PRINTER'S NO. 921

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL No. 883

Session of 2025

INTRODUCED BY WAXMAN, PIELLI, MALAGARI, GIRAL, SANCHEZ, NEILSON, HANBIDGE, OTTEN AND FRIEL, MARCH 11, 2025

AN ACT

Providing for collateral requirements for virtual currency lenders and for segregation of funds; and imposing penalties.

The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows:

Section 1. Short title.

This act shall be known and may be cited as the Digital Asset Regulation Act.

Section 2. Definitions.

The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise:

"Cash equivalent." Securities, including treasury bills, commercial paper, marketable securities, money market funds, short-term government bonds, a certificate of deposit or a banker's acceptance.

"Client." A third party, other than the virtual currency lender or a virtual currency, that uses a virtual currency lender for the lending of virtual currency.

"Collateral." Money or an item of value pledged as security for repayment in the event of a default.

"Department." The Department of Banking and Securities of the Commonwealth.

"Digital asset." A representation of economic, proprietary or access rights that is stored in a machine-readable format and has a transaction history that is recorded in a distributed, digital ledger or digital data structure in which consensus is achieved through a mathematically verifiable process. The term includes digital consumer assets and virtual currency.

"Digital consumer asset." A digital asset that is primarily for consumptive, personal or household purposes, including access to goods, services or content. The term includes any other digital asset that is not virtual currency.

"Lending." Engaging in the business of receiving monetary value for transmission to a location inside or outside of the United States by any means, including wire, facsimile or electronic transfer.

"Money." As defined in section 1 of the act of September 2, 1965 (P.L.490, No.249), referred to as the Money Transmission Business Licensing Law.

"Virtual currency." A digital asset that is used as a medium of exchange, unit of account or store of value and is not recognized as legal tender by the Federal Government.

"Virtual currency lender." A person that is regularly engaged in the lending of virtual currency or digital assets used for financial purposes.

Section 3. Applicability.

This act shall apply to any virtual currency lender, institution or any other person that lends virtual currency to a third party in this Commonwealth.

Section 4. Notice of intent to conduct business.

No later than 90 days before conducting business in this Commonwealth, a virtual currency lender shall send a letter to the department notifying the department that the virtual currency lender intends to conduct virtual currency lending in this Commonwealth. The virtual currency lender shall include all of the following information in the letter:

(1) The virtual currency lender's name.

(2) Parent companies and subsidiaries of the virtual currency lender.

(3) A statement explaining the virtual currency lender's intention on lending virtual currency in this Commonwealth and include any Internet websites or branding that the virtual currency lender wishes to offer.

(4) A statement that the virtual currency lender is in compliance with applicable Federal and State laws.

(5) Any other information deemed relevant and as specified by the department.

Section 5. Collateral requirements for virtual currency lenders.

(a) Collateral required.--A virtual currency lender shall require collateral, in connection with the services provided as a virtual currency lender, to be held in a trust for all digital consumer assets.

(b) Collateral amount.--A virtual currency lender shall secure a minimum of 100% of the value of the virtual currency exchanged in money or cash equivalents to serve as collateral under subsection (a). The money or cash equivalent may be increased or decreased depending on the market price of the virtual currency.

(c) Use of collateral.--In the event of a default or other circumstance that results in a client losing access to any account with the virtual currency lender, the client's virtual currency or the client's money, through fraud or other malfeasance or through a technical failure, a virtual currency lender shall use collateral to reimburse a client.

(d) Agreement required.--A virtual currency lender shall require an agreement to be signed by both a client and the virtual currency lender regarding the collateral required under this section.

(e) Penalties.--

(1) Failure by a virtual currency lender to establish policies in accordance with the requirements under this section shall constitute a violation of this section, and the virtual currency lender shall be subject to the following fines imposed by the department:

(i) $5,000 for the first violation.

(ii) $10,000 for a second violation.

(iii) $20,000 for a third and each subsequent violation.

(2) After a third violation of this section, the department may conduct a review of the virtual currency lender and may prohibit the virtual currency lender from operating within this Commonwealth.

Section 6. Segregation of funds.

(a) Segregation required.--A virtual currency lender shall, in connection with the services provided as a virtual currency lender, manage a consumer's money and digital consumer assets separately from the virtual currency lender's own money and digital assets in accordance with the regulations promulgated under section 7.

(b) Penalties.--

(i) $5,000 for the first violation.

(ii) $10,000 for a second violation.

(iii) $20,000 for a third and each subsequent violation.

(2) After a third violation of this section, the department may conduct a review of the virtual currency lender and may prohibit the virtual currency lender from operating within this Commonwealth.

Section 7. Regulations.

The department shall promulgate regulations necessary to implement and enforce this act.

Section 8. Effective date.

This act shall take effect in 60 days.

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