AB 1326, as amended, Dababneh. Virtual currency.
Existing law, the Money Transmission Act, prohibits a person from engaging in the business of money transmission in this state, or advertising, soliciting, or holding itself out as providing money transmission in this state, unless the person is licensed by the Commission of Business Oversight or exempt from licensure under the act. Existing law requires applicants for licensure to pay the commissioner a specified nonrefundable fee and to complete an application form requiring certain information. As security, existing law requires each licensee to deposit and maintain on deposit with the Treasurer cash in an amount not less than, or securities having a market value not less than, such amount as the commissioner may find and order from time to time as necessary to secure the faithful performance of the obligations of the licensee with respect to money transmission in this state. Existing law requires a licensee at all times to own eligible securities, as defined, in a specified aggregate amount not less than the amount of all of its outstanding money received for transmission, as specified.
This bill would prohibit a person from engagingbegin delete in this stateend delete in any virtual currency business, as defined,begin insert in this stateend insert unless the person is licensed by the Commissioner of Business Oversight or is exempt from the licensure requirement, as provided. The bill would require applicants for licensure, including an applicant for licensure and approval to acquire control of a licensee, to pay the commissioner a specified nonrefundable application fee and complete an application form required to include, among other things, information about the applicant, prior virtual
currency services provided by the applicant, a sample form of receipt for transactions involving the business of virtual currency, and specified financial statements. The bill would make these licenses subject to annual renewal and would require a renewal fee paid to the commissioner in a specified amount. The bill would require licensees to annually pay the commissioner a specified amount for each licensee branch office. The bill would require applicants and licensees to pay the commissioner a specified hourly amount for the commissioner’s examination costs, as provided. The bill would also require the commissioner to levy an assessment each fiscal year, on a pro rata basis, on licensees in an amount sufficient to meet the commissioner’s expenses in administering these provisions and to provide a reasonable reserve for contingencies.
This bill would require each licensee to maintain at all times such capital as the commissioner determines, subject to specified factors, is sufficient to ensure the safety and soundness of the licensee, its ongoing operations, and maintain consumer protection. The bill would require each licensee to maintain a bond or trust account in United States dollars for the benefit of its customers in the form and amount as specified by the commissioner.
This bill would authorize the commissioner to examine the business and any branch office of any licensee to ascertain whether the business is being conducted in a lawful manner and all virtual currency is properly accounted for. The bill would require a licensee to file a report with the commissioner within a specified period of time after the licensee knows about the occurrence of certain events relating to the virtual currency business and those persons connected to that business, and to also maintain records as required by the commissioner for a specified period of time.
With regard to enforcement, among other things, this bill would, if it appears that a licensee is violating or failing to comply with these provisions or conducting business in an unsafe or injurious manner, authorize the commissioner to order the licensee to comply or discontinue those practices. The bill would also authorize the commissioner to issue an order suspending or revoking a license, or placing a licensee in receivership, if after notice and an opportunity for a hearing, the commissioner makes a specified finding. The bill would provide that every order, decision, or other official act of the commissioner is subject to review.
This bill would authorize the commissioner to impose a civil penalty for a violation of these provisions. The bill would also make it a felony for a person to intentionally make a false statement, misrepresentation, or false certification in a record filed or required to be maintained or to intentionally make a false entry or omit a material entry in such a record. The bill would also make it a felony for a person to knowingly engage in an activity for which a license is required without being licensed or exempt from licensure, as provided. By creating these new crimes, the bill would impose a state-mandated local program.
This bill would prohibit a licensee from appointing or continuing any person as an agent unless the licensee and the person have made a specified written contract, including a requirement that the agent operate in full compliance with these provisions. The bill would prohibit a licensee from appointing any person as an agent unless it has conducted a review of the proposed agent’s fitness to act as an agent, as provided. Subject to specified notice, if any agent of a licensee conducts any virtual currency business on behalf of the licensee, where the commissioner has suspended or revoked the license of the licensee or the commissioner has issued a specified order, the bill would make the agent jointly and severally liable.
Within a specified period after the fiscal year, the bill would require a licensee to file with the commissioner a specified audit report. Within a specified period after the end of each calendar quarter, the bill would require a licensee to file with the commissioner a report containing financial statements verified by 2 of the licensee’s principal officers.
This bill would require a licensee to provide a specified consumer protection disclosure about virtual currency to its consumers.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.
The people of the State of California do enact as follows:
Division 11 (commencing with Section 26000)
2is added to the Financial Code, to read:
3
5
For purposes of this division, the following definitions
9shall apply:
10(a) “Commissioner” means the Commissioner of Business
11Oversight.
12(b) “Virtual currency” means any type of digital unit that is used
13as a medium of exchange or a form of digitally storedbegin delete value or that
14is incorporated into
payment system technology. Virtual currency
15shall be broadly construed to include digital units of exchange that
16(1) have a centralized repository or administrator, (2) are
17decentralized and have no centralized repository or administrator,
18or (3) may be created or obtained by computing or manufacturing
19effort.end deletebegin delete shall not be construed toend deletebegin insert does notend insert
20 include digital units that are used solely within online gaming
21platforms with no market or application outside of those gaming
22platforms, nor shall virtual currency be construed to include digital
23units that are used exclusively as part
of a customer affinity or
24rewards program, and can be redeemed for goods, services, or for
25purchases with the issuer or other designated merchants, but cannot
26be converted into, or redeemed for, fiat currency.
27(c) “Virtual currency business” means the conduct of either of
28the following types of activities involving a California resident:
29(1) begin deleteStoring, holding, or maintaining end deletebegin insertMaintaining full end insertcustody
30or control of virtual currency on behalf of others.
31(2) Providing conversion or exchange services of fiat currency
32into virtual currency or the conversion or
exchange of virtual
33
currency into fiat currency or other value, or the conversion or
34exchange of one form of virtual currency into another form of
35virtual currency.
P5 1(d) “Fiat currency” means government-issued currency that is
2designated as legal tender through government decree, regulation,
3or law, that customarily refers to paper money and coin and is
4circulated, used, and accepted as money.
For the purposes of carrying out the provisions of this
6division, the commissioner may adopt regulations pursuant to the
7Administrative Procedure Act (Chapter 3.5 (commencing with
8Section 11340) of Part 1 of Division 3 of Title 2 of the Government
9Code).
10
A person shall not engagebegin delete in this stateend delete in any virtual
14currency businessbegin insert in this stateend insert unless the person is licensed or
15exempt from licensure under this division.
The following are exempt from the licensing
17requirement described in Section 26002:
18(a) The United States or a department, agency, or instrumentality
19thereof, including any federal reserve bank and any federal home
20loan bank.
21(b) Money transmission by the United States Postal Service or
22by a contractor on behalf of the United States Postal Service.
23(c) A state, city, county, city and county, or any other
24governmental agency or governmental subdivision of a state.
25(d) A commercial bank or industrial bank, the
deposits of which
26are insured by the Federal Deposit Insurance Corporation or its
27successor, or any foreign (other nation) bank that is licensed under
28Chapter 20 (commencing with Section 1750) of Division 1.1 or
29that is authorized under federal law to maintain a federal agency
30or federal branch office in this state; a trust company licensed
31pursuant to Section 1042 or a national association authorized under
32federal law to engage in a trust banking business; an association
33or federal association, as defined in Section 5102, the deposits of
34which are insured by the Federal Deposit Insurance Corporation
35or its successor; and any federally or state chartered credit union,
36with an office in this state, the member accounts of which are
37insured or guaranteed as provided in Section 14858.
38(e) An entity licensed as a money transmitter under the Money
39
Transmission Act described in Division 1.2 (commencing with
40Section 2000).
P6 1(f) A merchant or consumer that utilizes virtual currency solely
2for the purchase or sale of goods or services.
3(g) (1) A transaction in which the recipient of virtual currency
4is an agent of the payee pursuant to a preexisting written contract
5and delivery of the virtual currency to the agent satisfies the payor’s
6obligation to the payee.
7(2) For purposes of this subdivision, the following shall apply:
8(A) “Agent” has the same meaning as that term is defined in
9Section 2295 of the Civil Code.
10(B) “Payee” means the provider of goods or services, who is
11owed payment of money or other monetary value from the payor
12for the goods or services.
13(C) “Payor” means the recipient of goods or services, who owes
14payment of money or monetary value to the payee for the goods
15or services.
16(h) A person or entity developing, distributing, or servicing a
17virtual currency network software.
18(i) A person or entity contributing software, connectivity, or
19computing power to a virtual currency network.
20(j) A person or entity providing data storage or cyber security
21services for a licensed virtual currency business.
(a) An applicant for licensure under this division shall
23pay to the commissioner a nonrefundable application fee of five
24thousand dollars ($5,000).
25(b) An applicant for a license shall do so in a form and in a
26medium prescribed by the commissioner by order or regulation.
27The application shall state or contain all of the following:
28(1) The legal name and residential business address of the
29applicant and any fictitious or trade name used by the applicant in
30conducting its business.
31(2) A list of any criminal convictions of the applicant and any
32material litigation
in which the applicant has been involved in the
3310-year period next preceding the submission of the application.
34(3) A description of any virtual currency services previously
35provided by the applicant and the virtual currency services that
36the applicant seeks to provide in this state.
37(4) A list of the applicant’s proposed agents and the locations
38in this state where the applicant and its agents propose to engage
39in the business of virtual currency.
P7 1(5) A list of other states in which the applicant is licensed to
2engage in the business of virtual currency and any license
3revocations, suspensions, or other disciplinary action taken against
4the
applicant in another state.
5(6) Information concerning any bankruptcy or receivership
6proceedings affecting the licensee.
7(7) A sample form of receipt for transactions that involve money
8received for the business of virtual currency.
9(8) The name and address of any bank through which the
10applicant’s
business will be conducted.
11(9) A description of the source of money and credit to be used
12by the applicant to provide virtual currency services.
13(10) The date of the applicant’s incorporation or formation and
14the state or country of incorporation or formation.
15(11) A certificate of good standing from the state or country in
16which the applicant is incorporated or formed.
17(12) A description of the structure or organization of the
18applicant, including any parent or subsidiary of the applicant, and
19whether any parent or subsidiary is publicly traded.
20(13) The legal name, any fictitious or
trade name, all business
21and residential addresses, and the employment, in the 10-year
22period next preceding the submission of the application, of each
23executive officer, manager, director, or person that has control, of
24the applicant, and the educational background for each person.
25(14) A list of any criminal convictions and material litigation
26in which any executive officer, manager, director, or person in
27control, of the applicant has been involved in the 10-year period
28next preceding the submission of the application.
29(15) A copy of the applicant’s audited financial statements for
30the most recent fiscal year and, if available, for the two-year period
31next preceding the submission of the application.
32(16) A copy of the
applicant’s unconsolidated financial
33statements for the current fiscal year, whether audited or not, and,
34if available, for the two-year period next preceding the submission
35of the application.
36(17) If the applicant is publicly traded, a copy of the most recent
37report filed with the United States Securities and Exchange
38Commission under Section 13 of the federal Securities Exchange
39Act of 1934 (15 U.S.C. Sec. 78m).
40(18) If the applicant is a wholly owned subsidiary of:
P8 1(A) A corporation publicly traded in the United States, a copy
2of audited financial statements for the parent corporation for the
3most recent fiscal year or a copy of the parent corporation’s most
4recent report filed under Section 13 of the federal Securities
5
Exchange Act of 1934 (15 U.S.C. Sec. 78m) and, if available, for
6the two-year period next preceding the submission of the
7application.
8(B) A corporation publicly traded outside the United States, a
9copy of similar documentation filed with the regulator of the parent
10corporation’s domicile outside the United States.
11(19) The applicant’s plan for engaging in the business of virtual
12currency, including without limitation three years of pro forma
13financial statements.
14(20) Any other information the commissioner requires with
15
respect to the applicant.
16(c) The commissioner may waive any of the information
17required under subdivision (b) or permit an applicant to submit
18other information instead of the required information.
19(d) The nonrefundable application fee for filing an application
20for licensure and approval to acquire control of a licensee is three
21thousand five hundred dollars ($3,500). An applicant for licensure
22and approval shall comply with subdivision (b).
23(e) A licensee, including a licensee described in subdivision
24(b), shall pay annually on or before July 1, a license renewal fee
25of two thousand five hundred dollars ($2,500).
26(f) A licensee shall pay
annually on or before July 1, one
27hundred twenty-five dollars ($125) for each licensee branch office
28in this state.
29(g) Whenever the commissioner examines a licensee, the
30licensee shall pay, within 10 days after receipt of a statement from
31the commissioner, a fee of seventy-five dollars ($75) per hour for
32each examiner engaged in the examination plus, if it is necessary
33for any examiner engaged in the examination to travel outside this
34state, the travel expenses of the examiner.
35(h) Whenever the commissioner examines an applicant, the
36applicant shall pay, within 10 days after receipt of a statement
37from the commissioner, a fee of seventy-five dollars ($75) per
38hour for each examiner engaged in the examination plus, if it is
39necessary for any examiner engaged in the examination to
travel
40outside this state, the travel expenses of the examiner.
P9 1(i) Each fee for filing an application shall be paid at the time
2the application is filed with the commissioner. No fee for filing
3an application shall be refundable, regardless of whether the
4application is approved, denied, or withdrawn.
(a) Each licensee shall maintain at all times such capital
6as the commissioner determines is sufficient to ensure the safety
7and soundness of the licensee and maintain consumer protection
8and its ongoing operations. In determining the minimum amount
9of capital that must be maintained by a licensee, the commissioner
10shall consider a variety of factors, including, but not limited to:
11(1) The composition of the licensee’s total assets, including the
12position, size, liquidity, risk exposure, and price volatility of each
13type of asset.
14(2) The composition of the licensee’s total liabilities, including
15the size
and repayment timing of each type of liability.
16(3) The actual and expected volume of the licensee’s virtual
17currency business activity.
18(4) Whether the licensee is already licensed or regulated by a
19state or federal entity, and whether the licensee is in good standing
20in such capacity.
21(5) The amount of leverage employed by the licensee.
22(6) The liquidity position of the licensee.
23(7) The financial protection that the licensee provides for its
24customers through its trust account or bond.
25(b) Each licensee shall maintain a bond or trust account
in
26United States dollars for the benefit of its customers in the form
27and amount specified by the commissioner.
28
(a) A licensee shall not appoint or continue any
32person as agent, unless the licensee and the person have made a
33written contract. A written contract between a licensee and an
34agent shall require the agent to operate in full compliance with
35this division.
36(b) The written contract shall contain each of the following
37provisions:
38(1) That the licensee appoints the person as its agent with
39authority to conduct any virtual currency business on behalf of the
40licensee.
P10 1(2) That the agent shall make and keep accounts,
2correspondence,
memoranda, papers, books, and other records as
3the commissioner by regulation or order requires, and shall preserve
4the records for the time specified by the commissioner pursuant
5to a regulation or order.
6(3) That all virtual currency, less fees due agents provided for
7and expressly set forth in the written agreement, received by the
8agent on behalf of the licensee shall be trust funds owned by and
9belonging to the licensee.
10(4) That the agent is subject to joint and several liability pursuant
11to Section 26008.8.
12(5) Any other provisions that the commissioner may by
13regulation or order find to be necessary to carry out the provisions
14and purposes of this division.
15(c) An agent shall not provide any virtual currency business
16outside the scope of activity permissible under the written contract
17between the agent and the licensee.
18(d) An agent shall not use a subagent to conduct any virtual
19currency business on behalf of a licensee.
20(e) Each licensee shall exercise reasonable supervision over its
21agents to ensure compliance with applicable laws, rules, and
22regulations with regard to the virtual currency business.
23(f) Licensees conducting any virtual currency business subject
24to this division shall maintain full charge, control, and supervision
25of any authorized agent and shall be responsible for ensuring any
26activity undertaken by an authorized agent on behalf of the licensee
27is
in compliance with this division.
(a) A licensee shall not appoint any person as an
29agent unless it has conducted a review of the proposed agent’s
30fitness to act as an agent and has determined that the proposed
31agent and any persons who control the proposed agent are of good
32character and sound financial standing.
33(b) A licensee shall maintain records of this review for each
34agent while the agent is providing any virtual currency business
35on behalf of the licensee, and for three years after the relationship
36with the agent has terminated.
A person, including an agent, shall not provide any
38virtual currency business on behalf of a person not licensed or not
39exempt from licensure under this division. A person that engages
40in that activity provides virtual currency business to the same extent
P11 1as if the person was a licensee and shall be jointly and severally
2liable with the unlicensed or nonexempt person.
(a) No agent of a licensee who has actual notice that
4the commissioner has suspended or revoked the license of the
5licensee or that the commissioner has issued an order taking
6possession of the property and business of the licensee shall
7conduct any virtual currency business on behalf of the licensee.
8(b) If any agent of a licensee, after first having actual notice
9that the commissioner has suspended or revoked the license of the
10licensee or that the commissioner has issued an order taking
11possession of the property and business of the licensee, conducts
12any virtual currency business on behalf of the licensee, the agent
13shall be jointly and severally liable with the
licensee.
14
(a) The commissioner may at any time and from time
18to time examine the business and any branch office, within or
19outside this state, of any licensee in order to ascertain whether that
20business is being conducted in a lawful manner and whether all
21virtual currency held or exchanged is properly accounted for.
22(b) The directors, officers, and employees of any licensee being
23examined by the commissioner shall exhibit to the commissioner,
24on request, any or all of the licensee’s accounts, books,
25correspondence, memoranda, papers, and other records and shall
26otherwise facilitate the examination so far as it may be in their
27power to do
so.
The commissioner may consult and cooperate with
29other state or federal regulators in enforcing and administering
30this division. They may jointly pursue examinations and take other
31official action that they are otherwise empowered to take.
A licensee shall file a report with the commissioner
33within five business days after the licensee has reason to know of
34the occurrence any of the following events:
35(a) The filing of a petition by or against the licensee under the
36United States Bankruptcy Code (11 U.S.C. Secs. 101-110, incl.)
37for bankruptcy or reorganization.
38(b) The filing of a petition by or against the licensee for
39receivership, the commencement of any other judicial or
P12 1administrative proceeding for its dissolution or reorganization, or
2the making of a general assignment for the benefit of its creditors.
3(c) The commencement of a proceeding to revoke or suspend
4
its virtual currency business license in a state or country in which
5the licensee engages in such business or is licensed to engage in
6such business.
7(d) The cancellation or other impairment of the licensee’s bond
8or trust account as required by subdivision (b) of Section 26008.
9(e) A charge or conviction of the licensee or of an executive
10officer, manager, director, or person in control of the licensee for
11a felony.
A licensee shall maintain any records as required by
13the commissioner for determining its compliance with this division
14for at least three years.
15
Any licensee may surrender its license by filing with
19the commissioner the license and a report with any information as
20the commissioner requires. The voluntary surrender of the license
21shall become effective at the time and upon the conditions as the
22commissioner specifies by order.
(a) The commissioner may prepare written decisions,
24opinion letters, and other formal written guidance to be issued to
25persons seeking clarification regarding the requirements of this
26division.
27(b) The commissioner shall make public on the commissioner’s
28Internet Web site all written decisions, opinion letters, and other
29formal written guidance issued to persons seeking clarification
30regarding the requirements of this division. The commissioner
31may, at his or her discretion or upon request by an applicant or
32licensee, redact proprietary or other confidential information
33regarding an applicant or licensee from any decision, letter, or
34other written guidance
issued in connection with an applicant or
35
licensee.
The commissioner may offer informal guidance to any
37prospective applicant for a license under this division, regarding
38the conditions of licensure that may be applied to that person. The
39commissioner shall inform any applicant that requests that guidance
40of the licensing requirements that will be required of that applicant,
P13 1based on the information provided by the applicant concerning its
2plan to conduct business under this division, and the factors used
3to make that determination.
At any time, if the commissioner deems it necessary
5for the general welfare of the public, he or she may exercise any
6power set forth in this division with respect to a virtual currency
7business, regardless of whether an application for a license has
8been filed with the commissioner, a license has been issued, or, if
9issued, the license has been surrendered, suspended, or revoked.
10(a) If it appears to the commissioner that a licensee is violating
11or failing to comply with this division, the commissioner may
12direct the licensee to comply with the law by an order issued under
13the commissioner’s official seal, or if it appears to the
14commissioner that any licensee is conducting its business in
an
15unsafe or injurious manner, the commissioner may in like manner
16direct it to discontinue the unsafe or injurious practices. The order
17shall require the licensee to show cause before the commissioner,
18at a time and place to be fixed by the commissioner, as to why the
19order should not be observed.
20(b) If, upon any hearing held pursuant to subdivision (a), the
21commissioner finds that the licensee is violating or failing to
22comply with any law of this state or is conducting its business in
23an unsafe or injurious manner, the commissioner may make a final
24order directing it to comply with the law or to discontinue the
25unsafe or injurious practices. A licensee shall comply with the
26final order unless, within 10 days after the issuance of the order,
27its enforcement is restrained in a proceeding brought by the
28licensee.
(a) The commissioner may issue an order suspending
30or revoking a license, or taking possession of and placing a licensee
31in receivership, if after notice and an opportunity for hearing, the
32commissioner finds any of the following:
33(1) The licensee is violating this division or a regulation adopted
34or an order issued under this division, or a condition of approval
35issued under this division.
36(2) The licensee does not cooperate with an examination or
37investigation by the commissioner.
38(3) The licensee engages in fraud, intentional misrepresentation,
39or
gross negligence.
P14 1(4) The competence, experience, character, or general fitness
2of the licensee, or any director, officer, employee, or person in
3control of a licensee, indicates that it is not in the public interest
4to permit the person to provide virtual currency services.
5(5) The licensee engages in an unsafe or unsound practice.
6(6) The licensee is insolvent, suspends payment of its
7obligations, or makes a general assignment for the benefit of its
8creditors.
9(7) The licensee has applied for an adjudication of bankruptcy,
10reorganization, arrangement, or other relief under any bankruptcy,
11reorganization, insolvency, or moratorium law, or any person has
12applied
for any such relief under that law against the licensee and
13the licensee has by any affirmative act approved of or consented
14to the action or the relief has been granted.
15(8) Any fact or condition exists that, if it had existed at the time
16when the licensee applied for its license, would have been grounds
17for denying the application.
18(b) In determining whether a licensee is engaging in an unsafe
19or unsound practice, the commissioner may consider the size and
20condition of the licensee’s provision of virtual currency services,
21the magnitude of the loss, the gravity of the violation of this
22division, and the previous conduct of the person involved.
(a) Every order, decision, or other official act of the
24commissioner is subject to review in accordance with law.
25(b) Whenever the commissioner has taken possession of the
26property and business of any licensee, the licensee, within 10 days
27after that taking, if it deems itself aggrieved thereby, may apply
28to the superior court in the county in which the head office of the
29licensee is located to enjoin further proceedings. The court, after
30citing the commissioner to show cause why further proceedings
31should not be enjoined and after a hearing and a determination of
32the facts upon the merits, may dismiss the application or enjoin
33the commissioner from further proceedings
and direct the
34commissioner to surrender the property and business to the
35licensee.
(a) If the commissioner finds that any of the factors
37set forth in Section 26017 is true with respect to any licensee and
38that it is necessary for the protection of the public interest, the
39commissioner may issue an order immediately suspending or
40revoking the licensee’s license.
P15 1(b) Within 30 days after the license is suspended or revoked
2pursuant to subdivision (a), the licensee may file with the
3commissioner an application for a hearing on the suspension or
4revocation.
5(c) If the commissioner fails to commence a hearing within 15
6business days after the application is filed with the commissioner
7pursuant
to subdivision (b) or within a longer period of time agreed
8to by the licensee, the suspension or revocation shall be deemed
9rescinded.
10(d) Within 30 days after the hearing, the commissioner shall
11affirm, modify, or rescind the suspension or revocation. Otherwise,
12the suspension or revocation shall be deemed rescinded.
13(e) The right of the licensee to petition for judicial review of
14the suspension or revocation shall not be affected by the failure of
15the licensee to apply to the commissioner for a hearing on the
16suspension or revocation pursuant to subdivision (b).
The commissioner may assess a civil penalty against
18a person that violates this division or a regulation adopted or an
19order issued under this division in an amount not to exceed one
20thousand dollars ($1,000) for each violation or, in the case of a
21continuing violation, one thousand dollars ($1,000) for each day
22or part thereof during which the violation continues, plus this
23state’s costs and expenses for the investigation and prosecution of
24the matter, including reasonable attorney’s fees.
(a) A person that intentionally makes a false statement,
26misrepresentation, or false certification in a record filed or required
27to be maintained under this division or that intentionally makes a
28false entry or omits a material entry in such a record is guilty of a
29felony.
30(b) A person that knowingly engages in an activity for which a
31license is required under this division without being licensed or
32exempt from licensure under this division is guilty of a felony.
33(c) Nothing in this division limits the power of the state to punish
34any person for any act that constitutes a crime under any
statute.
The enforcement provisions of this division are in
36addition to any other enforcement powers that the commissioner
37may have under law.
(a) The commissioner may by order or regulation grant
39exemptions from this section in cases where the commissioner
P16 1finds that the requirements of this section are not necessary or may
2be duplicative.
3(b) A licensee shall, within 90 days after the end of each fiscal
4year, or within any extended time as the commissioner may
5prescribe, file with the commissioner an audit report for the fiscal
6year that shall comply with all of the following provisions:
7(1) The audit report shall contain audited financial statements
8of the licensee for or as of the end of the fiscal year prepared in
9accordance with
United States generally accepted accounting
10principles and any other information as the commissioner may
11require.
12(2) The audit report shall be based upon an audit of the licensee
13conducted in accordance with United States generally accepted
14auditing standards and any other requirements as the commissioner
15may prescribe.
16(3) The audit report shall be prepared by an independent certified
17public accountant or independent public accountant who is not
18unsatisfactory to the commissioner.
19(4) The audit report shall include or be accompanied by a
20certificate of opinion of the independent certified public accountant
21or independent public accountant that is satisfactory in form and
22content to the commissioner. If the certificate or
opinion is
23qualified, the commissioner may order the licensee to take any
24action as the commissioner may find necessary to enable the
25independent or certified public accountant or independent public
26accountant to remove the qualification.
27(c) Each licensee shall, not more than 45 days after the end of
28each calendar year quarter, or within a longer period as the
29commissioner may by regulation or order specify, file with the
30commissioner a report containing all of the following:
31(1) Financial statements, including balance sheet, income
32statement, statement of changes in shareholders’ equity, and
33statement of cashflows, for, or as of the end of, that calendar year
34quarter, verified by two of the licensee’s principal officers. The
35verification shall state that each of the officers
making the
36verification has a personal knowledge of the matters in the report
37and that each of them believes that each statement in the report is
38true.
39(2) Other information as the commissioner may by regulation
40or order require.
In addition to the fees provided in Section 26006, the
2commissioner shall levy an assessment each fiscal year, on a pro
3rata basis, on those licensees that at any time during the preceding
4calendar year engaged in this state in the virtual currency business
5in an amount that is, in his or her judgment, sufficient to meet the
6commissioner’s expenses in administering the provisions of this
7division and to provide a reasonable reserve for contingencies.
8
A licensee shall disclose to consumers the following
12disclosure in a form and manner prescribed by the commissioner:
13“Once submitted to the network, a virtual currency transaction
14will be unconfirmed for a period of time (usually less than one
15hour, but up to one day or more) pending sufficient confirmation
16of the transaction by the network. A transaction is not complete
17while it is in a pending state. Virtual currency associated with
18transactions that are in a pending state will be designated
19accordingly, and will not be included in your account balance or
20be available to conduct transactions.
21The risk of loss in trading or holding virtual currency can be
22substantial.
You should therefore carefully consider whether trading
23or holding virtual currency is suitable for you in light of your
24financial condition. In considering whether to trade or hold virtual
25currency, you should be aware that the price or value of virtual
26currency can change rapidly, decrease, and potentially even fall
27to zero.
28(Insert company name) is licensed by the Department of Business
29Oversight to do business in California. If you have complaints
30with respect to any aspect of the virtual currency business
31conducted by (company name), you may contact the California
32Department of Business Oversight at its toll-free telephone number,
331-800-622-0620, by email at consumer.services@dbo.ca.gov, or
34by mail at the Department of Business Oversight, Consumer
35Services, 1515 K Street, Suite 200, Sacramento, CA 95814.”
No reimbursement is required by this act pursuant to
37Section 6 of Article XIII B of the California Constitution because
38the only costs that may be incurred by a local agency or school
39district will be incurred because this act creates a new crime or
40infraction, eliminates a crime or infraction, or changes the penalty
P18 1for a crime or infraction, within the meaning of Section 17556 of
2the Government Code, or changes the definition of a crime within
3the meaning of Section 6 of Article XIII B of the California
4Constitution.
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