also had to have licenses to perform the transactions on
behalf of the company. Ms. Tomasofsky responded that a
money transmission license was associated with the company.
There were situations when a company had agents that
conducted its business like a Western Union in a Walmart.
Walmart was an agent of Western Union but would need a
license as well.
2:22:09 PM
Representative Galvin understood there were 30 states that
had joined in the model law. She remarked that some of the
states with large populations did not adopt it including
the cities of Seattle, Charlotte, New York City, and
Philadelphia. Ms. Tomasofsky replied that California was
involved in creating the model law and had implemented
portions of the model law. She expounded that Florida had
operated uniquely in the past and was the only state not
using the NMLS system. The Conference of State banking
Supervisors (CSBS) was working to try to obtain all states'
adoption; it was a slow process. She furthered that New
York and California both had strong protections in the
virtual currency area and the model law was a secondary
priority for those states. She could not speak to
Pennsylvania. She indicated that the bill was a bipartisan
and different states had different priorities and often it
was difficult to find a sponsor.
2:25:24 PM
Representative Galvin asked for specific information
regarding Portland, Oregon's and Seattle, Washington's
reason for not adopting the model law. Ms. Tomasofsky
answered that Washington planned to introduce a bill and
had adopted parts of the model law. She could not speak to
Oregon. Representative Galvin noted that Nebraska had
legislation pending. She wondered whether the bill was
identical to Alaska's and if Alaska was lining up with the
model law. Ms. Tomasofsky answered that overall, Alaska was
lining up with the model law and noted that the state had
already embraced the uniform law, which meant the state was
little ahead of other states. She disclosed that the
uniform law was the basis for the model law. She revealed
that many states failed to adopt the uniform law and
therefore fully repealed prior laws and replaced the law
versus amending specific sections. She listed a few states
that adopted the bill. She expected more states to adopt
the law in the upcoming year now that the elections were
over. Representative Galvin indicated that the tiers were
not outlined in the bill and granted DCCED the authority to
establish them. She wondered what other states were doing
regarding moving from a $3,000 flat fee to a tiered system.
2:29:11 PM
Ms. Tomasofsky replied that she could not answer the
question and offered to provide the answer. Representative
Galvin understood that Ms. Tomasofsky was not familiar with
how states charged entities. Ms. Tomasofsky answered in the
affirmative.
Representative Allard asked about the testifier's expertise
and for verification that the testifier was in support of
the bill. Ms. Tomasofsky answered in the affirmative.
Representative Allard was concerned regarding the consumer
protection, anti-money laundering, terrorism, regulation
burden, high risk of penalties, and size versus cost. She
added that crypto was an issue and the cost of compliance.
She wondered if that was the reason other states did not
want to adopt the model law. Ms. Tomasofsky rephrased her
question. She deduced that due to the anti-money lending
requirements the crypto companies did not want to be
involved in the money transmission licensing.
Representative Allard clarified that the disinterest was
due to lack of strong consumer protection, the regulatory
burden, and the cost of compliance. She ascertained that
there were some security issues with the enhanced
reporting, record keeping, and increased data collection.
She asked if her statement was accurate.
2:32:10 PM
Ms. Tomasofsky answered in the negative. She explained that
crypto companies were currently licensed at the state level
and registered money transmitter companies. Crypto
companies had to abide by consumer protection and anti-
money laundering regulations in order to conduct business.
The consumer protection regulations required them to hold
in reserve the amount of money the consumer wanted to
transmit. The transactions were tracked to ensure
compliance. Most states already regulated crypto albeit
some in their own way.
Representative Allard indicated that Ms. Tomasofsky did not
answer her question. She communicated her concerns to the
committee about the bill concerning the anti-money
laundering and terrorism protections that could be
infiltrated in this type of program and created security
issues. The enhanced reporting, record keeping, and
increased data collection were reasons why crypto companies
did not want to be involved in the legislation. Ms.
Tomasofsky did not see how licensing crypto increased anti-
money laundering and terrorism. She deferred the answer to
Mr. Schmidt.
Representative Allard asserted that she did not want more
information and that it was very partisan testimony.
Co-Chair Foster asked if there were any closing remarks.
Ms. Tomasofsky thanked the committee for its time. She
urged the committee to pass the bill.
Co-Chair Foster CLOSED public testimony.
2:36:27 PM
Representative Tomaszewski asked about the changes in the
fiscal note versus the prior fiscal note.
Mr. Evan Anderson addressed the changes in the fiscal note.
He stated that the Labor and Commerce Committee had made
three changes to the bill that subsequently altered the
fiscal note. He noted the Summary of Changes included in
the members bill packets. He explained that the first
change harmonized proposed money service business civil
penalties with mortgage civil penalties in existing AS
06.60.420. and was an existing penalty. The change
increased the penalty from $1,000 to $10,000. He turned to
the largest of other changes that pushed the effective date
out from January to July 1, 2026, to give the Department of
Commerce, Community and Economic Development (DCCED) the
ability to accommodate regulation drafting, a public
comment period, and a renewal period for licensees.
Co-Chair Foster asked his staff to add remarks.
Mr. Brodie Anderson replied that the previous fiscal note
was no longer pertinent. There was only one active note.
Representative Tomaszewski cited that in the previous
fiscal note there were more costs for FY 26 [$570,000] and
the new fiscal note only had $15,000 for FY 26. He asked if
the delayed date deferred the costs to FY 27. Mr. Brodie
Anderson answered in the affirmative. He furthered that the
delayed effective date decreased costs so the only expenses
for FY 26 would be the regulatory costs to enact the bill.
Representative Bynum cited the fiscal note and read some
excerpts from the analysis: "The bill will reduce
regulatory burden and bring uniformity across states for
core licensing and examination processes." He favored the
actions stated by DCCED. He also read, "The changes allow
the division to coordinate more effectively with other
states and leverage resources to reduce regulatory burden
on licensees." He pointed to the fiscal note analysis
stating the need for additional positions. He wondered why
there was a need for added positions if HB 99 and the new
system was streamlined and created efficiencies.
2:42:03 PM
Representative Fields responded there had been much growth
in money transmission and Alaska was behind. He agreed that
the new system was more efficient and would increase
revenues. However, current statutes were woefully out of
date at present with respect to where technology was at.
In addition, there may be money laundering or fraud that
the department could address if the statutes were updated.
He deferred to Mr. Schmidt for further answer. Mr. Schmidt
responded that DCCED had 4 staff responsible for examining
600 institutions. He expounded that the legislation added
positions to increase overview of all the entities. He
pointed to the mortgage industry where the division only
examined 2 percent of licensed mortgage lenders per year.
It was not uncommon for a lender to never be subject to
examination. In 2020, all of the money transmissions
amounted to $2.8 million. In four years, the number had
more than doubled from 90 licensees to 273 in the current
year. He commented that the bill increased efficiencies.
However, the additional positions reflected the growth in
the industry. Representative Bynum cited section 53 and
summarized that the department shall establish fee levels
so that the total amount of fees collected for licenses
equals the department's actual total regulatory costs. He
inquired whether the approximate fee would require raising
fees necessary to implement the program or would it cause a
delay in fee increases.
[Secretary note: The provision is included in Section 51 of
CS HB 88 (L&C)]
Mr. Schmidt responded affirmatively. He offered that the
department would establish fees to cover the cost of
administration. The delayed enactment allowed DCCED to have
the regulations and renewal fees in place when the bill
took effect.
2:45:36 PM
Representative Johnson asked if the bill was impacted by HB
113 [HB 113 - TAX EXEMPTION: SMALL BUSINESS].
Representative Fields answered in the negative.
Mr. Schmidt was not familiar with HB 113.
Representative Johnson asked how the bill would be impacted
by HB 113. Representative Fields replied that HB 113 would
not be impacted by the bill due to different subject matter
and separate areas of policy. Representative Johnson
mentioned Amazon sales versus was trying to understand
selling a transmission. Representative Fields answered that
the bill did not affect Amazon, which related to sales and
the bill related to money transmission.
Mr. Schmidt added that the customer did not pay a sales tax
on goods when they used a money transmission. He was unable
to provide an expanded answer.
Representative Johnson asked if a money transmitter could
pay a sales tax on money transmissions. Representative
Fields responded that the state could tax money
transmissions, but the bill did not. She wondered what
problem the bill was trying to solve. She deduced that the
industry bill was standardizing money transmissions across
banking institutions and there were things the federal
government could regulate country wide and other issues
were left up to the state. She guessed HB 99 was an
industry bill that mostly helped the industry via
standardization. Representative Fields answered that
multiple parties had different interests in the bill. He
expanded that standardization helped the industry however,
it was a governor's bill in the previous year and the
department made a good case that modernized statutes would
fight crime and protect consumers from fraud. He had agreed
to carry the bill for the administration because of fraud
targeting elders, fraud through crypto currency and other
forms of transmission, and particularly in stored value
cards. He commented that the bill provided the Division of
Banking and Securities (DBS) more oversight regarding money
laundering. He relayed that his interest was protecting
elders and public safety and the industry benefited by
creating a level playing field.
2:51:40 PM
Representative Johnson concern was as things moved to more
digital buying, there was still an information gap. She
believed there was opportunity and Alaska could be a leader
in regulating financial instruments, but standardization
meant Alaska would function like "everyone else." She
worried the state could lose opportunities due to "fear"
around cryptocurrencies. She wondered whether the state
could look at regulation with a "fresher perspective." She
pondered whether there was a way to capture additional
revenue from the money transmission market. Representative
Fields answered that the bill would more than pay for
itself in orders of magnitude as a result of the updated
fee structure and adequate staff to administer the program.
He mentioned the added revenue in the millions of dollars.
Representative Johnson referenced the updated fiscal note
and the added positions. She noted that one position was a
range 14, which was not a lot of money and wondered what
the vacancy rate was for staff with lower ranges. She
listed the other ranges and thought that it looked like a
minimal amount and that a range 14 was inadequate and not a
living wage. She cited the fiscal note analysis that
stated, "?this bill results in approximately $500,000 to
$1,000,000 in new revenue for the State." She did not think
the bill provided new revenue if it was designed to cover
costs. She asked if she was correct. Representative Fields
deferred to Mr. Schmidt for answers. He reminded the
committee that he did not introduce the bill for revenue
generation but for increased public safety. He observed
that DCCED and specifically DBS did a good job of retaining
staff and the staff performed well.
2:57:13 PM
Mr. Schmidt asked for a breakdown of Representative
Johnson questions.
Representative Johnson referenced the position range 14,
range 17, range 19, and range 23. She wondered what the
division's vacancy rate was and if the ranges were adequate
to fill the positions. Mr. Schmidt responded that when he
became the division director in 2021, there was a 30
percent vacancy rate. He reported that by 2023 it was the
first division in state government to be fully staffed and
was awarded the Alaska Journal of Commerce award for best
workplace in Alaska in the small employer division. He
added that currently, the division had two vacancies out of
27 positions. The division's licensing staff was fully
staffed by the same employees since 2021. The higher range
staff were financial examiners and had college degrees or
financial backgrounds who ensured compliance.
2:59:21 PM
Representative Johnson asked if he believed that the levels
of pay were fine and that the positions would be filled.
Mr. Schmidt responded that he did not have an opinion on
the adequacy of the pay of state employees. Representative
Johnson asked who determined the ranges. Mr. Schmidt
answered that DCCED's operations manager prepared the
fiscal note and could answer in more detail.
Representative Johnson advised that the state should pay
people enough to take care of the vacancy rate. She asked
if there was any other way to generate revenue with the
bill. Representative Fields reiterated that he had not
looked at the bill as a revenue generator as much as for
regulatory and law enforcement functionality. He deferred
to Mr. Schmidt to answer regarding increasing revenue.
3:01:34 PM
Mr. Schmidt answered that one of the first and most
frustrating things he became of aware of was that a company
that moved $1 billion of Alaskans' money paid the same
renewal fee as a money transmitter in Nome, Alaska. He
declared that it made no sense." He elaborated that no
private business would price its services in the same way.
The bill would pay for itself by allowing an appropriate
fee based on how much money was moved. The division's fee
revenue was roughly $300,000 and would increase to $800,000
to over $1 million. The division lost money on regulating
money transmission due to the antiquated statutes. The
legislation would cover the cost of the program area, if
adopted. He reiterated that the division had a $4.8 million
budget and last year it had receipts of $22.5 million and
contributed $17.7 million to the general fund (GF) in the
prior year, which was up from a decade ago. However, the
specific program area did not pay for itself and most of
the division's revenue came from securities; the division
issued massive volumes of security registrations at roughly
$75.00 each. He emphasized that every year the bill did not
pass meant they were stuck with the old statutes and fees
that did not cover the cost of operations. Representative
Johnson asked about payroll processing. She thought it
should be included. Mr. Schmidt replied that after he had
written his prepared remarks, he had been informed that an
amendment was being contemplated that may include payroll
processors with a carveout for small processors. He
believed the bill posed an undue regulatory burden on very
small bookkeeping and payroll shops. He offered that every
provider would need enough money on hand to cover money
transmission obligations and he was concerned that it was
an onerous requirement for small businesses in Alaska.
3:06:58 PM
Representative Johnson asked if there was a level that
should be considered to include larger payroll processors.
Mr. Schmidt replied affirmatively. He noted that ADP was a
very large nationwide payroll processor company and brought
the issue to the forefront. The company published an ADP
unemployment report due to its awareness of unemployment in
the country. He was uncertain of where he would draw a line
but was certain there was a point where regulation of
payroll processors was not an excessive burden.
Representative Galvin deemed that the bill would have
received more opinion from other entities and chambers of
commerce. She requested comment. Representative Fields
answered that the Alaska Banker's Association supported the
bill and was the primary affected industry and Ms.
Tomasofsky represented the money transmitters.
Representative Galvin asked if there were any other
penalties besides those listed in the bill for fraud and
money laundering. Representative Fields deferred to Mr.
Schmidt.
Mr. Schmidt answered that when the division uncovered
crimes it tried to prosecute the lawbreakers. He delineated
that Title 6 contained blanket criminal provisions for all
of its programs like banking, mortgage lending, money
transmission, etc. The division routinely relied on First
Degree Felony Theft in its criminal investigations.
Representative Galvin asked if he felt Title 6 statutes
were sufficient and did not need modernization for the
bill. Mr. Schmidt replied that the daily penalties were
enhanced, but the current penalties were sufficient. He
reported that currently, the division enforcement section
was extremely busy investigating fraud and scams from a few
thousand to millions of dollars. He elaborated that the
fraud happened most frequently on the elderly and mostly
involved crypto currency. He could not share the "strides"
the division was engaged in but assured the committee it
was protecting Alaskans every day.
3:11:58 PM
Representative Galvin asked about the tiered costs
structure. She asked how it came about. Representative
Fields answered that it was suggested by the department and
deferred to Mr. Schmidt.
Mr. Evan Anderson interjected that the division had shared
a draft model plan regarding the bill and recommended the
tiered fee system ranging from $3,000 to $30,000. However,
the language in the bill was flexible so that as
transmission volumes increased the fees could increase.
Mr. Schmidt answered that the division particularly looked
at the formulas Ohio and Texas employed and used it as a
reference point while it determined the program's costs.
The fees would ultimately cover the costs to administer the
program.
Representative Stapp looked at Section 37 of the bill
pertaining to civil penalties. He asked what the
conditional impact was pertaining to the section.
Representative Fields deferred to Mr. Schmidt.
Representative Stapp referred to Section 69 of the
Sectional Analysis (copy on file) and read: "Adds a new
section "CONDITIONAL EFFECT" to allow adoption of
transitional regulations by DCCED. He asked for an
explanation of the section and noted the sectional left out
much of the section.
Mr. Evan Anderson replied that he believed the change had
been made in the House Labor and Commerce Committee at the
request of the department.
Representative Stapp pointed out that Section 69 contained
conditional language that required the legislature to have
a two-thirds vote on the bill to allow Section 37 and
Section 65 become law. He turned to page 55, line 14 of the
bill and read: "Conditional Effect. AS 06.55.605, as
amended by sec. 37 of this Act, takes effect only if sec.
65 of this Act receives the two-thirds majority vote of
each house required by art. IV, sec. 15, Constitution of
the State of Alaska." He asked what would happen to the
bill if the two-thirds majority vote was not received.
Representative Fields replied that it was a question for
Legislative Legal Services, and he would follow up.
Representative Stapp cited Section 65 of the bill and
believed that it was a "key" provision in the bill by
requiring a two-thirds vote threshold. He assumed that the
exclusion in the sectional analysis was an oversight.
Representative Fields noted that the bill passed the Senate
unanimously. He would follow up. Representative Stapp did
not understand why the definitions were so prescriptive. He
pointed to Section 57, page 49, line 2 deleting estates and
trusts from statue and replacing it with partnerships,
liabilities, stock corporation, and corporate entities
identified by the department. He asked why trusts and
estates were deleted. Representative Fields answered that
the language did not eliminate trusts. Representative Stapp
noted that the words "an estate, a trust, and a partnership
were bracketed. Representative Fields pointed to the word
trust on line 3 that was not bracketed. He deduced that
trusts were not eliminated.
3:19:01 PM
Representative Stapp referenced Section 58, page 49, line
11 and read: "a United States military installation that is
located in a foreign country?" He interpreted that applied
to a "cop in Iraq." He wondered how Alaska could codify
something in statute that allowed jurisdiction in a foreign
country. Representative Fields deferred to Mr. Schmidt.
Mr. Schmidt deferred to a colleague.
TRACY RENO, CHIEF OF EXAMINATIONS, DIVISION OF BANKING AND
SECURITIES, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT (via teleconference), replied that the division
had worked with the entities involved in crafting the model
law. Therefore, the changes made throughout the bill were
part of the modernization act to ensure uniformity. She
delineated that if a multi-state enforcement action was
necessary against a national company all participants had
the same language in law to carry out the law enforcement.
Representative Stapp read from page 49 and stated it made
no sense to him. He read as follows: "state" means a state
of the United States, the District of Columbia, Puerto
Rico, the United States Virgin Islands, a United States
military installation that is located in a foreign country,
or a territory or insular possession subject to the
jurisdiction of the United States?" He thought that it
seemed very weird to specify a U.S. military installation
in a foreign country. He wondered how the law could apply
on a base in a foreign country. Ms. Reno answered that she
would follow up with a response after consulting the
drafters of the model law.
Representative Fields interjected and cited AS
06.55.990(22) and read: "state" means a state of the United
States, the District of Columbia, Puerto Rico, the United
States Virgin Islands, or a territory or insular possession
subject to the jurisdiction of the United States?" He
deduced that a military installation might be considered an
insular possession subject to the jurisdiction of the U.S.
He was uncertain why it was included in the bill.
Representative Stapp thought the language was strange.
Representative Fields deduced that there was a benefit to
protecting Alaskans that were stationed overseas.
3:23:06 PM
Representative Stapp pointed to page 49, line 22,
subsection (B) and read: "(B) does not mean a payment
instrument or a closed-loop stored value, or a stored value
not sold to the public but issued and distributed as part
of a loyalty, rewards, or promotional programHe inquired
if gold was referenced as a closed loop stored value.
Representative Fields answered that it pertained to a
points program on the amount of money spent in a store; a
loyalty program. Representative Stapp asked for the
definition of closed loop stored value. Representative
Fields responded that a closed loop meant an item was not
being sold in the marketplace.
3:24:27 PM
Representative Allard was concerned because it felt like it
was an industry bill that was using government to push
their agenda. She was concerned about the portion related
to crypto. She reiterated that the security provisions
actually had the potential to expose individuals'
information. She asked Representative Fields to speak to
her concern and how the bill impacted cryptocurrency. She
asserted that the crypto industry was not in favor of the
legislation. Representative Fields responded that he did
not view HB 99 as an industry bill. He thought the
department made a compelling argument about why the
statutes needed to be updated. He voiced that he had not
seen any criticism of the bill by the crypto industry. He
deferred to Mr. Schmidt to describe how the bill enhanced
Alaskans' security in the money transmission market.
Mr. Schmidt answered that if one wanted to encourage the
financing of terrorism or money laundering the best way to
do so was to not regulate money transmission. Conversely,
the way to discourage those crimes was to allow financial
examiners to audit records, data, and compliance. He
emphasized that the bill modernized and improved the
regulatory abilities. He addressed the comment that the
bill appeared to be an industry bill. He explained that the
statement was inaccurate. The division worked closely with
the Conference of State Bank Supervisors (CSBS) and
routinely relied on the expertise of other state
regulators. He related that his equivalent division in New
York state had over 1,000 employees and Alaska had 27. The
bill had passed diverse states including Massachusetts,
Texas, Illinois, and Indiana. In addition, the very large
state that had not adopted the model law developed their
own laws because they had the resources to develop
statutes. Those states wanted to draft their own laws
reflecting their own priorities. He stressed that with a
staff of 27 he could not draft an equivalent bill. He
asserted that HB 99 was not an industry bill. He furthered
that as part of his job, he was working to get jailtime for
financial criminals caught "doing bad things to Alaskans.
He was not here to caudle anyone. He stated that if
someone wanted to be a bad actor in the crypto space, they
did not get licensed in the U.S. He informed the committee
that the companies that were licensed in the U.S. had the
best compliance and were very responsive. He had tried to
get scammed Alaskans their money from cryptocurrency
exchanges from outside of the U.S. and it was difficult. He
averred that HB 99 was a bill that would protect consumers
and harmonize regulations. He shared that he sent his
examination team out to PayPal, who were onsite for weeks
examining records, yet they were using the toolkit from
2004 and not the modern tools others were utilizing. He
emphasized that antiquated statutes were not benefitting
Alaskans.
3:30:53 PM
Representative Allard maintained that she did not
appreciate being mansplained" [colloquial expression] to.
She reiterated that members of the crypto industry were
antagonistic to the bill because of the security issues.
She stated that none of her questions were answered.
Representative Fields relayed that the Alaska Public
Interest Research Group and the Consumer Confederation of
America reviewed the bill and had a modest amendment
suggestion. He emphasized that he did not just take
industry's word or the department's word on the bill. He
indicated that he engaged national consumer protection
experts to review the bill.
Co-Chair Josephson referenced Section 37 that was referred
to in Section 65 mentioned by Representative Stapp. He
explained that Constitutional law mandated that a two-
thirds votes of both chambers was necessary to change Court
Administration rules. He determined that if the two-thirds
vote was not attainable the fine could still be increased.
He informed the committee that in a regular criminal court,
the prosecutors' fees would not be included in the penalty
and without the vote the penalties would also not be
included in the bill. However, the bill would remain
viable.
Representative Fields thanked the committee for hearing the
bill.
HB 99 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the schedule for the following
day.
ADJOURNMENT
3:33:31 PM
The meeting was adjourned at 3:33 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 1. HB 99 ver. I Sponsor Statement.pdf |
HFIN 5/6/2025 1:30:00 PM |
HB 99 |
| 4. HB 99 Supporting Document - How crypto helps Latin America's drug cartels do business - Context.pdf |
HFIN 5/6/2025 1:30:00 PM |
HB 99 |
| 4. HB 99 ver. A - ver. I - Summary of Changes.pdf |
HFIN 5/6/2025 1:30:00 PM |
HB 99 |
| 5. HB 99 Supporting Document - How to Combat Cryptocurrency in the Illicit Drug Trade - Air Force University.pdf |
HFIN 5/6/2025 1:30:00 PM |
HB 99 |
| 6. HB 99 Supporting Document - Understanding the Use of Cryptocurrencies By Cartels - TRM Insights.pdf |
HFIN 5/6/2025 1:30:00 PM |
HB 99 |
| 7. HB 99 Letters of Support - 3.21.25.pdf |
HFIN 5/6/2025 1:30:00 PM |
HB 99 |
| 3. HB 99 ver. I Sectional Analysis Narrative.pdf |
HFIN 5/6/2025 1:30:00 PM |
HB 99 |
| HB 99 ver. I Sectional Analysis .pdf |
HFIN 5/6/2025 1:30:00 PM |
HB 99 |
| HB 99 Public Testimony Rec'd by 050525.pdf |
HFIN 5/6/2025 1:30:00 PM |
HB 99 |