AN ACT Relating to virtual currency transaction kiosks; amending RCW 19.230.030, 19.230.370, and 19.230.010; adding new sections to chapter 19.230 RCW; prescribing penalties; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. RCW 19.230.030 and 2017 c 30 s 3 are each amended to read as follows:

(1) A person may not engage in the business of money transmission, or advertise, solicit, or hold itself out as providing money transmission, unless the person is:

(a) Licensed as a money transmitter under this chapter;

(b) An authorized delegate of a person licensed as a money transmitter under this chapter; or

(c) Excluded under RCW 19.230.020.

(2) A money transmitter license is not transferable or assignable.

Sec. 2. RCW 19.230.370 and 2017 c 30 s 21 are each amended to read as follows:

(1) Virtual currency licensees must provide to any person seeking to use the licensee's products or services the disclosures required by subsections (2) through (6) of this section.

(2) As applicable, virtual currency licensees must make the following disclosures:

(a) A schedule of all fees and charges the licensee may assess on a transaction, how the fees and charges will be calculated if not set in advance and disclosed, and the timing of the fees and charges.

(b) Whether the product or service provided is insured or guaranteed by an agency of the United States, such as the federal deposit insurance corporation or the securities investor protection corporation or by private insurance against theft or loss, including cybertheft or theft by other means.

(c) A notice that the transfer of virtual currency or digital units is irrevocable and any exception to the irrevocability of transfer.

(((d) A notice describing the licensee's liability for unauthorized, mistaken, or accidental transfers and, describing the user's responsibility for providing notice of such mistake to the licensee and of general error-resolution rights applicable to any transaction.))

(3) Separate and in addition to the disclosures required under subsections (2), (4), and (5) of this section, before entering into a virtual currency transaction for, on behalf of, or with a person, a virtual currency transaction kiosk operator must disclose all material risks generally associated with virtual currency. The disclosure must be displayed on the screen of the virtual currency transaction kiosk with the ability for a person to acknowledge the receipt of the disclosures. The disclosures must include at least the following information:

(5) Licensees must provide any additional disclosures the director may require as set forth in rule.

(((4)))(6) Disclosures required by this section must be((made)):

(a) Made separately from any other information provided by the licensee ((and));

(b) Made in a clear and conspicuous manner; and

(c) Legibly written in English.

NEW SECTION.  Sec. 3. A new section is added to chapter 19.230 RCW to read as follows:

(1) Each money transmitter licensee who owns, operates, solicits, markets, advertises, or facilitates virtual currency transaction kiosks in this state must maintain a detailed plan and accounting as to how the licensee must engage in winding down operations, and must provide such plan and accounting to the director upon request. Such plan and accounting must contain:

(a) A record showing that the licensee's minimum net worth and reserves are sufficient to prevent losses to consumers and purchasers and to repay any outstanding obligations or accounts payable;

(b) Procedures to ensure that, after winding down operations, the licensee does not retain any consumer funds, purchaser funds, or other client funds;

(c) A plan demonstrating that consumers have access to consumer funds in the licensee's custody;

(d) Detailed instructions informing consumers how they may withdraw consumer funds upon request; and

(e) Any other records and information requested by the director regarding winding down operations.

(2) No licensee who owns, operates, solicits, markets, advertises, or facilitates virtual currency transaction kiosks in this state may terminate such licensee's business unless the following conditions are met:

(a) The licensee provides written notice to the director of the proposed termination at least 30 days prior to the effective date of such proposed termination;

(b) The licensee notifies, in writing, all consumers, purchasers, and users of the licensee of the proposed termination, and the date of such proposed termination, at least 30 days prior to the date of such proposed termination;

(c) The licensee provides all consumers, purchasers, and users of the licensee with detailed final accountings of the accounts of such consumers, purchasers, and users;

(d) The licensee remits all money held in the custody of the licensee on behalf of consumers, purchasers, and users to such consumers, purchasers, and users; and

(e) The licensee files a request to surrender such licensee's license, and the director accepts such request.

(3) Each owner or operator of a virtual currency transaction kiosk must:

(a) Gather and maintain full know-your-customer information in accordance with federal reporting requirements;

(b) Maintain restrictions that prevent more than one customer of such owner or operator from using the same virtual currency wallet;

(c) Be able to prevent designated virtual currency wallets from being used at any virtual currency transaction kiosk owned or operated by such owner or operator;

(d) Use an established third party that specializes in performing blockchain analyses to preemptively perform such analyses to identify and prevent high-risk or sanctioned virtual currency wallets from being used by customers at virtual currency transaction kiosks owned or operated by such owner or operator;

(e) Define, in such owner or operator's policies and procedures, a risk-based method of monitoring customers of such owner or operator on a posttransaction basis;

(f) Offer, during the hours of operation of the virtual currency transaction kiosks owned or operated by such owner or operator, live customer support by telephone from a telephone number prominently displayed at or on such virtual currency transaction kiosks;

(g) Designate and employ a chief compliance officer who shall:

(i) Be qualified to coordinate and monitor a compliance program to ensure compliance with this section and all other applicable federal and state laws and rules;

(ii) Be employed on a full-time basis by such owner or operator; and

(iii) Not own more than 20 percent of the virtual currency transaction kiosk or operator that employs such officer; and

(h) Use full-time employees to fulfill the owner or operator's compliance responsibilities under federal and state laws and rules.

(4)(a) Subject to (b) and (c) of this subsection (4), each operator of a virtual currency transaction kiosk must demonstrate and maintain tangible net worth calculated at $10,000 for every $1,000,000 of total company-wide money transmission and payment instrument dollar volume over the previous 12 months.

(b) The minimum tangible net worth is $10,000 and the maximum required tangible net worth is $3,000,000.

(c) The minimum tangible net worth if the company provides digital financial asset storage is $100,000.

NEW SECTION.  Sec. 4. A new section is added to chapter 19.230 RCW to read as follows:

The owner or operator of a virtual currency transaction kiosk shall, upon the completion of any virtual currency transaction, provide to the customer a receipt containing the following information:

(1) The name of, and contact information for, the owner or operator including, but not limited to, the owner or operator's business address and a customer service telephone number established by the owner or operator to answer questions and register complaints;

(2) The customer's name;

(3) The type, value, date, and precise time of such virtual currency transaction, and each virtual currency address;

(4) The amount of such virtual currency expressed in United States currency;

(5) The full unique transaction hash or identification number;

(6) The public virtual currency address of the customer;

(7) The unique identifier;

(8) Any fee charged including, but not limited to, any fee charged directly or indirectly by the owner, operator, or a third party involved in such virtual currency transaction; and

(9) The exchange rate, if applicable.

Sec. 5. RCW 19.230.010 and 2017 c 30 s 1 are each amended to read as follows:

The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Affiliate" means any person who directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another person.

(2) "Annual assessment due date" means the date specified in rule by the director upon which the annual assessment is due.

(3) "Applicant" means a person that files an application for a license under this chapter, including the applicant's proposed responsible individual and executive officers, and persons in control of the applicant.

(4) "Authorized delegate" means a person a licensee designates to provide money services on behalf of the licensee. A person that is exempt from licensing under this chapter cannot have an authorized delegate.

(5) "Board director" means a natural person who is a member of the applicant's or licensee's board of directors if the applicant is a corporation or limited liability company, or a partner if the applicant or licensee is a partnership.

(6) "Closed loop prepaid access" means prepaid access that can only be redeemed for a limited universe of goods, intangibles, services, or other items provided by the issuer of the prepaid access, its affiliates, or others involved in transactions functionally related to the issuer or its affiliates.

(7) "Control" means:

(a) Ownership of, or the power to vote, directly or indirectly, at least twenty-five percent of a class of voting securities or voting interests of a licensee or applicant, or person in control of a licensee or applicant;

(b) Power to elect a majority of executive officers, managers, directors, trustees, or other persons exercising managerial authority of a licensee or applicant, or person in control of a licensee or applicant; or

(c) Power to exercise directly or indirectly, a controlling influence over the management or policies of a licensee or applicant, or person in control of a licensee or applicant.

(8) "Currency exchange" means exchanging the money of one government for money of another government, or holding oneself out as able to exchange the money of one government for money of another government. The following persons are not considered currency exchangers:

(a) Affiliated businesses that engage in currency exchange for a business purpose other than currency exchange;

(b) A person who provides currency exchange services for a person acting primarily for a business, commercial, agricultural, or investment purpose when the currency exchange is incidental to the transaction;

(c) A person who deals in coins or a person who deals in money whose value is primarily determined because it is rare, old, or collectible; and

(d) A person who in the regular course of business chooses to accept from a customer the currency of a country other than the United States in order to complete the sale of a good or service other than currency exchange, that may include cash back to the customer, and does not otherwise trade in currencies or transmit money for compensation or gain.

(9) "Currency exchanger" means a person that is engaged in currency exchange.

(10) "Director" means the director of financial institutions.

(11) "Executive officer" means a president, chairperson of the executive committee, chief financial officer, responsible individual, or other individual who performs similar functions.

(12) "Financial institution" means any person doing business under the laws of any state or the United States relating to commercial banks, bank holding companies, savings banks, savings and loan associations, trust companies, or credit unions.

(13) "Licensee" means a person licensed under this chapter. "Licensee" also means any person, whether located within or outside of this state, who fails to obtain a license required by this chapter.

(14) "Material litigation" means litigation that according to generally accepted accounting principles is significant to an applicant's or a licensee's financial health and would be required to be disclosed in the applicant's or licensee's annual audited financial statements, report to shareholders, or similar records.

(15) "Mobile location" means a vehicle or movable facility where money services are provided.

(16) "Money" means a medium of exchange that is authorized or adopted by the United States or a foreign government or other recognized medium of exchange. "Money" includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more governments.

(17) "Money services" means money transmission or currency exchange.

(18) "Money transmission" means receiving money or its equivalent value (equivalent value includes virtual currency) to transmit, deliver, or instruct to be delivered to another location, inside or outside the United States, by any means including but not limited to by wire, facsimile, or electronic transfer. "Money transmission" includes selling, issuing, or acting as an intermediary for open loop prepaid access and payment instruments, but not closed loop prepaid access. "Money transmission" includes all virtual currency transaction kiosk transactions. "Money transmission" does not include: The provision solely of connection services to the internet, telecommunications services, or network access; units of value that are issued in affinity or rewards programs that cannot be redeemed for either money or virtual currencies; and units of value that are used solely within online gaming platforms that have no market or application outside of the gaming platforms.

(19) "Money transmitter" means a person that is engaged in money transmission.

(20) "Open loop prepaid access" means prepaid access redeemable at multiple, unaffiliated merchants or service providers, or automated teller machines.

(21) "Outstanding money transmission" means the value of all money transmissions reported to the licensee for which the money transmitter has received money or its equivalent value from the customer for transmission, but has not yet completed the money transmission by delivering the money or monetary value to the person designated by the customer.

(22) "Payment instrument" means a check, draft, money order, or traveler's check for the transmission or payment of money or its equivalent value, whether or not negotiable. "Payment instrument" does not include a credit card voucher, letter of credit, or instrument that is redeemable by the issuer in goods or services.

(23) "Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture; government, governmental subdivision, agency, or instrumentality; public corporation; or any other legal or commercial entity.

(24) "Prepaid access" means access to money that has been paid in advance and can be retrieved or transferred through an electronic device or vehicle, such as a card, code, electronic serial number, mobile identification number, or personal identification number.

(25) "Record" means information that is inscribed on a tangible medium, or that is stored in an electronic or other medium, and is retrievable in perceivable form.

(26) "Responsible individual" means an individual who is employed by a licensee and has principal managerial authority over the provision of money services by the licensee in this state.

(27) "State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

(28) "Tangible net worth" means the physical worth of a licensee, calculated by taking a licensee's assets and subtracting its liabilities and its intangible assets, such as copyrights, patents, intellectual property, and goodwill.

(29) "Unsafe or unsound practice" means a practice or conduct by a licensee or an authorized delegate which creates the likelihood of material loss, insolvency, or dissipation of the licensee's assets, or otherwise materially prejudices the financial condition of the licensee or the interests of its customers.

(30) "Virtual currency" means a digital representation of value used as a medium of exchange, a unit of account, or a store of value, but does not have legal tender status as recognized by the United States government. "Virtual currency" does not include the software or protocols governing the transfer of the digital representation of value or other uses of virtual distributed ledger systems to verify ownership or authenticity in a digital capacity when the virtual currency is not used as a medium of exchange.

--- END ---