Digital Asset Businesses to face stricter regulations with new Act
The bill's definitions of digital assets and digital consumer assets clearly include all sellers of NFTs, regardless of whether the NFTs have financial utility or carry financial risk.
New Jersey is making progress in implementing new regulations for cryptocurrency and blockchain technology, as legislation mandating the licensing of digital assets business operations with the Bureau of Securities has been advanced by the state Senate Budget Committee.
The bill would mandate that individuals obtain a license to engage in digital asset business activity with or on behalf of a New Jersey resident. Those who have been convicted of fraud, embezzlement, forgery, or theft within the past five years would not be eligible for a license.
Get ready for a licensed digital asset business era: New Act passed.
The bill regulates NFT business activity, including defining "NFT" as a representation of economic, proprietary, or access rights stored in a machine-readable format and recorded in a distributed digital ledger.
It requires that a person must be licensed by the Department of Banking and Insurance to engage in NFT business activity and hold themselves out as being able to do so.
Violations of the bill's provisions can result in a penalty of $500 per day.
The bill establishes a licensing application process through the Nationwide Multistate Licensing System, requiring a non-refundable fee and certain information relevant to the applicant's proposed NFT business activity.
It prohibits the department from issuing a license to an individual who has been convicted of embezzlement, forgery, fraud, or theft within the last five years.
The department is required to grant or deny any license application within 120 days of receipt.
Licensees are required to submit a renewal report, through the Nationwide Multistate Licensing System, that contains an update of all information required at initial licensing and a description of certain information described in the bill.
The bill allows the department to audit any NFT business licensee, and stipulates that licensees must maintain and enforce confidential, written compliance policies.
The department may suspend or revoke an NFT business license upon certain findings that are provided in the bill.
The bill requires the terms and conditions of a NFT business involving a consumer's account to be disclosed at the time the consumer contracts for a NFT business service.
On the roll-call, two members, Cunningham, Sandra B. and Steinhardt, Douglas J. did not vote, while the remaining 11 voted in favor.
This bill is distinct from the Digital Assets and Blockchain Regulation Act proposed by Senator Robert Singer (R-Ocean), who has previously stated his desire for New Jersey's digital asset and blockchain laws to be favorable to the industry
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