Legislature(2023 - 2024)BELTZ 105 (TSBldg)
03/06/2023 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB84 | |
| SB83 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 84 | TELECONFERENCED | |
| *+ | SB 83 | TELECONFERENCED | |
SB 84-MONEY TRANSMISSION; VIRTUAL CURRENCY
1:32:16 PM
CHAIR BJORKMAN announced the consideration of SENATE BILL NO. 84
"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."
1:32:38 PM
ROBERT SCHMIDT, Director, Division of Banking and Securities
(DBS), Department of Commerce, Community and Economic
Development (DCCED), Anchorage, Alaska, introduced SB 84 with a
presentation on money transmission and virtual currency. He
advanced to slide 2 and began the presentation:
Introduction
This legislation amends and modernizes the Alaska
Uniform Money Services Act (AS 06.55) and adopts
pertinent sections of the Uniform Money Transmission
Modernization Act (Model Law).
• In 2008, money transmission was sending a wire
transfer at your local grocery store or purchasing a
money order or traveler's checks at the bank.
• This bill will modernize Alaska's money transmission
laws to include cryptocurrency (aka "virtual
currency," Bitcoin, Ethereum, DogeCoin). Six states
have adopted the Model Law in some form so far with
12 more introducing bills this year. Effective
1/1/23 DBS adopted regulations to include crypto in
current law as an interim solution.
• Cryptocurrency remains one of the key tools of rogue
actors. "North Korea stole more cryptocurrency
assets in 2022 than in any other year[.]" (Reuters,
2/6/23)
1:32:48 PM
MR. SCHMIDT stated the following:
Thank you for holding this hearing to discuss the
Money Transmission Modernization Act. I understand
that 50+ page legislation on the financial industry
may not sound exciting. But this bill impacts an
industry that most Alaskans carry in their pocket and
is used thousands of times an hour by our residents
involving billions of dollars each year. And last
year, the unregulated underbelly of this industry
resulted in thousands of Alaskans losing tens of
millions of dollars.
This presentation will have two parts. First, I will
discuss what money transmission is (think PayPal), I
will discuss the utilization of cryptocurrency by
Alaskans, the Alaska impact of the crypto
bankruptcies, and the explosive growth of money
transmission in Alaska. Then I will discuss the
modernization act and how it will benefit Alaskans.
Money transmission dates back to the middle ages when
the Knights Templar established a system for persons
to deposit gold and silver in Europe and withdraw it
in Jerusalem. In America, money transmission took hold
with the western expansion of the country, with
entities such as Western Union accepting money on the
east coast, then sending a telegram to an office near
the intended recipient, instructing the local office
to give the money to the intended recipient. For over
100 years, this was the pattern of money transmission
in America the sender physically going to a money
transmitter's office, instructing an amount of money
to be sent to the recipient, and the recipient
physically going into the local branch of the money
transmitter to receive the money. Alaskans can and do
still send money by physically going to a money
transmitter. But the industry has grown into so much
more.
As we will discuss, smartphones have revolutionized
the sending and receiving of money. Alaskans now use
their smartphones tens of millions of times a year to
send billions of dollars.
1:34:45 PM
SENATOR GRAY-JACKSON joined the meeting.
MR. SCHMIDT continued speaking:
The Division of Banking and Securities enforces the
Alaska Uniform Money Services Act (AS 06.55) which was
passed by the Legislature in 2007 and implemented in
2008.
When passed in 2007, cryptocurrency did not exist and
mobile money transmission was in its infancy. This
legislation updates the licensing, recordkeeping, and
enforcement provisions to support these business
activities and protect Alaska consumers.
This bill is based on the Uniform Money Transmission
Modernization Act (Model Law), which was developed by
state regulators, the Conference of State Bank
Supervisors (CSBS), with input and participation from
industry stakeholders.
1:35:29 PM
MR. SCHMIDT reviewed the purpose of the Alaska Uniform Money
Services Act of 2008 on slide 3. He said the Act provides the
legal framework for money transmission functions, including
currency exchange, transfer or wiring of money, and loading and
reloading payment instruments, including stored-value cards.
Slide 3 reads:
What is covered by the 2008 Act?
• Money transmitters (wiring of funds)
• Issuers of traveler's checks, money orders, or
stored valued cards
• Sellers or redeemers of traveler's checks, money
orders, or stored value cards
• Currency dealers or exchangers
1:36:04 PM
MR. SCHMIDT reviewed slide 4, stating SB 84 defines virtual
currency in statute and adds it to the definition of money
transmission requiring licensure and supervision:
Virtual Currency and Money Transmission
Definition of virtual currency: Cryptocurrency or
virtual currency means a digital representation of
value that is used as a medium of exchange, unit of
account, or store of value; and is not money, whether
or not denominated in money. AS 06.55.990(45)
MR. SCHMIDT said:
Cryptocurrency was invented by the online community in
response to the 2008 financial crisis. It is a digital
representation of value, i.e., money, that does not
pass through the banking system, is not backed by a
government, that by design has a limited quantity
only so many bitcoin can ever be available (federal
banks cannot just print more), and relies on
decentralized public ledgers to verify transactions.
Many people are surprised when they learn about
cryptocurrency, that it sounds like "Monopoly money.
How can there be a currency that is not issued by a
government and is outside the banking system? I am not
here as an advocate for or against cryptocurrency, but
I want to show you that Alaskans are using
cryptocurrency, and they are using a lot of it.
1:36:53 PM
MR. SCHMIDT spoke to the chart on slide 5, "Money Transmission
Licensees." He said:
Money transmission keeps on growing. In 2018, we had
111 licensed money transmitters. As of December 31,
2022, Alaska had 168 money transmitter licenses. Over
the past five (5) years, money transmission licenses
have increased 51 percent.
Today online transactions conducted by smartphone and
virtual currency such as Bitcoin are now common means
of exchanging or transferring payment or value. The
proposed legislation is necessary to appropriately
supervise and regulate money transmitters to protect
Alaskans. The eight largest money transmitters in the
state of Alaska all conduct over $100,000,000 a year
of business to, from, and within Alaska. The largest
two each conduct over $1 billion of business to, from,
and within the state.
1:37:50 PM
MR. SCHMIDT spoke to slides 6 and 7, "Alaska Money Transmission
Transactions." He reviewed the bar graph on slide 6 that
illustrates the total number of money transactions in Alaska,
including all money transmissions, payment instruments, stored
value, and virtual currency from 2019 through 2022. He said:
This graph shows the explosive growth in Alaskans
using money transmission. This graph shows how many
times transactions were used; this graph does not show
dollars. In three years, the number of money-serviced
transactions has tripled from over 10 million in 2019
to over 31 million transactions last year. In 2022,
Alaskans used money transmission on average, 3,540
times per hour, 24 hours a day, 365 days a year.
1:38:35 PM
SENATOR BISHOP asked whether the cited numbers exceed daily
credit card transactions.
MR. SCHMIDT answered yes, they do. He clarified that credit card
transactions are not a money service end-to-end payment
transmission; for example, a PayPal transmission of money or a
cash app transmission of money. These transmissions of money do
not include debit or credit cards.
SENATOR BISHOP said the prepared statement he is reading from is
fascinating. He requested a copy for distribution to committee
members with the chair's permission.
MR. SCHMIDT replied that it is not his decision to make, but he
hopes to share it.
1:39:43 PM
SENATOR GRAY-JACKSON asked if Zelle and Venmo are
cryptocurrencies.
MR. SCHMIDT replied that cryptocurrency is a digital
representation of value and has its own name. For example, the
most widely recognized name in cryptocurrency is Bitcoin.
Cryptocurrency is also known as virtual currency. An example of
real money is U.S. dollars. An individual might find an item on
the Facebook marketplace that costs $20. That individual sends
$20 by PayPal or Meta Pay. Those are real U.S. cash dollars
deposited into a bank account and withdrawn by a debit card. An
individual could also elect to use cryptocurrency to buy the
item. He said that cryptocurrency is so simple that it is
confounding because of our ideas about money, but it is a
digital representation of value.
SENATOR GRAY-JACKSON interrupted, stating it sounds like the
answer to her question is no.
MR. SCHMIDT replied that cryptocurrency and cash are different
things.
1:41:28 PM
MR. SCHMIDT continued his commentary on slide 6, stating the
growth in the money transmission industry is driven by two
factors. The first is mobile payment apps on smartphones. These
are apps such as PayPal, Meta Pay, etc.
1:41:30 PM
MR. SCHMIDT reviewed the bar graph on slide 7:
The second factor driving money transmission growth is
the emergence of cryptocurrency. Cryptocurrency
exploded in the last two years largely for investment
reasons people bought crypto hoping it would
increase in value. But crypto is now being used
increasingly for its original purpose of exchanging
value. People are using crypto in place of cash to pay
for things.
1:42:00 PM
SENATOR BISHOP asked if that was because it is off-book.
MR. SCHMIDT replied that it is and is not off-book.
Cryptocurrency does not pass through the banking system, but the
transactions are available on publicly viewable ledgers. The
ledgers look encrypted unless an individual's wallet address is
known; then, it is publicly traceable. The wallet address
comprises about 30 letters, commas, and other characters.
Cryptocurrency does not pass through the banking system, is not
subject to suspicious activity reporting, and knowing customer
requirements is not always necessary. It lacks that regulation
but, in some ways, is more public than most people realize.
MR. SCHMIDT continued his commentary of slide 7, stating:
In 2019, there were 84,719 cryptocurrency transactions
in Alaska. In 2021, the heyday of cryptocurrency,
there were 3,283,291 individual transactions. Last
year, even with all the bankruptcies, Alaskans
transacted 1,956,704 times. The key takeaway is
whether we understand it fully or not, or like it or
not, it is a reality that it is here and being used
at-scale by Alaskans.
1:43:37 PM
MR. SCHMIDT reviewed the bar graph on slide 8, "Money
Transmission Volume." He said:
In 2019, the volume of money transmission in Alaska
was $1.6 million. In 2021, it was over $7 billion. In
2022, it went down slightly to $5.8 billion due to
cryptocurrency bankruptcies. This is not entirely an
apples-to-apples comparison, but if you were to
compare the volume of money transmission to the assets
of the Alaska state-chartered financial institutions,
they are about the same. That is to say, this is an
awful lot of money and it is a very common way for
Alaskans to conduct their business.
1:44:27 PM
MR. SCHMIDT reviewed the bar graph on slide 9, "Money
Transmission Volume - Virtual Currency." He said:
This graph shows the jaw-dropper of them all. In 2019,
Alaska went from $33.6 million in cryptocurrency
transactions to, from, and within the state to $1.9
billion in 2021. That is a growth of 5,789 percent
from 2019 to 2021, 24 months.
Virtual currency transmission in Alaska grew 2,120
percent in 2021 alone. Virtual currency transactions
have fundamentally changed the financial services
world. This bill will add virtual currency activities
to the definition of money transmission in statute to
allow DBS to regulate this activity that accounted for
nearly one-third of the total money transmission
volume in Alaska in 2021. The dollar amount of volume
dipped in 2022 due to the crypto company bankruptcies
and market crash. But Alaskan's utilization of crypto
remains far above its 2020 level.
Alaska did not regulate virtual currency activity
until this year. A very limited regulations package
became effective on January 1st, adding virtual
currency to the definition of money transmission under
the current statute and requiring additional companies
to become licensed.
1:45:53 PM
MR. SCHMIDT advanced to slide 10, "2022 Crypto Bankruptcies -
Alaska Consumer Harm:"
VOYAGER DIGITAL:
• 1,879 Alaskan Accounts
• $4.96 million in Alaska accounts frozen
CELSIUS NETWORK:
• 526 Alaskan Accounts
• $13.9 million in Alaska accounts frozen
CONSUMER COMPLAINTS RECEIVED: 0
MR. SCHMIDT reviewed slide 10:
Of course, we cannot talk about cryptocurrency without
discussing its tumultuous year in 2022. This slide
captures one of the biggest stories that you did not
hear about in 2022, and that is the Alaska impact on
crypto-bankruptcies. There were three main crypto-
bankruptcies in 2022. The first two were Voyager
Digital and Celsius Network. Twenty-four hundred
Alaska accounts valued at almost $20 million were
frozen in those two bankruptcies. That is to say, on
day one of the first bankruptcy, and on day one of the
second bankruptcy, Alaska assets at $20 million were
frozen. It is unclear if, when, or how much impacted
Alaskans might get back as these bankruptcies
progress.
The impact of the crypto-bankruptcies on Alaskans
makes these bankruptcies an exceptionally large
consumer loss. Yet DBS received zero complaints. We
often find that victims of financial harm often suffer
in silence, but that silence does not mean Alaskans
are not impacted. This is not the sort of situation
where you want to wait for a squeaky wheel because we
had this massive event, thousands of Alaskans, tens of
millions of dollars, and no one has really said
anything. This does not mean that it is not having an
impact.
1:47:16 PM
MR. SCHMIDT advanced to slide 11, which outlined the biggest
bankruptcy of 2022:
FTX Trading - Alaskan Consumer Harm
FTX - Bankruptcy in November 2022; largest crypto
bankruptcy yet; former CEO facing federal criminal
charges.
$$$ ? ? ? ALASKA IMPACT UNKNOWN
"Never in my career have I seen such a complete
failure of corporate controls and such a complete
absence of trustworthy financial information as
occurred here."
-FTX CEO-in-bankruptcy John Jay Ray III
(Mr. Ray was the CEO-in-bankruptcy of Enron)
MR. SCHMIDT spoke about the 2022 FTX bankruptcy:
The biggest crypto bankruptcy of 2022 was the
spectacular collapse of FTX. DBS is closely monitoring
this bankruptcy, but we have yet to get reliable data
on the Alaska impact of this bankruptcy. What we do
know is that FTX was bigger than Voyager and Celsius.
Because of that, we expect the impact on Alaskans to
be greater. FTX's former CEO, Sam Bankman-Fried, has
been charged with financial crimes. Some of FTX's
senior management has pled guilty to financial crimes.
DBS believes that Alaskans lost many millions of
dollars to FTX, and the chance of any recovery
currently looks remote.
1:47:59 PM
MR. SCHMIDT advanced to slide 12 to discuss the fiscal impact of
SB 84:
Fiscal Impact
• Receipts in FY2012 were $12.4 million. The FY2012
budget was $3.5 million.
• Receipts in FY2022 were $22 million. The FY2022
budget was $4.3 million.
1:47:57 PM
MR. SCHMIDT said:
This bill contains a fiscal note. Division receipts
have grown 77% from FY2012 to FY2022. Receipts in
FY2022 were $22 million against a division budget of
$4.3 million.
The division will require additional staff and support
costs to respond to the growth in money service
activities, the complexity of new business models, and
use of third-party partnerships. The positions will
allow the division to implement the new law,
incorporate changes in the operation of NMLS
[Nationwide Multistate Licensing System], develop
proficiency in the examination of electronic systems,
and assessment of cybersecurity measures in a high-
risk environment.
New program receipt revenue is estimated to be at the
low end, with a minimum of $110,000 for 35 new license
applications by FY2025. It is difficult to anticipate
the number of new applications, annual renewal
fees/assessments, and resulting revenue for future
years. However, the division expects to adopt an
assessment fee model through new regulations that
would ensure actual costs of supervision of the
industry would be covered through annual program
receipts and is expected to range between $750K to
$1.2 million.
MR. SCHMIDT described this as an industry of minnows and whales.
Alaska has:
- Two top money-service businesses over $1 billion each,
- Eight money-service businesses over $100 million each, and
- At least one locally owned, smaller money-service business
that all pay the same fees.
MR. SCHMIDT said that the fees are inappropriately scaled for
each business. SB 84 allows for a volume-based assessment, so
the larger, higher-risk operations pay more than the locally
owned, smaller business.
1:49:58 PM
SENATOR MERRICK asked if he could disclose who the top two
operators are.
MR. SCHMIDT answered probably not, but those names would not
surprise anyone. They are widely known.
SENATOR DUNBAR brought up Venmo that is owned by PayPal. He
asked if they would pay a fee of some kind under SB 84's new
regulatory package and, if so, how would the state get them to
pay and collect the fee.
MR. SCHMIDT replied that all the data is self-reported through
the Nationwide Multistate Licensing System (NMLS), an automated
system used to regulate the financial services industry. Venmo
and PayPal would report their data, and the state would adopt a
formula based on fractions of a percent. They would pay through
MNLS and pay the state annually instead of a $3,000 license fee
which is an annual renewal.
SENATOR DUNBAR sought confirmation that the fraction of a
percent is so small that the consumer would not notice an
increase in transaction fees.
MR. SCHMIDT replied that the consumer would not notice an
increase in fees. He said he intends to discuss later how the
fee model would benefit consumers. The change in the proposed
fee model would have no impact on the consumer.
1:52:11 PM
MR. SCHMIDT reviewed slide 13:
Why do we need to change the Act?
• The current law has not kept up with the industry's
explosive growth and innovation.
Consumer protection is insufficient; cryptocurrency
is currently one of the top risks for consumer
fraud.
• Reduce wasting staff time, increase automation,
harmonize Alaska laws to encourage business, reduce
regulatory burden.
1:52:39 PM
MR. SCHMIDT advanced to slide 14. He said SB 84 would let the
Division of Banking and Securities (DBS) leverage the Nationwide
Multistate Licensing System (NMLS) registry for submitting
license applications, filing documents, reporting, and paying
fees. The bill removes the currency exchange license type and
adds currency exchange to the definition of money transmission,
so only one license is needed. He summarized slide 14:
What does this bill do?
• Reduces regulatory burden by streamlining initial
licensing and license renewal
• Protects Alaska consumers by conducting criminal
background checks through the Nationwide Multistate
Licensing System (NMLS)
1:53:05 PM
MR. SCHMIDT said he has a staff member who spends about 400
hours per year doing manual background checks because NMLS does
not allow the division to do automated background checks under
current statute.
• Ensures regulatory costs of supervision keep pace
with growth
• Broadens the definition of money transmission and
defines virtual currency activities
• Requires licensees to comply with federal laws,
including suspicious activity reporting
• Updates enforcement provisions by allowing a broader
spectrum of orders to be issued
• 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
MR. SCHMIDT continued paraphrasing his statement below:
The bill allows the implementation of a volume-based
annual assessment. Licensees will be required to
report money transmission volume, which will ensure
licensees are treated fairly and equitably based on
the level of volume and business conducted in the
state. He said it does not make sense for a guy who is
doing a couple of million dollars to pay the same
couple of grand as someone who is doing billions.
The bill includes virtual currency transactions and
other methods of moving or transferring monetary value
to better protect Alaskans. Six states have adopted
some version of the Model Law so far, and twelve have
introduced bills this legislative session.
1:54:03 PM
MR. SCHMIDT said thank you for the opportunity to testify on SB
84. He expressed his hope that he communicated how expansive
this field of the Alaska economy is, the importance of it, and
the silent revolution and payment systems happening out there.
He hoped the committee would view the bill favorably.
SENATOR DUNBAR asked which states adopted some version of the
Model Law.
MR. SCHMIDT replied that Arizona adopted it, essentially fully.
Connecticut, Georgia, South Dakota, Utah, and West Virginia
partially adopted it. He pointed out that one of the things he
likes about SB 84 is it has support from the industry and
support from consumer rights advocates. Politically and
geographically diverse states and urban and rural areas are
adopting it. The Model Law has been well received nationwide.
1:55:24 PM
SENATOR BJORKMAN recalled that the director had said there is an
unregulated financial transaction underbelly. He asked if there
are people who endanger the financial security of Alaskans and
whether SB 84 has the penalties and measures that punish bad
actors.
MR. SCHMIDT replied yes. Before January 1 of this year, the
division's approach was cryptocurrency was not money; therefore,
DBS did not regulate it. Cryptocurrency in Alaska was entirely
unregulated by the state. The exception was that DBS could
regulate anything to the extent that it was an investment, but
it could not regulate money transmissions. SB 84 was introduced
last year and made good progress, but it did not pass. The
division prioritized passing a regulations package that
clarified that DBS could regulate cryptocurrency under existing
statutes. The division applied a temporary fix under existing
statute, including:
- enforcement provisions that allow DBS to enter enforcements
orders, and
- revoke licenses to assess civil penalties.
MR. SCHMIDT said underbellies should be well regulated.
1:57:16 PM
CHAIR BJORKMAN invited Tracy Reno of DBS to present the
sectional analysis.
1:57:29 PM
TRACY RENO, Chief of Examinations, Division of Banking and
Securities, Department of Commerce, Community and Economic
Development (DCCED), Anchorage, Alaska stated the sectional
analysis is available on BASIS under the SB 84 "Documents" tab.
She presented a shortened version, and the following excerpts
show the points she highlighted:
Sectional Analysis
SB 84 version A
An Act Relating to Money Transmission; Virtual
Currency
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.
Section 1. Adds a section of uncodified law explaining
the purpose of the bill.
Section 2. Amends AS 06.05.101(a) requires a license
to engage in the business of money transmission (MT).
The amendment inserts a citation to the exemption
statute, AS 06.55.802, and clarifies that an
authorized delegate may not engage in MT if the
actions taken are outside the scope of the exemption.
Section 3. Repeals and reenacts AS 06.55.102 to
conform with the Model Law providing application
requirements for a MT license and allows the
Department of Commerce, Community, and Economic
Development (DCCED or the department) to change or
update the forms to be consistent with licensing
requirements in NMLS [also referred to as the
registry].
1:58:35 PM
Section 7. Amends AS 06.55 to add new sections to
Article 1A concerning virtual currency derived from
the Model Law. Virtual Currency (VC) 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. The bill will allow regulation
and supervision of persons that issue VC or that
provide services that allow others to transfer VC,
provide exchange services to the public, or offer to
take custody of VC for other persons.
AS 06.55.150 provides that VC business activity is
MT and unless exempt, the activity requires a MT
license.
AS 06.55.155 concerns required disclosures granting
the department discretion to require additional
disclosures and to regulate the time and form
required for disclosure.
AS 06.55.160 requires VC business with control over
VC to maintain an amount of each type of VC
sufficient to satisfy the aggregate entitlements of
the persons to each type of VC ensuring consumer
protection and reducing regulatory burden on the
licensee without increasing net worth requirements.
AS 06.55.165 allows a licensee engaged in VC
business activity to include VC in its tangible net
worth calculation and details record keeping
requirements specific to VC businesses.
AS 06.55.170 contains a list of exempted activities
and provides an exemption for business activity of
$5,000 or less.
1:59:10 PM
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 [for network
supervision], 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.
1:59:41 PM
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.
MS. RENO said this section change would help the division
regulate virtual currency companies it did not previously
regulate.
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 and 17. Amends AS 06.55.405(a) and (d) for
consistency with the Model Law. It details record
keeping obligations of licensees, increasing the time
period from 3 years to 5 years [to follow the Bank
Secrecy Act], and makes conforming language changes.
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.
2:00:58 PM
Section 24. Amends AS 06.55 to add new sections to
Article 4 from the Model Law
AS 06.55.408 requires licensees to submit an annual
audited financial statement to the department within
90 days after the end of the licensee's fiscal year.
AS 06.55.409(a) grants the department discretion to
enter into agreements with other state and federal
agencies to improve efficiencies and reduce
regulatory burden.
AS 06.55.409(b) grants the department broad
discretion to administer, interpret, and enforce the
chapter, to adopt rules and regulations, and to
recover its costs through imposition and collection
of fees.
AS 06.55.410 expands the department's ability to
participate in multistate supervisory processes such
as joint investigations.
AS 06.55.411 provides that in the event of an
inconsistency between state and federal law, the
federal law governs to the extent of the
inconsistency.
AS 06.55.412 contains the requirements and
procedures applicable when a licensee adds or
replaces a key individual allowing the department to
disapprove a change of key individual due to certain
criteria.
2:01:06 PM
Sections 27 and 28. Amends subsections (a) and (b) of
AS 06.55.502 concerning permissible investments for
consistency with the Model Law.
Subsection (a) does the following:
1. Incorporates ACH items in transit to licensees and
payees, cash in transit via armored car, cash in smart
safes, etc. ACH funds are in the banking system and
the Model Law defines cash in transit via ACH as a
permissible investment;
2. allows letters of credit as a permissible investment;
and
3. allows excess bonding as a permissible investment
type.
2:01:32 PM
Section 29. Amends AS 06.55 to add a new section to
Article 5.
AS 06.55.503 contains the requirements for letters of
credit to align with the Model Law
Amends AS 06.55 to add new sections to Article 5.
AS 06.55.505 proposes applicable forms of security (AS
06.55.104) and is a hybrid of the Model Law and the
existing Act. It requires a licensee to hold a security
bond or with the department's approval, a deposit, with a
maximum amount of $1,000,000 and be maintained for no
less than 5 years with the details to be determined by
the department in regulation or order.
AS 06.55.506 provides a significant expansion of net
worth requirements from $25,000 to a new net worth based
on a tiered level of total assets held, requiring a
licensee to demonstrate net worth at application. It also
allows the department to exempt applicants or licensees
from net worth requirements.
Section 30. Amends AS 06.55.601 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.
2:02:11 PM
Section 37. Amends AS 06.55.605 regarding civil
penalties allowing the department to assess its costs
and expenses for investigation.
2:02:21 PM
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 43. Amends AS 06.55.802 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).
MS. RENO said that SB 84 gives payroll processors an exemption
at the request of industry.
2:03:06 PM
Section 46. Amends AS 06.55.810 by adding a new
subsection (d) that requires licensees and authorized
delegates include on a receipt or through disclosure
on 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.
2:03:27 PM
SENATOR BISHOP sought confirmation that payroll processors are
third parties that run payroll for a small mom-and-pop business.
MR. SCHMIDT clarified that payroll processors run payroll for
small and large businesses. The division found that except for
one multi-state licensed payroll processor, DBS never required
payroll processors to license their operations. There was
concern about imposing a $2,000 regulatory requirement on them.
The division decided that, given the past practice, DBS would
exempt them from this version of the legislation.
SENATOR BISHOP asked if there are many payroll processors in the
state.
MR. SCHMIDT replied he expects there are over 100.
2:05:01 PM
MS. RENO continued highlighting excerpts from the sectional
analysis:
Section 46. Amends AS 06.55.810 by adding a new
subsection (d) that requires licensees and authorized
delegates include on a receipt or through disclosure
on 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.
Section 48. Repeals and reenacts AS 06.55.830
regarding receipts for consistency with the Model Law.
Subsections (a) (b) include content and format
requirements for transaction receipts and define
receipt. Receipts are required to be in English and
any other language principally used by the licensee or
authorized delegate to negotiate a transaction.
Subsection (c) describes exceptions to the receipt
requirement including stored value. Subsection (d)
provides a definition of receipt.
Section 53. Amends AS 06.55.850 by adding a new
subsection (f) that states an annual renewal fee must
be based on a licensee's total volume of money
transmission in the state with the annual renewal fee
to be determined by the department by regulation or
order.
MS. RENO said the division is sensitive to small businesses but
acknowledges the risk of large, multi-state international
companies. So, the administration proposes tiers based on volume
to address annual renewal fees in this section.
2:05:56 PM
Sections 54 - 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
ensuring 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 to at least 25 percent of
ownership and amends the definition of stored value.
2:06:27 PM
Section 62. Amends AS 06.55.990 to renumber and add
definitions for terms introduced by the Model Law
including the following terms:
1. Accredited state
2. Acting in concert
3. Average daily money transmission liability
4. Bank Secrecy Act
5. Closed loop stored value
6. Control of virtual currency
7. Dollar equivalent
8. Eligible rating
9. Eligible rating service
10. Federally insured depository financial
institution
11. In this state
12. Individual
13. Key individual
14. Passive investor
15. Payroll processing services
16. Registry
17. Tangible net worth
18. Virtual currency
2:06:41 PM
Section 63. Amends AS 06.55.995 to refer to the Act or
Chapter as the Alaska Uniform Money Transmission
Modernization Act instead of the Alaska Uniform Money
Services Act.
2:06:53 PM
Section 64. Amends AS 12.62.400(b) to read that an
applicant under AS 06.55 may submit fingerprints to
the registry.
2:07:04 PM
Section 65. 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.
2:07:30 PM
Section 66 68. are transitional provisions amending
uncodified law to avoid interference with existing
contracts, to allow a transitional period for holders
of existing money services licenses and for payroll
processors, to allow adoption of transitional
regulations by DCCED, and to instruct the revisor of
statutes to amend certain headings.
2:07:36 PM
Section 69. provides for an immediate effective date
for sec. 68, which would allow DCCED to begin the
regulation promulgation process.
Section 70 provides for an effective date of January
1, 2024.
2:07:55 PM
SENATOR BISHOP remarked that the administration is proposing
many statutory changes and repeals. He sought confirmation that
the goal of SB 84 is to weed out bad actors and protect
Alaskans.
MR. SCHMIDT replied that this is one of the goals.
SENATOR BISHOP drew attention to Section 64, which states, "...
an applicant under AS 06.55 may submit fingerprints to the
registry." He asked why the proposed change does not read
"shall" rather than "may" since one of the bill's objectives is
to weed out bad actors.
2:08:27 PM
MS. RENO replied that the bill uses "may" rather than "shall" to
give DBS the flexibility of choosing a different licensing and
regulation system.
MR. SCHMIDT added that an applicant must submit their
fingerprints; one way an applicant may do it is through NMLS.
2:09:12 PM
SENATOR GRAY-JACKSON said she would like to meet offline to
understand SB 84 better.
MR. SCHMIDT replied that he is in Juneau all week.
2:09:45 PM
CHAIR BJORKMAN opened public testimony on SB 84; finding none,
he stated he would hold public testimony open.
CHAIR BJORKMAN held SB 84 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 83 ver A.PDF |
SL&C 3/6/2023 1:30:00 PM |
SB 83 |
| SB 83 Sectional Analysis 02.27.2023.pdf |
SL&C 3/6/2023 1:30:00 PM |
SB 83 |
| SB 83 Transmittal Letter 02.23.23.pdf |
SL&C 3/6/2023 1:30:00 PM |
SB 83 |
| SB 83 Hearing Request Memo 02.27.2023.pdf |
SL&C 3/6/2023 1:30:00 PM |
SB 83 |
| SB 83 Fiscal Note-DCCED-CBPL-02-17-23.pdf |
SL&C 3/6/2023 1:30:00 PM |
SB 83 |
| Statutes Repealed by SB 83.pdf |
SL&C 3/6/2023 1:30:00 PM |
SB 83 |
| SB 84 ver A.PDF |
SL&C 3/6/2023 1:30:00 PM SL&C 3/27/2023 1:30:00 PM |
SB 84 |
| SB 84 Sectional Analysis Ver A 02.24.2023.pdf |
SL&C 3/6/2023 1:30:00 PM SL&C 3/27/2023 1:30:00 PM |
SB 84 |
| SB 84 Transmittal Letter 02.27.23.pdf |
SL&C 3/6/2023 1:30:00 PM SL&C 3/27/2023 1:30:00 PM |
SB 84 |
| SB 84 Hearing Request Memo 02.27.2023.pdf |
SL&C 3/6/2023 1:30:00 PM SL&C 3/27/2023 1:30:00 PM |
SB 84 |
| SB 84 Fiscal Note-DCCED-DBS-02-16-23.pdf |
SL&C 3/6/2023 1:30:00 PM SL&C 3/27/2023 1:30:00 PM |
SB 84 |
| Statutes Repealed by SB 84.pdf |
SL&C 3/6/2023 1:30:00 PM SL&C 3/27/2023 1:30:00 PM |
SB 84 |
| SB 84 Presentation_DCCED-DBS 03.06.23.pdf |
SL&C 3/6/2023 1:30:00 PM SL&C 3/27/2023 1:30:00 PM |
SB 84 |
| SB 84 Supporting Documents-DCCED-DBS White Paper 03.03.23.pdf |
SL&C 3/6/2023 1:30:00 PM SL&C 3/27/2023 1:30:00 PM |
SB 84 |
| SB 83 Presentation_DCCED-CBPL 03.06.23.pdf |
SL&C 3/6/2023 1:30:00 PM |
SB 83 |
| SB 83 Supporting Documents-DCCED-CBPL White Paper 03.06.23.pdf |
SL&C 3/6/2023 1:30:00 PM |
SB 83 |
| SB 83 Supporting Documents-Letter of Support_Fresenius Medical Care.pdf |
SL&C 3/6/2023 1:30:00 PM |
SB 83 |