New Jersey is taking its first steps toward regulating blockchain and cryptocurrencies, with legislation that many believe will encourage the creation of legitimate fintech and cryptocurrency businesses in the state.
The Senate Budget and Appropriations Committee approved legislation sponsored by Senator Nellie Pou (D-Passaic/Bergen) that would establish the “Digital Asset and Blockchain Technology Act.” This came on the heels of the passage in the State Assembly of a similar bill sponsored by Assemblywoman Yvonne Lopez (D-District 19) and her colleagues.
According to Guillermo C. Artiles, partner and chair of government affairs at the law firm McCarter & English (Newark), “This is a sign of strong progress for the digital currency community in New Jersey, and the state itself, as the legislation strikes a healthy balance between responsible regulation and innovation growth.
“Specifically, the bill does the opposite of what New York did with its BitLicense, that brought many great companies across the river to New Jersey,” Artiles said in a statement to NJTechWeekly.com. According to a recent CoinDesk opinion piece by Alex Adelman and Aubrey Strobel, “BitLicense holders and applicants have reported that the time allocation, legal fees and other costs drive the total cost of pursuing a BitLicense to more than $100,000, surpassing the means of most early stage startups.”
New Jersey’s law will protect consumers, but also encourage business. “We need to continue regulating these young, exciting companies, but not stifle their growth. They can leave us here in New Jersey as quickly as they left New York. ” Guillermo C. Artiles, partner and chair of government affairs at McCarter & English
New Jersey’s law will protect consumers, but also encourage business. “We need to continue regulating these young, exciting companies, but not stifle their growth. They can leave us here in New Jersey as quickly as they left New York. This bill tries to accomplish those two lofty goals,” Artiles said.
“Under current law, New Jersey has no authority to regulate the rapidly growing cryptocurrency industry,” said Pou. “Virtual currency is currency that is not controlled by a centralized banking authority, and it is imperative that we establish the appropriate measures to effectively regulate this industry, as more companies begin to shift towards offering cryptocurrency for purchase.
“With this bill, we will be able to manage who can purchase and sell digital assets, and protect our residents from purchasing falsified assets, as well.”
The Senate bill, S-3132, would regulate digital asset business activity under the Department of Banking and Insurance (DOBI). The bill would define “digital asset” as a representation of economic, proprietary or access rights that is stored electronically and is distributed digitally through a ledger or data structure. This would include digital consumer assets and virtual currency.
Under the bill, DOBI could issue a license to a person to participate in one or more of the following digital-asset business activities:
- receiving a digital asset for transmission or transmitting a digital asset;
- storing, holding or maintaining custody of a digital asset on behalf of others;
- buying and selling digital assets as a customer business;
- performing exchange services of digital assets as a customer business;
- issuing a digital asset; or
- borrowing or lending customer digital assets.
Furthermore, individuals would be prohibited from engaging in a digital asset business activity unless they are licensed, or have a pending license, issued by DOBI. Applications for licenses to participate in digital asset businesses must be submitted through the Nationwide Multistate Licensing System. Participating in a digital asset activity without a license would result in a penalty of $500 per day, from the first day DOBI issues a notice of failure to apply for a license until a license application is filed.
The bill was released from the committee by a vote of 12-0.