AN ACT relating to digital assets.

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AN ACT relating to digital assets. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 369.130 is amended to read as follows: 3
As used in KRS 369.130 to 369.139: 4
(1) "Blockchain" means data that is: 5
(a) Shared across a peer -to-peer network to create a ledger of verified 6
transactions or information among linked network participants usi ng 7
cryptography to: 8
1. Maintain the integrity of the ledger; or 9
2. Execute other functions; and 10
(b) Distributed in a concurrent, automated update to network participants on the 11
state of the ledger and any other functions; 12
(2) "Blockchain network" means a technical infrastructure that provides ledger and 13
smart contract services to applications; 14
(3) "Blockchain protocol" means any executable software: 15
(a) Deployed to a blockchain, including an additional standardized set of rules 16
that: 17
1. Uses an existing blockchain as a base; 18
2. Facilitates the transfer of data and electronic records; 19
3. Allows that data to be broadcast to nodes; and 20
4. Is governed by a set of predefined rules which execute autonomously 21
without human intervention and can be altered by a predetermined 22
mechanism; and 23
(b) Composed of a source code that is publicly available and accessible, including 24
a smart contract or any network of smart contracts; 25
(4) "Cryptocurrency" has the same meaning as in KRS 139.516; 26
(5) "Cryptography" means the practice of coding information to ensure only the person 27
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that a message was written for can read and process that information; 1
(6) "Digital asset" means: 2
(a) Virtual currency; 3
(b) Cryptocurrency; and 4
(c) Natively electronic assets, including stablecoins, fungible tokens, and 5
nonfungible tokens; 6
that confer economic, proprietary, or access rights or powers; 7
(7) "Hardware wallet" means a physical device that: 8
(a) Stores private keys offline; 9
(b) Provides a way to sign transactions and interact with the blockchain; and 10
(c) Allows the owner to retain independent control over the digital asset 11
contained therein; 12
(8) "Natively electronic asset" means a purely digital asset that exists only on the 13
blockchain network; 14
(9) "Node" means a computer which: 15
(a) Uses software to: 16
1. Communicate with other devices or participants on a blockchain to 17
maintain consensus and integrity of that blockchain; 18
2. Create and validate transaction blocks; or 19
3. Contain and update a copy of a blockchain; and 20
(b) Does not exercise discretion over transactions initiated by the end users of the 21
blockchain protocol; 22
(10) "Nonfungible token" means a digital asset on a blockchain that: 23
(a) Has unique identification codes and metadata that are recorded; 24
(b) Has been tokenized and cannot be replicated; 25
(c) Is used to certify ownership and authenticity; and 26
(d) Represents digital or physical items including artwork or real estate; 27
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(11) "Private key" means the access to manage digital assets at a specific internet 1
address and may be used for encryption and digital signature; 2
(12) "Self-hosted wallet" means a digital interface that can: 3
(a) Secure and transfer digital assets; and 4
(b) Allow its owner to retain independent control of the secured digital assets and 5
private keys; 6
(13) "Smart contract" has the same meaning as in KRS 42.747; 7
(14) "Stablecoin" means a digital asset that is: 8
(a) Issued by a corporation; 9
(b) Backed by cash or high-quality liquid assets; and 10
(c) Redeemable on demand by the holder at par for a fixed monet ary value in 11
equivalent United States dollars; 12
(15) "Staking" means using a node to commit digital assets to a blockchain network to: 13
(a) Validate transactions; 14
(b) Propose and attest to blocks contained in the blockchain; and 15
(c) Secure the network; 16
(16) (a) "Staking as a service" means the provision of technical staking services by a 17
service provider on behalf of an individual or business that owns the digital 18
assets being staked. 19
(b) "Staking as a service" includes the operation of nodes and the associat ed 20
infrastructure necessary to facilitate participation in blockchain protocols' 21
consensus mechanisms; 22
(17) "Third-party wallet" means a wallet that: 23
(a) Is hosted and controlled by a party other than the owner; and[ which] 24
(b) Contains the private keys for the owner of digital assets; and 25
(18) "Wallet" means a digital interface or a physical device that[which] holds digital 26
assets or private keys, and may include a: 27
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(a) Hardware wallet; 1
(b) Self-hosted wallet; and 2
(c) Third-party wallet. 3