Trenton – In an effort to better monitor and regulate digital asset business activity in New Jersey, the Senate Budget and Appropriations Committee approved legislation sponsored by Senator Nellie Pou and Senator Andrew Zwicker that would establish the “Digital Asset and Blockchain Technology Act.”
Under the bill, a person would not be allowed to engage in a digital asset business activity, or hold themselves out as being able to engage in a digital asset business activity, with or on behalf of a resident unless the person is licensed in this State by the Bureau of Securities in the Division of Consumer Affairs in the Department of Law and Public Safety.
“Virtual currency is not controlled by a centralized banking authority, and under current law, our state has no authority to regulate this rapidly-growing industry,” said Senator Pou (D-Passaic/Bergen), Chair of the Commerce Committee. “It is imperative that we establish appropriate measures to better regulate digital asset businesses and blockchain industries as more companies shift towards these platforms to grow their business. This bill will put in place necessary measures to oversee and manage who can purchase and sell digital assets, and protect residents from purchasing falsified assets as well.”
The bill would define “digital asset” to mean a representation of economic, proprietary, or access rights that is stored in a machine-readable format, 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. Examples of digital assets include digital consumer assets, and virtual currency.
“As companies develop new and exciting ways to utilize blockchain technology, it is imperative to balance a business environment that fosters innovation with regulations to protect consumers from fraud,” said Senator Zwicker (D-Middlesex/Mercer/Somerset/Hunterdon). “By requiring licensing, the state will be able to develop a 21st-century economy that provides new and efficient services for residents in our state while protecting New Jerseyans from potential harm.”
Under the bill, the Bureau of Securities in the Division of Consumer Affairs 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 of customer digital assets.
Applications for licensure to participate in digital asset business must be submitted through the Nationwide Multistate Licensing system, or in another manner prescribed by the Bureau. Participating in a digital asset activity without a license would result in a penalty of $500 per day, from the first day the Bureau issues a notice of failure to apply for a license until a license application is filed.
The bill, S-1756, was released from committee by a vote of 10-0.