SENATE, No. 4288

STATE OF NEW JERSEY

221st LEGISLATURE

INTRODUCED MARCH 24, 2025

Sponsored by:

Senator RAJ MUKHERJI

District 32 (Hudson)

SYNOPSIS

Establishes "Virtual Currency Kiosk Consumer Protection Act."

CURRENT VERSION OF TEXT

As introduced.

An Act concerning the regulation of virtual currency kiosks and supplementing P.L.1998, c.14 (C.17:15C-1 et seq.).

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. This act shall be known and may be cited as the "Virtual Currency Kiosk Consumer Protection Act."

2. The Legislature finds and declares that:

a. Legislation is needed to standardize:

(1) notices and disclosures to consumers regarding the operation and use of virtual currency kiosks in the State; and

(2) the types of consumer protections that virtual currency kiosk operators shall perform.

b. Modernized safety and soundness requirements will ensure consumers' funds are protected in an environment that supports innovative and competitive business practices.

c. Any legislation providing consumer protections at a virtual currency kiosk is intended to work in tandem with any other legislation or law that regulates digital assets, money transmissions, or virtual currency.

3. As used in this act:

"Bank Secrecy Act" means the federal "Bank Secrecy Act" (31 U.S.C. s.5311 et seq.) and rules and regulations promulgated, and as amended and readopted from time to time, to effectuate the purposes of the "Bank Secrecy Act."

"Blockchain" means a distributed digital ledger or database which is chronological, consensus-based, decentralized, and mathematically verified.

"Blockchain analytics" means a software service that uses data from various virtual currencies and their applicable blockchains to provide a risk rating specific to digital wallet addresses from users of virtual currency kiosks.

"Commissioner" means the Commissioner of Banking and Insurance, or a designee.

"Department" means the Department of Banking and Insurance.

"Digital wallet" means hardware or software that enables customers to store and use virtual currency.

"Digital wallet address" means an alphanumeric identifier representing a destination on a blockchain for a virtual currency transfer that is associated with a digital wallet.

"Federal Deposit Insurance Corporation or Securities Investor Protection Corporation" means a bank, credit union, savings and loan association, trust company, savings association, savings bank, industrial bank, or industrial loan company organized under the laws of the United States or any state of the United States, if the bank, credit union, savings and loan association, trust company, savings association, savings bank, industrial bank, or industrial loan company has federally insured deposits.

"Fiat currency" means a medium of exchange authorized or adopted by the United States government as part of its currency and is not backed by a commodity.

"Individual" means a natural person.

"NMLS" means the Nationwide Multistate Licensing System and Registry developed by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators and owned and operated by the State Regulatory Registry, LLC, or any successor or affiliated entity, for the licensing and registration of persons in financial services industries.

"USA PATRIOT Act" means the "Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001," (Pub.L.107-56) and rules and regulations promulgated, and as amended and readopted from time to time, to effectuate the purposes of the "USA PATRIOT Act."

"Virtual currency" means any type of digital unit used as a medium of exchange or a form of digitally-stored value or that is incorporated into payment system technology. "Virtual currency" shall include digital units of exchange that (1) have a centralized repository or administrator; (2) are decentralized and have no centralized repository or administrator; or (3) may be created or obtained by computing or manufacturing effort. "Virtual currency" shall not include digital units that are used (1) solely within online gaming platforms with no market or application outside such gaming platforms, or (2) exclusively as part of a consumer affinity or rewards program, and can be applied solely as payment for purchases with the issuer or other designated merchants, but cannot be converted into or redeemed for fiat currency.

"Virtual currency kiosk" means an electronic terminal of the virtual currency kiosk operator that enables the owner or operator to facilitate the exchange of fiat currency for virtual currency or virtual currency for fiat currency or other virtual currency, including, but not limited to, (1) connecting directly to a separate virtual currency exchange that performs the actual virtual currency transmission, or (2) drawing upon the virtual currency in the possession of the owner or operator of the electronic terminal.

"Virtual currency kiosk operator" means a corporation, limited liability company, limited liability partnership, or foreign entity qualified to do business in New Jersey which operates a virtual currency kiosk within the State.

4. a. Except as otherwise provided in this section, all information or reports obtained by the department from a virtual currency kiosk operator, and all information contained in or related to an examination, investigation, operating report, or condition report prepared by, on behalf of, or for the use of the department, are confidential and are not subject to disclosure under P.L.1963, c.73 (C.47:1A-1 et seq.).

b. Information contained in the records of the department that is not confidential and may be available to the public on the department's website, upon receipt by the department of a written request, or in NMLS shall include:

(1) the name, business address, telephone number, and unique identifier of a virtual currency kiosk operator;

(2) the business address of a virtual currency kiosk operator's registered agent for service; and

(3) copies of any final orders of the department relating to any violation of this act or regulations effectuated for the purposes of implementing this act.

5. If anything in this act is inconsistent with federal law, including, but not limited to, the "Bank Secrecy Act" or the "USA PATRIOT Act," the applicable federal law shall govern to the extent of any inconsistency.

6. a. The commissioner may request evidence demonstrating compliance with this act, subsequent rule or regulation promulgated to effectuate the purposes of this act, or order issued under this act, as reasonably necessary or appropriate, to administer and enforce this act, and other applicable law, including the "Bank Secrecy Act" and the "USA PATRIOT Act."

b. A virtual currency kiosk operator shall provide the commissioner all records the commissioner reasonably requires to ensure compliance pursuant to subsection a. of this section.

7. As part of establishing a relationship with a customer, and prior to entering into an initial transaction for, on behalf of, or with the customer, each virtual currency kiosk operator shall disclose in clear, conspicuous, and legible writing in English, whether in accessible terms of service or elsewhere, all material risks associated with the products, services, and activities of the operator and with virtual currency generally, including disclosures substantially similar to the following:

a. virtual currency is not legal tender, is not backed by the government, and accounts and value balances are not subject to Federal Deposit Insurance Corporation or Securities Investor Protection Corporation protections;

b. legislative and regulatory changes or actions at the State, federal, or international level may adversely affect the use, transfer, exchange, and value of virtual currency;

c. transactions in virtual currency may be irreversible, and, accordingly, losses due to fraudulent or accidental transactions may not be recoverable;

d. some virtual currency transactions shall be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that the customer initiates the transaction;

e. the value of virtual currency may be derived from the continued willingness of market participants to exchange fiat currency for virtual currency, which may result in the potential for permanent and total loss of value of a particular virtual currency should the market for that virtual currency disappear;

f. there is no assurance that a person who accepts a virtual currency as payment today will continue to do so in the future;

g. the volatility and unpredictability of the price of virtual currency relative to fiat currency may result in significant loss over a short period of time;

h. the nature of virtual currency may lead to an increased risk of fraud or cyber attack;

i. the nature of virtual currency means that any technological difficulties experienced by the virtual currency kiosk operator may prevent the access or use of a customer's virtual currency; and

j. any bond or trust account maintained by the virtual currency kiosk operator for the benefit of its customers may not be sufficient to cover all losses incurred by customers.

8. When opening an account for a new customer, and prior to entering into an initial transaction for, on behalf of, or with the customer, each virtual currency kiosk operator shall disclose in clear, conspicuous, and legible writing in the English language, whether in accessible terms of service or elsewhere, all relevant terms and conditions associated with the products, services, and activities of the operator and virtual currency generally, including disclosures substantially similar to the following:

a. the customer's liability for unauthorized virtual currency transactions;

b. under what circumstances the virtual currency kiosk operator will, absent a court or government order, disclose information concerning the customer's account to third parties;

c. the customer's right to receive periodic account statements and valuations from the virtual currency kiosk operator;

d. the customer's right to receive a receipt, trade ticket, or other evidence of a transaction;

e. the customer's right to prior notice of a change in the virtual currency kiosk operator's rules or policies; and

f. any other disclosures as are customarily given in connection with the opening of customer accounts.

9. Prior to entering into a virtual currency transaction with a customer, each virtual currency kiosk operator shall ensure a warning is disclosed to a customer substantially similar to the following:

"Customer Notice. Please Read Carefully.

Did you receive a phone call from your bank, software provider, the police, or were you directed to make a payment for social security, utility bill, investment, warrants, or bail money at this kiosk? STOP

Is anyone on the phone pressuring you to make a payment of any kind? STOP

I understand that the purchase and sale of cryptocurrency is a final irreversible and non-refundable transaction.

I confirm I am sending funds to a wallet I own or directly have control over. I confirm that I am using funds gained from my own initiative to make my transaction."

10. Upon completion of any virtual currency kiosk transaction, each virtual currency kiosk operator shall provide to a customer a digital or physical receipt containing the following information:

a. the name and contact information of the virtual currency kiosk operator, including a telephone number established by the virtual currency kiosk operator to answer questions and register complaints;

b. the type, value, date, and precise time of the transaction in the local time zone;

c. the fee charged;

d. the exchange rate, if applicable;

e. a statement of the liability of the virtual currency kiosk operator for non-delivery or delayed delivery; and

f. a statement of the refund policy of the virtual currency kiosk operator.

11. a. All virtual currency kiosk operators shall use blockchain analytics software to assist in the prevention of sending purchased virtual currency from a virtual currency kiosk operator to a digital wallet known to be affiliated with fraudulent activity at the time of a transaction.

b. The department may request evidence from a virtual currency kiosk operator of current use of blockchain analytics.

12. a. All virtual currency kiosk operators performing business in the State shall provide live customer service through a toll-free number during, at a minimum, Monday through Friday between 8 a.m. EST and 10 p.m. EST.

b. The customer service toll free number shall be displayed on the virtual currency kiosk or the virtual currency kiosk screens.

13. All virtual currency kiosk operators shall take reasonable steps to detect and prevent fraud, including establishing and maintaining a written anti-fraud policy. The anti-fraud policy shall, at a minimum, include:

a. the identification and assessment of fraud related risk areas;

b. procedures and controls to protect against identified risks;

c. allocation of responsibility for monitoring risks; and

d. procedures for the periodic evaluation and revision of the anti-fraud procedures, controls, and monitoring mechanisms.

14. a. Each virtual currency kiosk operator shall maintain, implement, and enforce a written Enhanced Due Diligence ("EDD") policy. The policy shall be reviewed and approved by the board of directors or an equivalent governing body of the virtual currency kiosk operator.

b. The EDD Policy shall identify, at minimum, customers who are at risk of fraud based on age or mental capacity.

15. a. Each virtual currency kiosk operator is required to comply with the provisions of this act, any lawful order, rule, or regulation made or issued under the provisions of this act, and all applicable federal and State laws, rules, and regulations.

b. Each virtual currency kiosk shall maintain, implement, and enforce written compliance policies and procedures. The policies and procedures shall be reviewed and approved by the board of directors or an equivalent governing body of the virtual currency kiosk operator.

16. a. A virtual currency kiosk operator shall designate and employ a compliance officer and a consumer protection officer, each with the following requirements:

(1) the individual shall be qualified to coordinate and monitor compliance with this act and all other applicable federal and State laws, rules, and regulations;

(2) the individual shall be employed full-time by the virtual currency kiosk operator; and

(3) the designated compliance officer and designated consumer protection officer shall not be individuals who own more than 20 percent of the virtual currency kiosk operator by whom the individuals are employed.

b. Compliance responsibilities required under federal and State laws, rules, and regulations shall be completed by full-time employees of the virtual currency kiosk operator.

17. a. Each virtual currency kiosk operator shall submit a report of the location of each virtual currency kiosk located in the State within 45 days of the end of the calendar quarter. The commissioner shall formulate a system for virtual currency kiosk operators to submit the report on locations that is consistent with the requirements of subsection b. of this section.

b. The location report shall include, at a minimum, the following regarding the location where a virtual currency kiosk is located:

(1) company legal name;

(2) any fictitious or trade name;

(3) physical address;

(4) start date of operation of virtual currency kiosk at location; and

(5) end date of operate of virtual currency kiosk at location, if applicable.

18. a. A virtual currency kiosk operator who owns, operates, solicits, markets, advertises or facilitates virtual currency kiosks in this State shall be deemed to be engaged in money transmission and require licensure pursuant to P.L.1998, c.14 (C.17:15C-1 et seq.).

b. All unlicensed virtual currency kiosk operators shall apply for a money transmitter license within 60 days after the effective date of this act. A virtual currency kiosk operator shall be allowed to operate during the application review process of the department.

c. A virtual currency kiosk operator whose application is denied by the department shall cease operations until granted a money transmitter license.

19. The commissioner shall, pursuant to P.L.1968, c.410 (C.52:14B-1 et seq.), shall adopt rules and regulations necessary to effectuate the purposes of this act.

20. This act shall take effect on the first day of the 13th month next following enactment.

STATEMENT

This bill establishes the "Virtual Currency Kiosk Consumer Protection Act."

Under the bill, a virtual currency kiosk means, in part, an electronic terminal of the virtual currency kiosk operator that enables the owner or operator to facilitate the exchange of fiat currency for virtual currency or virtual currency for fiat currency or other virtual currency. The kiosk operator is to provide numerous disclosures to customers to ensure the customer is aware of the threats and possible outcomes as a result of using a virtual currency kiosk. This includes, among other items, disclosure that virtual currency is not legal tender; notice of the customer's liability for unauthorized virtual currency transactions; and the posting of a notice, at or near the kiosk, of a warning of potential scams that may lead a customer to use a kiosk.

A virtual currency kiosk operator is to employ a compliance officer and a consumer protection officer to ensure the kiosk operates as required and that consumers are receiving the required disclosures. The operator is to obtain a license from the New Jersey Department of Banking and Insurance as a money transmitter to operate the kiosk. Additionally, an operator is issue quarterly reports to the Department on the locations of its virtual currency kiosks.

New Jersey S 4288

Virtual Currency Kiosk Consumer Protection

2025 NE S 4288

New Jersey S 4288

Virtual Currency Kiosk Consumer Protection

2025 NE S 4288