AN ACT relating to the regulation of digital asset business.

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AN ACT relating to the regulation of digital asset business. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
SECTION 1. SUBTITLE 13 OF KRS CHAPTER 286 IS ESTABLISHED, 3
AND A NEW SECTION THEREOF IS CREATED TO READ AS FOLLOWS: 4
As used in this subtitle, unless the context requires otherwise: 5
(1) "Affiliate" means a person that, either direc tly or indirectly through one (1) or 6
more intermediaries, controls, is controlled by, or is under common control with 7
another person; 8
(2) "Agent": 9
(a) Means a person authorized by written agreement and designated by a 10
virtual currency kiosk operator to engage in virtual currency kiosk business 11
in this state on behalf of the operator; 12
(b) Includes, as the context requires, a person that an applicant propo ses to 13
engage in virtual currency kiosk business in this state as an agent on behalf 14
of the applicant; and 15
(c) Does not include an employee of a virtual currency kiosk operator or 16
applicant; 17
(3) "Control" means one (1) or more of the following: 18
(a) The pow er to direct the management, operations, or policies of a person, 19
which power may be: 20
1. Direct or indirect; and 21
2. Obtained: 22
a. Through legal or beneficial ownership of voting power in the 23
person; or 24
b. Under a contract, arrangement, or understanding; 25
(b) The power to vote, directly or indirectly, at least twenty-five percent (25%) of 26
the outstanding voting shares or voting interests of a person or a person in 27
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control of the person; 1
(c) The power to elect or appoint a majority of a person's executive offic ers, 2
managers, directors, trustees, or other persons exercising managerial 3
authority of a person or a person in control of the person; 4
(d) The power to exercise, directly or indirectly, a controlling influence over the 5
management or policies of a person or a person in control of the person; 6
and 7
(e) Any other set of facts or circumstances, as determined by the commissioner 8
through promulgation of an administrative regulation in accordance with 9
KRS Chapter 13A, that constitutes control; 10
(4) "Director" means any of the following: 11
(a) A member of a corporation's board of directors; 12
(b) A manager of a limited liability company; 13
(c) A partner of a partnership; or 14
(d) A member of any other entity's governing body; 15
(5) "Executive officer" means: 16
(a) A president, chairperson of the executive committee, responsible individual, 17
or chief financial officer; or 18
(b) Any other natural person who performs similar functions for an applicant, 19
licensee, or agent; 20
(6) "Fiat currency" means a government-issued currency that is: 21
(a) Backed by the government's authority; and 22
(b) Not backed by a physical commodity; 23
(7) "Key shareholder" means any person, or group of persons acting in concert, that 24
is the owner of twenty percent (20%) or more of any voting class of the stock of 25
an applicant, licensee, or agent; 26
(8) "Legal tender": 27
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(a) Means a medium of exchange or unit of value, including the coin or paper 1
money of the United States, that is: 2
1. Issued by: 3
a. The United States; or 4
b. Another government; or 5
2. Recognized by the Commonwealth of Kentucky, as permitted under 6
Article 1, Section 10, of the Constitution of the United States; and 7
(b) Does not include any medium of exchange or unit of value authorized, 8
recognized, or adopted by a foreign government if the medium of exchange 9
or unit of value was a virtual currency before the gover nment authorized, 10
recognized, or adopted the medium of exchange or unit of value; 11
(9) "License" means a license issued by the commissioner under this subtitle; 12
(10) "Licensee" means a person issued a license; 13
(11) "Material litigation": 14
(a) Means litigation that according to generally accepted accounting principles: 15
1. Is significant to the financial health of an applicant, licensee, or 16
agent; and 17
2. Would be required to be disclosed in the applicant's, licensee's, or 18
agent's annual audited financial statements, report to shareholders, or 19
similar records; and 20
(b) Includes any adjudication against an applicant, licensee, or agent by a 21
federal or state administrative or regulatory agency relating to a violation of 22
the Bank Secrecy Act, 31 U.S.C. secs. 5311 to 5332 and 31 C.F.R. pt. 103, 23
regardless of whether liability or fault has been admitted; 24
(12) "Responsible individual": 25
(a) Means a natural person who: 26
1. Is employed by a virtual currency kiosk operator; and 27
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2. Has principal managerial authority over the v irtual currency kiosk 1
operator's virtual currency kiosk business in this state; and 2
(b) Includes, as the context requires, a natural person who: 3
1. Is employed by an applicant; and 4
2. The applicant proposes to have principal managerial authority over its 5
virtual currency kiosk business in this state; 6
(13) "Virtual currency": 7
(a) Except as provided in paragraph (b) of this subsection, means a digital 8
representation of value that is: 9
1. Used as a: 10
a. Medium of exchange; 11
b. Unit of account; or 12
c. Store of value; and 13
2. Not legal tender, whether or not denominated in legal tender; and 14
(b) Does not include: 15
1. A transaction in which a merchant grants, as part of an affinity or 16
rewards program, value that cannot be taken from or exchanged with 17
a merchant for legal tender, bank credit, or virtual currency; or 18
2. A digital representation of value: 19
a. Issued by or on behalf of a publisher; and 20
b. Used solely within an online game, game platform, or family of 21
games: 22
i. Sold by the same publisher; or 23
ii. Offered on the same game platform; 24
(14) (a) "Virtual currency kiosk" means a physical electronic terminal acting as a 25
mechanical agent of a virtual currency kiosk operator to enable the 26
operator to facilitate the exchange of one (1) or more of the following: 27
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1. Fiat currency for virtual currency; 1
2. Virtual currency for fiat currency; and 2
3. Virtual currency for other virtual currency. 3
(b) As used in this subsection, "facilitate" includes: 4
1. Connecting directly to a separate virtual currency exchanger that 5
performs the exchange; and 6
2. Drawing upon the virtual currency or fiat currency in the possession 7
or control of th e virtual currency kiosk operator to perform the 8
exchange; 9
(15) "Virtual currency kiosk charges" means all of the following: 10
(a) Fees and expenses charged to a virtual currency kiosk user; and 11
(b) The difference between the market price of virtual currency and the price of 12
the virtual currency charged to a virtual currency kiosk user; 13
(16) "Virtual currency kiosk operator" or "operator" means a person, including a 14
licensee, that engages in virtual currency kiosk business in this state; 15
(17) "Virtual currency kiosk transaction" means any transaction: 16
(a) Conducted or performed by electronic means via a virtual currency kiosk 17
located in this state; or 18
(b) Made at a virtual currency kiosk located in this state to purchase, sell, 19
transfer, or otherwise exchange virtual currency; and 20
(18) "Virtual currency kiosk user" or "user" means a person, other than a virtual 21
currency kiosk operator, that initiates, authorizes, completes, or engages in a 22
virtual currency kiosk transaction. 23
SECTION 2. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 24
IS CREATED TO READ AS FOLLOWS: 25
This subtitle shall not apply to: 26
(1) The United States or any department, agency, or instrumentality thereof; 27
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(2) A state or any agency, department, or political subdivision of a state; 1
(3) A state -chartered or federally chartered bank, savings bank, savings and loan 2
association, trust company, or credit union; 3
(4) A bank holding company, as defined in 12 U.S.C. sec. 1841, as amended; 4
(5) A subsidiary, affiliate, or service corporation of a person referenced in subsection 5
(3) or (4) of this section; 6
(6) An office of an international banking corporation; 7
(7) A branch of a foreign bank; 8
(8) A bank service company, as defined in 12 U.S.C. sec. 1861, as amended; 9
(9) A corporation organized under the Edge Act, 12 U.S.C. sec. 611, et seq., as 10
amended; or 11
(10) A service provider that: 12
(a) Pursuant to a written agreement, acts on behalf of an entity referenced in 13
subsection (3), (4), (5), (6), (7), (8), or (9) of this section; and 14
(b) Allows the state or federal regulators with regulatory jurisdiction over the 15
entity on whose behalf the service provider is acting to examine and inspect 16
the service provider's applicable records, books, and transactions. 17
SECTION 3. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 18
IS CREATED TO READ AS FOLLOWS: 19
(1) (a) The commissioner: 20
1. Shall enforce the provisions of this subtitle; and 21
2. Subject to paragraph (b) of this subsection, may promulgate 22
administrative regulations in accordance with KRS Chapter 13A that 23
the commissioner determines are necessary to effectuate, or aid in the 24
effectuation of, this subtitle. 25
(b) The discretion to promulgate administrative regulations under paragraph 26
(a)2. of this subsection shall be supplemental to any other provisions of this 27
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subtitle relating to the promulgation of administrative regulations. 1
(2) (a) The commissioner may, by order, require licensees to file with the 2
commissioner any: 3
1. Special report that the commissioner determines is necessary for the 4
proper supervision of virtual currency kiosk business under this 5
subtitle; and 6
2. Regular report that is: 7
a. Developed as a uniform report by state regulators; and 8
b. Submitted in accordance with Section 5 of this Act. 9
(b) All reports filed under this subtitle shall contain a certification by an 10
executive officer or director of the licensee that at tests to the truth and 11
correctness of the report. 12
(3) The commissioner may invoke the aid of the courts through injunction or other 13
proper process to: 14
(a) Enjoin any existing or threatened violation of this subtitle; or 15
(b) Enforce any proper order or action issued or taken by the commissioner. 16
(4) (a) The remedies and penalties set forth in this subtitle shall be cumulative. 17
(b) This subtitle shall not be c onstrued to limit or restrict the powers, duties, 18
remedies, or penalties available to the commissioner or any other person 19
under any other statutory or common law. 20
SECTION 4. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 2 86 21
IS CREATED TO READ AS FOLLOWS: 22
(1) (a) A person shall not engage in virtual currency kiosk business in this state 23
without: 24
1. A license; and 25
2. First obtaining, for each: 26
a. Agent, the written approval of the commissioner to designate the 27
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agent to engag e in virtual currency kiosk business in this state 1
on behalf of the person; and 2
b. Location at which the person, or an agent of the person, engages 3
in virtual currency kiosk business in this state: 4
i. Any license, permit, registration, or other authorizati on 5
required for the person, agent, or location under any 6
applicable local ordinance, resolution, or regulation; and 7
ii. The written approval of the commissioner to do business at 8
the location, as provided in Section 8 of this Act. 9
(b) Except as provided in paragraph (c) of this subsection, a person shall be 10
deemed to be engaged in virtual currency kiosk business in this state if the 11
person: 12
1. Owns, operates, solicits, markets, or advertises a virtual currency kiosk 13
located in this state; or 14
2. Engages in, or holds out as being able to engage in, a virtual currency 15
kiosk transaction with or on behalf of any virtual currency kiosk user. 16
(c) A person shall not be deemed to be engaged in virtual currency kiosk 17
business in this state solely because the person le ases space to, or otherwise 18
contracts for or allows, a virtual currency kiosk operator to locate a virtual 19
currency kiosk at a store or locale in this state. 20
(2) A license shall: 21
(a) Be valid unless it is: 22
1. Revoked or suspended by the commissioner; 23
2. Surrendered by the licensee; or 24
3. Expired; 25
(b) Except as provided in Section 12 of this Act, not be transferred or assigned; 26
and 27
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(c) Expire on December 31 of the year in which it is issued, unless renewed or 1
reinstated in accordance with Section 11 of this Act. 2
SECTION 5. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 3
IS CREATED TO READ AS FOLLOWS: 4
(1) As used in this section, "registry" means the State Regulatory Registry, LLC, or 5
its successor organization. 6
(2) When an application, report, or approval request is required to be filed with the 7
commissioner under this subtitle, the commissioner may req uire that the filing, 8
including any applicable fees and supporting documentation, be submitted to: 9
(a) The registry or its successor organization; 10
(b) The registry's parent, affiliate, or operating subsidiary; or 11
(c) Other agencies or authorities as part of a nationwide licensing system; 12
which may act as an agent for receiving, requesting, and distributing information 13
to and from any source directed by the commissioner. 14
(3) The commissioner: 15
(a) May report violations of this subtitle, enforcement actions, and other 16
relevant information that the commissioner deems necessary to carry out 17
the purpose of this section to the registry or its affiliated entities; and 18
(b) Shall establish a process whereby licensees may challenge information 19
entered into the registry by the commissioner. 20
(4) The commissioner shall annually request: 21
(a) Audited financial reports, including inquiring as to the budget and fees 22
collected, both proposed and actual, from the registry; and 23
(b) Any nonconfidential protocols or reports for th e security and safeguarding 24
of personal information maintained by the registry, including inquiring as 25
to: 26
1. Whether the system has implemented and complied with the data 27
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security guidelines set forth in the Gramm-Leach-Bliley Act, 15 U.S.C. 1
sec. 6801; 2
2. The results of any nonconfidential periodic data protection audits that 3
the system may conduct; and 4
3. Whether any security breaches have occurred resulting in the 5
substantial likelihood that personal information may be misused or 6
stolen. 7
(5) The commissi oner may establish relationships and contracts with other 8
governmental agencies or entities affiliated with the registry that the 9
commissioner deems necessary to carry out this section. 10
(6) For purposes of this section, the commissioner may use other gover nmental 11
agencies or the registry or its affiliated entities as an agent for requesting 12
information from, and distributing information to, the United States Department 13
of Justice or other governmental agencies. 14
SECTION 6. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 15
IS CREATED TO READ AS FOLLOWS: 16
(1) (a) A person seeking to become a licensee shall file a complete application for a 17
license with the commissioner. 18
(b) An application for a license shall not be complete unless it: 19
1. Is made in writing, under oath or affirmation; 20
2. Is in the format required by the commissioner; 21
3. Contains, and is accompanied by, the information, documentation, 22
and evidence required under Section 7 of this Act; 23
4. Contains an attestation that the applicant is in, and will maintain, 24
compliance with Section 10 of this Act; 25
5. Is accompanied by evidence that the requirements of Section 9 of this 26
Act have been satisfied; and 27
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6. Is accompanied by a nonrefundable applicat ion fee that is determined 1
by the commissioner in accordance with Section 13 of this Act. 2
(2) Within ninety (90) days after receipt of a complete application for a license, 3
which period may be extended by the commissioner for good cause, the 4
commissioner shall: 5
(a) Review the application and all attachments for compliance with the 6
requirements of this subtitle; 7
(b) Investigate the following of the applicant, including for each person in 8
control of the applicant and each responsible individual: 9
1. Competence; 10
2. Experience; 11
3. Character; 12
4. Financial condition; and 13
5. Responsibility; and 14
(c) Subject to Section 24 of this Act and subsection (4) of this section, issue: 15
1. An unconditional license to the applicant to engage in virtual 16
currency kiosk business at one (1) or more locations in this state; 17
2. A notice of intent to issue a conditional license to the applicant to 18
engage in virtual currency kiosk business at one (1) or more locations 19
in this state; or 20
3. A notice of intent to deny the applicant's application for a license. 21
(3) As part of the review and investigation of an application under subsection (2) of 22
this section, the commissioner may, in his or her discretion, investigate an 23
applicant's business premises. 24
(4) (a) The commissioner shall issue an un conditional license to an applicant to 25
engage in virtual currency kiosk business at one (1) or more locations in 26
this state if the commissioner determines that the applicant: 27
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1. Is in compliance with the requirements of this subtitle; 1
2. Has reasonably dem onstrated that it has the competence, experience, 2
character, financial condition, and responsibility to continue to satisfy 3
the requirements of this subtitle; and 4
3. Has satisfied the requirements of subsection (3)(a)1. and 2. of Section 5
8 of this Act for at least one (1) location in this state. 6
(b) 1. The commissioner may issue a notice of intent to issue a conditional 7
license to an applicant to engage in virtual currency kiosk business at 8
one (1) or more locations in this state if the commissioner determi nes 9
that the conditions, including any additional bond amount specified by 10
the commissioner under Section 9 of this Act, are necessary for the 11
applicant to satisfy the requirements of paragraph (a)1., 2., and 3. of 12
this subsection. 13
2. A notice of intent is sued under subparagraph 1. of this paragraph 14
shall specify the additional conditions that are required for the 15
applicant to obtain and maintain a license. 16
3. The commissioner may issue a conditional license to an applicant to 17
engage in virtual currency kio sk business at one (1) or more locations 18
in this state if the applicant files with the commissioner a written 19
acceptance of the conditions specified in the notice issued under 20
subparagraph 1. of this paragraph to the applicant within thirty (30) 21
days after service of the notice. 22
4. If the department does not receive an applicant's written acceptance of 23
the conditions specified in the notice issued under subparagraph 1. of 24
this paragraph to the applicant within thirty (30) days after service of 25
the notice, t he commissioner shall issue a notice of intent to deny the 26
applicant's application for a license. 27
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(c) 1. Except as provided in paragraph (b) of this subsection, the 1
commissioner shall issue a notice of intent to deny an applicant's 2
application for a license if the commissioner determines that: 3
a. Denial of the license is warranted under Section 25 of this Act; 4
or 5
b. The requirements of paragraph (a)1., 2., and 3. of this subsection 6
are not satisfied. 7
2. A notice of intent to deny an applicant's application for a license shall 8
specify the reasons for the determination. 9
SECTION 7. A N EW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 10
IS CREATED TO READ AS FOLLOWS: 11
An application filed under Section 6 of this Act shall provide all of the following 12
information, documentation, and evidence unless the commissioner, for good cause, 13
waives any requirement of this section with respect to a license application: 14
(1) The following for the applicant, each executive officer, director, key shareholder, 15
and person in control of the applicant, and each responsible individual and 16
agent, as applicable: 17
(a) Legal name; 18
(b) Any former names used, including former fictitious or trade names; 19
(c) Any fictitious or trade names used; 20
(d) Business addresses; 21
(e) Residential addresses; 22
(f) Social Security number; 23
(g) Employment history for the ten (10) year period prec eding the application 24
filing; and 25
(h) A description of the activities conducted by the person and a history of 26
operations, including a description of any money or virtual currency 27
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services, money transmission, or virtual currency kiosk business that has 1
been previously conducted in this state; 2
(2) The physical address of each proposed virtual currency kiosk in this state; 3
(3) A copy of any agreement between the applicant and each responsible individual 4
and agent; 5
(4) A list of each license or other authoriz ation the applicant holds to conduct money 6
or virtual currency services, money transmission, or virtual currency kiosk 7
business in any state, federal, or foreign jurisdiction and the date each license or 8
authorization expires; 9
(5) A list of all regulatory revocations, suspensions, restrictions, and other 10
disciplinary actions in any state, federal, or foreign jurisdiction, including all 11
rejected applications, taken against any of the following: 12
(a) The applicant; 13
(b) A responsible individual; or 14
(c) An agent; 15
(6) (a) A list and description of all criminal convictions, deferred prosecution 16
agreements, and pending criminal proceedings, other than traffic violations, 17
in any jurisdiction for the ten (10) year period preceding the filing of the 18
application against any of the following: 19
1. The applicant; 20
2. A responsible individual; 21
3. An agent; 22
4. An executive officer of the applicant; or 23
5. A key shareholder of the applicant. 24
(b) The commissioner may request a copy of any criminal conviction, which 25
shall be promptly provided within ten (10) working days of the request; 26
(7) (a) A list and description of all material litigation for the ten (10) year period 27
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preceding the filing of the application against any of the following: 1
1. The applicant; 2
2. A responsible individual; 3
3. An agent; 4
4. An executive officer of the applicant; or 5
5. A key shareholder of the applicant. 6
(b) The commissioner may request a copy of any material litigation, w hich 7
shall be promptly provided within ten (10) working days of the request; 8
(8) A list of all bankruptcy and receivership proceedings in any jurisdiction for the 9
past ten (10) years in which any of the following was a debtor: 10
(a) The applicant; 11
(b) A responsible individual; 12
(c) An agent; 13
(d) A person in control of the applicant; or 14
(e) A person over which the applicant has control; 15
(9) The name, business address, and telephone number of each financial institution 16
in which the applicant and its agents plan to deposit or clear funds obtained by or 17
through its virtual currency kiosk business in this state; 18
(10) A description of the source of funds and credit to be used by the applicant and its 19
agents to conduct virtual currency kiosk business in this state; 20
(11) A sample contract for an agent; 21
(12) A copy of the written procedures that will be provided by the applicant or licensee 22
to its responsible individuals and agents; 23
(13) The physical address and email address to which communications from the 24
department may be sent; 25
(14) The name, physical address, email address, and telephone number of the 26
applicant's registered agent for service of process in this state; 27
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(15) The name, business address, email address, and telephone number of the 1
applicant's chief complia nce officer for virtual currency kiosk business 2
conducted in this state; 3
(16) With respect to the applicant's virtual currency kiosk business in this state, a copy 4
of the certificate of coverage for each liability, casualty, business interruption, 5
and cybe rsecurity insurance policy maintained by the applicant for any of the 6
following: 7
(a) Itself; 8
(b) A responsible individual; 9
(c) An agent; 10
(d) An affiliate of the applicant; 11
(e) A person in control of the applicant; or 12
(f) A person over which the applicant has control; 13
(17) If applicable: 14
(a) The date on which, and the state where, the applicant is formed; 15
(b) A copy of any current certificate of good standing issued by the state where 16
the applicant is formed; 17
(c) A copy of the applicant's filed articles of incorporation; 18
(d) Evidence that the applicant is registered or qualified to do business in this 19
state; 20
(e) The name, business address, and telephone number of each affiliate of the 21
applicant; 22
(f) A description of the cont rol relationship between the applicant and each 23
affiliate of the applicant; and 24
(g) A description of the corporate or business structure of the applicant, 25
including: 26
1. The identity of any parent and subsidiary of the applicant; and 27
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2. Disclosure of whethe r any parent or subsidiary of the applicant is 1
publicly traded on any stock exchange; 2
(18) A copy of the following for the most recent fiscal year and, if available, for the 3
two (2) year period preceding filing of the application: 4
(a) The applicant's audited annual financial statements; or 5
(b) If the applicant is a wholly owned subsidiary of another corporation: 6
1. The audited consolidated annual financial statement of the parent 7
corporation; or 8
2. The applicant's audited consolidated annual financial statements; 9
(19) A copy of the applicant's unconsolidated financial statements, whether audited or 10
not, for: 11
(a) The current fiscal year; and 12
(b) If available, for the two (2) year period preceding the filing of the 13
application; 14
(20) If the applicant is publicl y traded in the United States, a copy of the most recent 15
report filed by the person pursuant to 15 U.S.C. sec. 78m, as amended; 16
(21) If a person in control of the applicant is publicly traded in the United States, a 17
copy of the: 18
(a) Audited financial statements of the person for the most recent fiscal year; or 19
(b) Most recent report filed by the person pursuant to 15 U.S.C. sec. 78m, as 20
amended; 21
(22) If a person in control of the applicant is publicly traded outside the United States, 22
a copy of the most recent documentation filed by the person with a relevant 23
foreign regulator in the person's domicile that is similar to that required in 24
subsection (20) of this section; 25
(23) If the applicant or its agents are required to register with the Financial Crimes 26
Enforcement Network of the United States Department of the Treasury as a 27
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money service business, evidence of the registration; 1
(24) Any substituted inf ormation, documentation, or evidence the commissioner, for 2
good cause, permits for any license application in lieu of the information, 3
documentation, or evidence required by this section; and 4
(25) Any other information, documentation, or evidence the commi ssioner reasonably 5
requires to determine whether an applicant satisfies the requirements of this 6
subtitle. 7
SECTION 8. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 8
IS CREATED TO READ AS FOLLOWS: 9
(1) (a) An applicant or licensee seeking to engage in virtual currency kiosk 10
business at one (1) or more locations in this state, either directly or through 11
an agent, shall file a complete application for approval of the location or 12
locations with the commissioner. 13
(b) An applic ant or licensee seeking to designate one (1) or more agents to 14
engage in virtual currency kiosk business on behalf of the applicant or 15
licensee in this state shall file a complete application for approval of the 16
agent or agents with the commissioner. 17
(2) (a) Subject to paragraph (b) of this subsection, an application for approval to 18
engage in virtual currency kiosk business at one (1) or more locations, or 19
through one (1) or more agents, in this state shall not be complete unless it: 20
1. Is made in writing, under oath or affirmation; 21
2. Is in a format required by the commissioner; 22
3. Contains, and is accompanied by, the information, documentation, 23
and evidence required or permitted under Section 7 of this Act that the 24
commissioner determines is necessary and appropriate for the purpose 25
of making the determination under subsection (3) of this section; and 26
4. Is accompanied by a nonrefundable fee for each location and agent 27
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that is determined by the commissioner in accordance with Section 13 1
of this Act, except the commissioner may waive the nonrefundable fee 2
for any application that is made at the same time as a license 3
application under Section 6 of this Act. 4
(b) When an applicant seeks approval to engage in virtual currency kiosk 5
business at one (1) or more lo cations, or through one (1) or more agents, in 6
this state at the same time as filing a license application under Section 6 of 7
this Act, the commissioner may: 8
1. Accept the license application as the complete application required 9
under this section; or 10
2. Require the applicant to submit additional information to the 11
commissioner as part of the license application for each location, 12
agent, or location and agent. 13
(3) Upon receipt of a complete application in accordance with subsection (2) of this 14
section, and subject to Section 24 of this Act, the commissioner shall do one (1) of 15
the following for each proposed location and agent: 16
(a) The commissioner shall issue an unconditional approval to the applicant or 17
licensee to engage in virtual currency kiosk business at the location, or 18
through the agent, in this state if, after investigation, the commissioner 19
determines that: 20
1. The applicant or licensee will conduct business at the location, or 21
through the agent, in a lawful and proper manner; and 22
2. The interest of the public will not be jeopardized by the applicant or 23
licensee conducting business at the location or through the agent; 24
(b) 1. The commissioner may issue a notice of intent to issue a conditional 25
approval to the applicant or licensee to engage in virtua l currency 26
kiosk business at the location, or through the agent, in this state if the 27
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commissioner, after investigation, determines that the conditions, 1
including any additional bond amount specified by the commissioner 2
under Section 9 of this Act, are nec essary for the applicant or licensee 3
to satisfy the requirements of paragraph (a)1. and 2. of this 4
subsection. 5
2. A notice of intent issued under subparagraph 1. of this paragraph 6
shall specify the additional conditions that are required for the 7
applicant or licensee to engage in the proposed activity. 8
3. The commissioner may issue a conditional approval to an applicant or 9
licensee to engage in virtual currency kiosk business at the location, 10
or through the agent, in this state if the applicant or licensee files a 11
written acceptance of the conditions specified in the notice issued 12
under subparagraph 1. of this paragraph to the applicant or licensee 13
within thirty (30) days after service of the notice. 14
4. If the department does not receive an applicant's or a licensee's 15
written acceptance of the conditions specified in the notice issued 16
under subparagraph 1. of this paragraph to the applicant or licensee 17
within thirty (30) days after service of the notice, the commissioner 18
shall issue a notice of intent to deny the applicant's or licensee's 19
application for approval to engage in the proposed activity; or 20
(c) 1. Except as provided in paragraph (b) of this subsection, the 21
commissioner shall issue a notice of intent to deny the applicant's or 22
licensee's application to engage in virtual currency kiosk business at 23
the location, or through the agent, in this state if, after investigation, 24
the commissioner determines that: 25
a. For a proposed agent, denial is warranted under Section 25 of 26
this Act; or 27
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b. The requirements of paragraph (a)1. and 2. of this subsection 1
are not satisfied. 2
2. A notice of intent to deny an applic ant's or licensee's application to 3
engage in virtual currency kiosk business at a location, or through an 4
agent, shall specify the reasons for the determination. 5
SECTION 9. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 6
IS CREATED TO READ AS FOLLOWS: 7
(1) As used in this section: 8
(a) "Bond" means: 9
1. A surety bond; or 10
2. Another similar security acceptable to the commissioner; 11
(b) "Net worth" means assets less liabilities as determined by generally 12
accepted accounting principles; and 13
(c) "Person" includes any applicant and licensee. 14
(2) (a) Except as otherwise provided in paragraph (b) of this subsection, an 15
applicant shall submit with its license application, and a licensee shall at all 16
times maintain, a bond in an amount that is not less than five hundred 17
thousand dollars ($500,000). 18
(b) The commissioner may require an applicant to submit before a license is 19
issued, and a licensee to maintain at all times, a bond in an amount in 20
excess of five hundred thousand dollars ($5 00,000) but not exceeding five 21
million dollars ($5,000,000) if the commissioner determines the additional 22
amount is necessary to cover the nature and extent of risks associated with 23
the virtual currency kiosk business activity in this state of the: 24
1. Applicant and its proposed agents; or 25
2. The licensee and its agents. 26
(c) An applicant or a licensee that is required to increase its bond under 27
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paragraph (b) of this subsection shall submit to the commissioner evidence 1
that it has secured the additional bond amount not later than thirty (30) 2
days after the applicant or licensee is notified by the commissioner in 3
writing of the required increase. 4
(3) (a) The bond required under this section shall: 5
1. Be in a form satisfactory to the commissioner; 6
2. Hold and bi nd the principal and surety to the Commonwealth of 7
Kentucky for the benefit of any claimants against the person and its 8
agents to secure the faithful performance of the obligations of the 9
person and its agents in accordance with the requirements of this 10
subtitle, including the payment of unpaid fee amounts and civil 11
monetary penalties due to the department under this subtitle; 12
3. Except as provided in paragraph (e) of this subsection, cover claims 13
brought by a claimant for as long as the commissioner specif ies, but 14
not less than five (5) years after the later of the following: 15
a. The date of any violation of this subtitle by the person or its 16
agents; or 17
b. The date the person ceases to do business in this state; 18
4. Be continuous and remain in effect until canceled; 19
5. Require the person and surety to provide the commissioner at least 20
thirty (30) days written notice of an intent to cancel the bond; and 21
6. Provide that cancellation of the bond shall not affect any liability 22
incurred or accrued under the bond during the thirty (30) day notice 23
period required under subparagraph 5. of this paragraph. 24
(b) The aggregate liability on a bond shall not exceed the pr incipal sum of the 25
bond. 26
(c) A claimant may maintain a civil action on a bond. 27
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(d) The commissioner may maintain a civil action on a bond on behalf of the 1
department or any other claimant in the Franklin Circuit Court or in any 2
other court of competent jur isdiction, either in one (1) action or successive 3
actions. 4
(e) The commissioner may permit the amount of a bond to be reduced or 5
eliminated after a person ceases to do business in this state to the extent the 6
amount of a person's and its agents' outstanding obligations in this state are 7
reduced. 8
(4) In addition to the bond required under this section, an applicant shall submit 9
with its license application, and a licensee shall at all times maintain, evidence of 10
a net worth that is not less than five hundred thousand dollars ($500,000). 11
(5) The commissioner may promulgate an administrative regulation in accordance 12
with KRS Chapter 13A or issue an order to: 13
(a) Exercise his or her discretion under this section; or 14
(b) Otherwise carry out the requirements of this section. 15
SECTION 10. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 16
IS CREATED TO READ AS FOLLOWS: 17
Every applicant and licensee shall, at the time of filing a license application and at all 18
times during the consideration of the application and licensure: 19
(1) Be in good standing in its state of incorporation or formation; 20
(2) Be registered or qualified to do business in this state; 21
(3) Maintain a registered agent for service of process in this state; and 22
(4) (a) File a written report with the commissioner within fifteen (15) business days 23
of knowledge of any of the following events: 24
1. A material change in the information provided in: 25
a. A license application; 26
b. An application for approval to engage in virtual currency kiosk 27
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business at one (1) or more locations, or through one (1) or more 1
agents, in this state; or 2
c. Any report filed under this subtitle; 3
2. A failure to satisfy the requirements of Section 9 of this Act; 4
3. Insolvency, the filing for bankruptcy, reorganization, dissolution, or 5
receivership under the United States bankruptcy code or any other 6
law, or the making of a general assignment for t he benefit of creditors 7
by: 8
a. The applicant or licensee; 9
b. A responsible individual; 10
c. An agent; 11
d. An executive officer of the applicant or licensee; or 12
e. A director of the applicant or licensee; 13
4. The filing of any material litigation against the applicant or licensee 14
by any state, federal, or foreign governmental authority; or 15
5. The applicant or licensee, a responsible individual or agent, or an 16
executive officer or director of the applicant, the licensee, or an agent 17
has been: 18
a. Indicted for or convicted of any felony; or 19
b. Convicted of a misdemeanor involving fraud, theft, breach of 20
trust, or virtual currency kiosk business in this state. 21
(b) The report required under paragraph (a) of this subs ection shall describe 22
the event and its expected impact on: 23
1. The applicant's proposed activities in this state; or 24
2. The licensee's activities in this state. 25
SECTION 11. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 26
IS CREATED TO READ AS FOLLOWS: 27
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(1) As used in this section, "United States dollar equivalent of virtual currency" 1
means the equivalent value of virtual currency in United States dollars shown on 2
a virtual currency exchange based in the United States for a particular date or 3
period. 4
(2) On or before December 31 of each year, each licensee shall: 5
(a) Pay a nonrefundable annual renewal fee to the department that is 6
determined by the commissioner in accordance with Section 13 of this Act; 7
and 8
(b) File the lice nsee's annual renewal report with the commissioner in 9
accordance with subsection (5) of this section. 10
(3) The failure of a licensee to comply with subsection (2) of this section shall result 11
in the expiration of the licensee's license by operation of law o n January 1 of the 12
following year. 13
(4) (a) The commissioner may reinstate an expired license if, before February 1 of 14
the calendar year in which the license expired, the licensee: 15
1. Pays the annual renewal fee and files the annual renewal report 16
required under subsection (2) of this section; and 17
2. Pays a civil penalty to the department that is equal to the amount of 18
the annual renewal fee determined by the commissioner in accordance 19
with Section 13 of this Act. 20
(b) Any reinstatement of a license under par agraph (a) of this subsection shall 21
be retroactive to January 1 of the calendar year in which the license 22
expired. 23
(5) Except as provided in subsection (6) of this section, each licensee shall file an 24
annual renewal report with the commissioner that contains all of the following: 25
(a) A copy of: 26
1. The licensee's most recent audited annual financial statement; or 27
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2. If the licensee is a wholly owned subsidiary of another corporation, 1
the: 2
a. Most recent audited consolidated annual financial statement of 3
the parent corporation; or 4
b. Licensee's most recent audited consolidated annual financial 5
statements; 6
(b) A description of the following, if the information has not been previously 7
reported to the commissioner on any other report filed under this subtitle: 8
1. Any material changes to any of the information submitted by the 9
licensee on its original application; and 10
2. Any data security breach involving the licensee; 11
(c) A list of the licensee's permissible investments under Section 16 of this Act; 12
(d) A certification from the licensee that the licensee continues to maintain 13
permissible investments in accordance with Section 16 of this Act; 14
(e) A list of each location where the licensee, or an agent of the licensee, 15
conducts virtual currency kiosk business in this state; 16
(f) For January 1 to December 31 of the preceding calendar year and January 17
1 to September 30 of the current year: 18
1. The number of virtual currency kiosk transactions at each location in 19
this state where the licensee, or an agent of the licensee, conducts 20
virtual currency kiosk business; 21
2. The United States dollar amount of virtual currency kiosk transactions 22
at each location in this state where the licensee, or an agent of the 23
licensee, conducts virtual currency kiosk business; and 24
3. The total number and dollar amount of refund requests received by 25
the licensee, or an agent of the licensee, from virtual currency kiosk 26
users that were: 27
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a. Granted by the licensee or agent; and 1
b. Denied by the licensee or agent; 2
(g) As of December 31 of the preceding calendar year and September 30 of the 3
current year: 4
1. The amount of United States dollar equivalent of virtual currency in 5
the possession or control of the licensee or an agent of the licensee; 6
2. The number of virtual currency kiosk users for whom the licensee, or 7
an agent of the licensee, had possession or control of virtual currency; 8
and 9
3. The amount of United States dollar equivalent of virtual currency in 10
the possession or control of the licensee, or an agent of the licensee, 11
on behalf of virtual currency kiosk users; 12
(h) Evidence that the licensee continues to satisfy the requirements of Section 9 13
of this Act; 14
(i) The name, business address, email address, and telephone number of the 15
licensee's chief compliance officer for virtual currency kiosk business 16
conducted in this state; and 17
(j) Any other information the commissioner determines is necessary to aid in 18
the enforcement of this subtitle. 19
(6) A licensee that was not licensed in Kentucky at any time between January 1 and 20
October 31 of a calendar year shall not be required to file an annual renewal 21
report for the following year. 22
SECTION 12. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 23
IS CREATED TO READ AS FOLLOWS: 24
(1) A person shall not take any action that results in a change of control of a licensee 25
without: 26
(a) Providing the notice required under subsection (2) of this section; and 27
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(b) Obtaining the prior written approval of the commissioner in accordance 1
with subsection (3) of this section, except this paragraph shall not apply to: 2
1. A person that acts as a proxy for the sole purpose of voting at a 3
designated meeting of the security holders or holders of voting 4
interests of a licensee or person in control of a licensee; 5
2. A person that acquires control of a licensee by devise or descent; 6
3. A person that acquires control as a personal representative, custodian, 7
guardian, conservator, or trustee, or as an officer appointed by a court 8
of competent jurisdiction or by operation of law; 9
4. A public offering of securities under the laws of the United States; or 10
5. a. Any other person or circumstance that the commissioner 11
determines is exempted from compliance with this paragraph in 12
an administrative regulation promulgated in accordance with 13
KRS Chapter 13A. 14
b. The commissioner may promulgate an admi nistrative regulation 15
to exempt a person or circumstance from compliance with this 16
paragraph if the commissioner determines that the exemption is 17
necessary to serve the public interest. 18
(2) (a) A licensee shall file a complete notice of a: 19
1. Change of control of the licensee under subsection (1)(b)1. to 5. of this 20
section with the commissioner within fifteen (15) days of learning of 21
the change of control; and 22
2. Proposed change of control of the licensee, other than a change of 23
control under subsection (1) (b)1. to 5. of this section, with the 24
commissioner: 25
a. Within fifteen (15) days of learning of the proposed change of 26
control; and 27
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b. At least thirty (30) days prior to the proposed change of control. 1
(b) A notice of a change of control, or a proposed chan ge of control, of a 2
licensee shall not be complete unless it: 3
1. Is made in writing, under oath or affirmation; 4
2. Is in a format required by the commissioner; and 5
3. Contains the information that the commissioner determines is 6
necessary to provide reasona ble notice of the licensee's change of 7
control or proposed change of control. 8
(3) (a) Except as provided in subsection (1) of this section, a person seeking to 9
acquire control of a licensee shall file a complete application for approval of 10
the change of control with the commissioner at least thirty (30) days prior to 11
the proposed change of control. 12
(b) An application for approval of a change of control shall not be complete 13
unless it: 14
1. Is made in writing, under oath or affirmation; 15
2. Is in the format required by the commissioner; 16
3. Contains, and is accompanied by, any or all of the information, 17
documentation, and evidence required or permitted for an applicant 18
under Section 7 of this Act that the commissioner determines is 19
necessary and appropriate for t he purpose of making the 20
determination under paragraph (c) of this subsection; and 21
4. Is accompanied by a nonrefundable investigation fee of one hundred 22
dollars ($100). 23
(c) Upon receipt of a complete application for approval of a change of control 24
and subject to Section 24 of this Act, the commissioner shall: 25
1. Approve the application if the commissioner determines that the 26
person satisfies the requirements of this subtitle for obtaining a 27
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license; or 1
2. a. Issue a notice of intent to deny the application if the 2
commissioner determines that the person does not satisfy the 3
requirements of this subtitle for obtaining a license. 4
b. A notice of intent to deny an application for approval of a 5
change of control shall specify the requirements of this subtitle 6
that the person does not satisfy. 7
(4) (a) The commissioner may determine whether any set of facts or a proposed 8
transaction constitutes, or would constitute, control for purposes of this 9
section. 10
(b) Any of the following may make a request to the commissioner for a 11
determination under paragraph (a) of this subsection: 12
1. A licensee; or 13
2. A person that seeks to enter a proposed transaction with a licensee. 14
(5) (a) A licensee shall file a complete notice of the termination or resignation of a 15
responsible individual or agent with the commissioner within fifteen (15) 16
days of the termination or resignation. 17
(b) A notice of termination or resignation of a licensee's resp onsible individual 18
or agent shall not be complete unless it: 19
1. Is made in writing, under oath or affirmation; 20
2. Is in a format required by the commissioner; and 21
3. Contains the information that the commissioner determines is 22
necessary to provide reasonab le notice of the licensee's change in 23
responsible individual or agent. 24
(6) (a) A licensee shall obtain the prior written approval of the commissioner in 25
accordance with this subsection prior to adding or replacing a responsible 26
individual. 27
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(b) A licensee s hall file a complete application for approval of the addition or 1
replacement of a responsible individual with the commissioner. 2
(c) An application for approval of the addition or replacement of a responsible 3
individual shall not be complete unless it: 4
1. Is made in writing, under oath or affirmation; 5
2. Is in the format required by the commissioner; and 6
3. Contains, and is accompanied by, any or all of the information, 7
documentation, and evidence required or permitted under Section 7 of 8
this Act that the co mmissioner determines is necessary and 9
appropriate for the purpose of making the determination under 10
paragraph (d) of this subsection. 11
(d) Upon receipt of a complete application for approval of the addition or 12
replacement of a responsible individual and su bject to Section 24 of this 13
Act, the commissioner shall: 14
1. Approve the application if the commissioner determines that the 15
licensee will continue to satisfy the requirements of this subtitle for 16
maintaining a license after the addition or replacement; or 17
2. a. Issue a notice of intent to deny the application if the 18
commissioner determines that the addition or replacement will 19
cause the licensee to no longer satisfy the requirements of this 20
subtitle for maintaining a license. 21
b. A notice of intent to deny a n application for approval of the 22
addition or replacement of a responsible individual shall specify 23
the requirements of this subtitle that the licensee will not satisfy 24
if the addition or replacement is made. 25
SECTION 13. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 26
IS CREATED TO READ AS FOLLOWS: 27
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(1) Subject to subsection (2) of this section, the commissioner shall promulgate 1
administrative regulations in accordance with KRS Chapter 13A to establish: 2
(a) The format of, and manner of submission for, applications, notices, and 3
reports required under this subtitle; 4
(b) The nonrefundable application fees required under Sections 6 and 8 of this 5
Act; 6
(c) The nonrefundable annual renewal fee required under Section 11 of this 7
Act; 8
(d) Any additional information, documentation, or evidence that the 9
commissioner may require under Section 7 of this Act; and 10
(e) The information, documentation, and evidence that shall be contained in or 11
accompany an application or notice filed under Section 8 or 12 of this Act. 12
(2) (a) The nonrefundable fees required under Sections 6, 8, and 11 of this Act 13
shall be determined based on a reasonable estimation of the amount 14
required to cover the reasonable costs to the department to: 15
1. Review, investigate, and process the relevant applica tions and reports; 16
and 17
2. Enforce the requirements of this subtitle. 18
(b) The determination made under paragraph (a) of this subsection shall take 19
into account any other costs, fees, and expenses that are otherwise payable 20
to the commissioner under this subtitle. 21
SECTION 14. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 22
IS CREATED TO READ AS FOLLOWS: 23
(1) Virtual currency kiosk operators desiring to engage in virtual currency kiosk 24
business through agents shall authorize each agent to operate pursuant to an 25
express written contract, which shall include the following provisions: 26
(a) That the operator designates the person as its agent with authority to 27
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engage in virtual currency kiosk business on behalf of the operator as 1
authorized under this subtitle; 2
(b) That the agent shall operate in full compliance with this subtitle, 3
administrative regulations promulgated under this subtitle, and any order 4
issued by the commissioner pursuant to this subtitle; 5
(c) That both the operator and the agent shall not authorize subagents; 6
(d) That the agent shall timely remit all legal tender and virtual currency 7
legally due to the operator in accordance with the terms of the written 8
contract between the operator and the agent; 9
(e) That the operator and agent are subject to regulation by the commissioner; 10
and 11
(f) That the operator and agent shall comply with all applicable federal and 12
state laws. 13
(2) An agent shall not make any fraudulent statements or misrepresentations to: 14
(a) The virtual currency kiosk operator; or 15
(b) The commissioner, including any person acting under the commissioner's 16
authority. 17
(3) All virtual currency kiosk business conducted by agents shall be strictly 18
conducted in accordance with the virtual currency kiosk operator's w ritten 19
procedures provided to the agent. 20
(4) (a) An agent shall timely remit all legal tender and virtual currency legally due 21
to the virtual currency kiosk operator in accordance with the terms of the 22
written contract between the licensee and the agent. 23
(b) The commissioner shall have the discretion to set, by administrative 24
regulation or order, the maximum remittance time. 25
(5) An agent shall act only as authorized under the written contract with the virtual 26
currency kiosk operator. 27
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(6) (a) All funds, less fees, received by an agent of a virtual currency kiosk 1
operator from virtual currency kiosk business shall, from the time the funds 2
are received by the agent until such time when the funds or an equivalent 3
amount are remitted by the agent to the operator, constitute trust funds 4
owned by and belonging to the operator. 5
(b) If an agent commingles any of these funds with any other funds or property 6
owned or controlled by the agent, then all commingled proceeds and other 7
property shall be impressed with a trust in favor of the virtual currency 8
kiosk operator in an amount equal to the amount of the proceeds due the 9
operator. 10
(7) An agent shall report to the virtual currency kiosk operator the theft, forgery, or 11
loss of the operator's or a virtual currency kiosk u ser's funds within twenty -four 12
(24) hours from the time the agent learned of the theft, forgery, or loss. 13
SECTION 15. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 14
IS CREATED TO READ AS FOLLOWS: 15
(1) Each virtual currency kiosk operator and its agents shall: 16
(a) Maintain the books, accounts, and records of its virtual currency kiosk 17
business activities in this state that are required under subsection (2) of this 18
section; and 19
(b) Keep the books, accounts, and records referenced in paragraph (a) of this 20
subsection for: 21
1. A period of time determined by the commissioner in an administrative 22
regulation promulgated in accordance with KRS Chapter 13A; or 23
2. For a period that is longer than the period referenced in subparagraph 24
1. of this paragraph if required by: 25
a. Other state or federal law; or 26
b. The commissioner to resolve any examination, investigation, or 27
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claim. 1
(2) The following books, accounts, and records shall be maintained: 2
(a) For each virtual currency kiosk transaction: 3
1. The amount, date, and precise time of the transaction; 4
2. Any payment instructions for the transaction; 5
3. The total amount of virtual currency kiosk charges received by and 6
paid to the virtual currency kio sk operator or agent, including any 7
virtual currency kiosk charges received on behalf of the operator or 8
agent; 9
4. The exchange rate of the virtual currency to the United States dollar; 10
and 11
5. The names, account numbers, and physical addresses of the parti es to 12
the transaction; 13
(b) A general ledger containing all assets, liabilities, ownership equity, income, 14
and expense accounts; 15
(c) Bank statements and bank reconciliation records; 16
(d) Any receipts, statements, and valuations provided to virtual currency k iosk 17
users and account holders; 18
(e) Records or minutes of meetings of the board of directors or an equivalent 19
governing body of the virtual currency kiosk operator or agent; 20
(f) Records demonstrating compliance with applicable state and federal anti -21
money laundering laws, including virtual currency kiosk user and account 22
holder identification and verification documents, records linking virtual 23
currency kiosk users and account holders to their respective accounts and 24
balances, and a record of any compliance breaches; 25
(g) Communications and documentation related to: 26
1. Investigations of virtual currency kiosk user and account holder 27
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complaints; and 1
2. Transaction error resolutions; 2
(h) The policies required under Section 18 of this Act; and 3
(i) Any other books , accounts, or records that are required by the 4
commissioner in an administrative regulation promulgated in accordance 5
with KRS Chapter 13A for determining whether a virtual currency kiosk 6
operator or agent is in compliance with this subtitle, including wh ether an 7
operator or agent is in compliance with any administrative regulation 8
promulgated, or order issued, under this subtitle. 9
(3) The books, accounts, and records that are required to be maintained under this 10
section: 11
(a) May be maintained in any elect ronic format consistent with the virtual 12
currency kiosk operator's or agent's ordinary business practices unless the 13
operator or agent receives specific written instructions from the 14
commissioner to the contrary; 15
(b) Shall be maintained separate and apart from any other business in which 16
the virtual currency kiosk operator or agent is involved; 17
(c) Shall be kept at the virtual currency kiosk operator's or agent's principal 18
office or an office located in this state unless otherwise permitted in writing 19
by the commissioner; and 20
(d) Shall be made available for review or examination at a nonresidential 21
location approved by the commissioner. 22
(4) Books, accounts, or records of any person described in this section may be 23
maintained at a location outside of this state so long as they are made accessible 24
to the commissioner upon seven (7) business days' written notice. 25
SECTION 16. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 26
IS CREATED TO READ AS FOLLOWS: 27
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(1) Every virtual currency kiosk operator shall, at all times, maintain permissible 1
investments that: 2
(a) Have a market value that is computed in accordance with generally 3
accepted accounting principles; and 4
(b) Are not less than the aggregate amount of all of the operator's and its 5
agents' outstanding virtual currency kiosk transactions. 6
(2) Except to the extent otherwise limited in subsection (3) of this section , the 7
investments permitted under KRS 286.11 -015 are permissible for a virtual 8
currency kiosk operator. 9
(3) The commissioner may: 10
(a) Limit the extent to which a type of investment within a class of permissible 11
investments may be considered a permissible i nvestment, except for money, 12
time deposits, savings deposits, demand deposits, and certificates of deposit 13
issued by a federally insured financial institution; and 14
(b) By administrative regulation or order allow other types of investments that 15
the commissi oner determines to be substantially equivalent to other 16
permissible investments in regards to safety and soundness. 17
(4) Permissible investments, even if commingled with other assets of the virtual 18
currency kiosk operator, shall be deemed by operation of la w to be held in trust 19
for the benefit of the purchasers and holders of the operator's outstanding virtual 20
currency kiosk transactions in the event of the operator's insolvency or 21
bankruptcy. 22
SECTION 17. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 23
IS CREATED TO READ AS FOLLOWS: 24
(1) As used in this section: 25
(a) "New virtual currency kiosk user": 26
1. Means a virtual currency kiosk user: 27
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a. On the day of the user's first virtual currency kiosk transaction 1
with the virtual currency kiosk operator; and 2
b. For twenty-nine (29) calendar days thereafter; and 3
2. Does not include a virtual currency kiosk user on any day that the 4
user enters a virtual currency kiosk transaction with the virtual 5
currency kiosk operator following twenty-nine (29) calendar days after 6
the user's first virtual currency kiosk transaction with the operator; 7
(b) "Virtual currency kiosk operator" includes an agent of the virtual currency 8
kiosk operator; 9
(c) "Virtual currency wallet" means a software applicat ion or other 10
mechanism providing a means to hold the keys necessary to access and 11
transfer virtual currency; and 12
(d) "Virtual currency wallet address" means an alphanumeric identifier 13
associated with a virtual currency wallet that identifies the location to which 14
a virtual currency transaction can be sent. 15
(2) A virtual currency kiosk operator shall: 16
(a) Have maximum virtual currency kiosk transaction limits that do not exceed: 17
1. Two thousand dollars ($2,000), or the equivalent in virtual currency, 18
per day for all virtual currency kiosk transactions entered with a 19
virtual currency kiosk user; and 20
2. Ten thousand five hundred dollars ($10,500), or the equivalent in 21
virtual currency, for all virtual currency kiosk transactions entered 22
with a new virtual currency kiosk user; 23
(b) Either: 24
1. Wait seventy-two (72) hours before processing a virtual currency kiosk 25
transaction for a new virtual currency kiosk user; or 26
2. At the operator's cost, allow a new virtual currency kiosk user to 27
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cancel, and receive a full refund for, a virtual currency kio sk 1
transaction within seventy-two (72) hours after the transaction; 2
(c) Not collect, directly or indirectly, virtual currency kiosk charges from a 3
virtual currency kiosk user for any single virtual currency kiosk transaction 4
that exceeds the greater of: 5
1. Five dollars ($5); or 6
2. Eighteen percent (18%) of the value, in United States dollars, of the 7
transaction; 8
(d) Provide live customer service via a toll -free telephone number during the 9
operating hours of each virtual currency kiosk in this state; and 10
(e) Provide the following notices at each virtual currency kiosk in this state: 11
1. The following warning, stating in substantially similar form: 12
"WARNING: This technology can be used to defraud you. 13
If someone asked you to deposit money in this machine and/ or is on 14
the phone with you and claims to be a: 15
- Friend or family member; 16
- Government agent; 17
- Computer software representative; 18
- Bill collector; 19
- Law enforcement officer; or 20
- Anyone you do not know personally; 21
STOP THIS TRANSACTION IMMEDIATELY and contact your local 22
law enforcement and the virtual currency kiosk operator. This may be 23
a scam. NEVER SEND MONEY to someone you don't know."; 24
2. That virtual currency kiosk users can contact the following to report 25
fraud or suspected fraud: 26
a. Any relevant state and local law enforcement; 27
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b. The department; and 1
c. The Attorney General; 2
3. The contact information, including a telephone number, for each of 3
the agencies referenced in subparagraph 2. of this paragraph; 4
4. The name, address, and toll -free customer service telephone number 5
of the virtual currency kiosk operator; 6
5. The days, times, and means by which a virtual currency kiosk user can 7
contact the virtual currency kiosk operator for assistance; and 8
6. The operator's dedicated United States tele phone number or email 9
address for law enforcement, the department, and the Attorney 10
General, as required under subsection (6) of Section 18 of this Act. 11
(3) The notices required under subsection (2)(e) of this section shall be: 12
(a) 1. On the virtual currency kiosk; 13
2. Near, and within readable sight of, the virtual currency kiosk; or 14
3. On the first screen of the virtual currency kiosk, which shall be 15
viewable by any person without requiring the person to input money, 16
virtual currency, data, or information; and 17
(b) Displayed prominently and in bold type. 18
(4) (a) Prior to entering a virtual currency kiosk transaction with a virtual 19
currency kiosk user, a virtual currency kiosk operator shall: 20
1. Provide accurate and appropriate disclosures to the user; and 21
2. Obtain an acknowledgment from the user that the user received the 22
disclosures. 23
(b) The disclosures required under paragraph (a) of this subsection shall: 24
1. Describe the terms and conditions of the transaction, which shall 25
include but not be limited to: 26
a. The amount of the transaction; 27
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b. A description of all virtual currency kiosk charges, which shall 1
be disclosed to the user in United States dollars; and 2
c. The exchange rate of the virtual currency to the United States 3
dollar; 4
2. Describe all material risks associated with the virtual currency kiosk 5
transaction, including the following: 6
a. Virtual currency is not legal tender in the United States, is not 7
backed by the United States government, and accounts and value 8
balances are not subject to Federal Deposit Insurance 9
Corporation, National Credit Union Administration, or 10
Securities Investor Protection Corporation protections; 11
b. Legislative and regulatory changes or actions at the state, 12
federal, or international level may adversely affect the value of 13
virtual currency; 14
c. Virtual currency value relative to the United States dollar may 15
fluctuate significantly; 16
d. Transactions in virtual currency may be irreversible, and 17
accordingly, losses due to fraudulent or accidental transactions 18
may not be recoverable; 19
e. Some virtual currency transactions may be immediately effective 20
when recorded on a public ledger, which is not necessarily the 21
date or time that the user initiates the transaction; 22
f. The value of virtual currency may be derived from the continued 23
willingness of market participants to exchange legal tender for 24
virtual currency, which may result in the potential for permanent 25
and total loss of value of a particular virtual currency if the 26
market for the virtual currency declines or collapses for an 27
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extended period of time; 1
g. Any bond required by Section 9 of this Act for the benefit of 2
virtual currency kiosk users may not be sufficient to cover all 3
losses incurred by the users; 4
h. Virtual currency kiosk users should perform researc h before 5
purchasing or investing in virtual currency; and 6
i. The circumstances under which the virtual currency kiosk 7
operator will, in the ordinary course of business, disclose the 8
user's financial and account information to third parties; 9
3. Include any other terms, conditions, or information the commissioner 10
determines is necessary and appropriate to disclose to virtual currency 11
kiosk users; 12
4. Be made separately from any other information provided by a virtual 13
currency kiosk operator; and 14
5. Be clear, conspicuous, and in legible writing. 15
(5) (a) Upon completion of a virtual currency kiosk transaction, a virtual currency 16
kiosk operator shall provide a receipt in paper or electronic retainable form, 17
as designated under paragraph (b) of this subsection, to the virtual currency 18
kiosk user that contains all of the following information: 19
1. The name and toll -free customer service telephone number of the 20
operator; 21
2. The contact information required under subsection (2)(e)3. of this 22
section to report fraud or suspected fraud; 23
3. The type, value, date, and precise time of the transaction; 24
4. Each applicable virtual currency wallet address and transaction hash, 25
where available; 26
5. A description of all virtual currency kiosk charges, which shall be 27
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disclosed in United States dollars; 1
6. The exchange rate of the virtual currency to the United States dollar; 2
7. The operator's liability for nondelivery or delayed delivery; 3
8. The operator's refund policy; and 4
9. Any additional information required by the commissioner. 5
(b) Each virtual currency kiosk user shall be provided the option to receive a 6
paper or electronic receipt for each virtual currency kiosk transaction. 7
(6) A virtual currency kiosk operator may provide additional notices or disclosures, 8
or information on a receipt provided, to a virtual currency kiosk user. 9
(7) A fraud victim's eligibility for a refund shall not be waived, affected, or prevented 10
by, or due to, a disclosure made in accordance with this section. 11
(8) The notices, disclosures, and rec eipts required under this section shall be in the 12
English language. 13
(9) The commissioner may promulgate an administrative regulation in accordance 14
with KRS Chapter 13A to: 15
(a) Establish the format of the notices required under subsection (2)(e) of this 16
section; 17
(b) Establish any additional disclosures or information the commissioner 18
requires under subsection (4) or (5) of this section; and 19
(c) Require virtual currency kiosk operators to comply with one (1) or more 20
specified industry standards or practices i f the commissioner determines 21
that compliance with the standard or practice is necessary to: 22
1. Ensure the lawful conduct of business under this subtitle; or 23
2. Protect the interest of the public. 24
SECTION 18. A NEW SECTI ON OF SUBTITLE 13 OF KRS CHAPTER 286 25
IS CREATED TO READ AS FOLLOWS: 26
(1) As used in this section: 27
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(a) "Blockchain analytics" means the analysis of data from blockchains or 1
publicly distributed ledgers, including associated transaction information; 2
(b) "Blockchain analytics and tracing software" means a software service that 3
uses blockchain analytics data to provide: 4
1. Risk-specific information; 5
2. Tracing of virtual currency wallet addresses; and 6
3. Other information and services; and 7
(c) "Virtual currency wallet" and "virtual currency wallet address" have the 8
same meanings as in Section 17 of this Act. 9
(2) (a) Each virtual currency kiosk operator shall take reasonable steps to detect 10
and prevent frau d and money laundering associated with its virtual 11
currency kiosk business in this state. 12
(b) The reasonable steps required under paragraph (a) of this subsection shall 13
include establishing, implementing, maintaining, and enforcing: 14
1. An anti-fraud and anti-money laundering policy that, at a minimum: 15
a. Identifies and assesses fraud -related and money laundering -16
related risk areas; 17
b. Establishes procedures and controls to protect against identified 18
risks; 19
c. Allocates responsibility for monitoring risks; 20
d. Establishes procedures for the periodic evaluation and revision 21
of the policy's procedures, controls, and monitoring 22
mechanisms; and 23
e. Requires compliance with the federal Bank Secrecy Act, codified 24
at 31 U.S.C. sec. 5311 et seq.; 25
2. An enhanced due dil igence policy that, at a minimum, establishes 26
protocols to identify individuals who are at risk of fraud based on age 27
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or mental capacity; and 1
3. Policies that address: 2
a. Cybersecurity, the privacy of personal information, and 3
information security; and 4
b. Any other subjects required by the commissioner in an 5
administrative regulation promulgated in accordance with KRS 6
Chapter 13A. 7
(c) The policies required under paragraph (b) of this subsection shall: 8
1. Be in writing; 9
2. Apply to all employees and agents o f the virtual currency kiosk 10
operator; and 11
3. Be reviewed and approved by the virtual currency kiosk operator's 12
board of directors or equivalent governing body. 13
(3) (a) Each virtual currency kiosk operator and its agents shall use blockchain 14
analytics and tracing software to: 15
1. Assist in the prevention of sending virtual currency to a virtual 16
currency wallet known or likely to be affiliated with fraudulent activity 17
at the time of a virtual currency kiosk transaction; and 18
2. Detect virtual currency kiosk tr ansaction patterns that are indicative 19
of fraud or other illicit activities. 20
(b) A virtual currency kiosk operator and its agents shall block a virtual 21
currency kiosk transaction to a virtual currency wallet that is associated 22
with overseas exchanges that are not accessible for virtual currency kiosk 23
users in the United States. 24
(c) The department may request evidence from any virtual currency kiosk 25
operator or agent of current use of blockchain analytics. 26
(4) (a) Prior to accepting payment from any virtual currency kiosk user in this 27
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state, a virtual currency kiosk operator and its agents shall verify the 1
identity of the user. 2
(b) To comply with paragraph (a) of this subsection, the virtual currency kiosk 3
operator or agent, or an authorized delegate of the operator or agent, shall: 4
1. Obtain a copy of a government -issued identification card that 5
identifies the virtual currency kiosk user; and 6
2. Collect additional information about the virtual currency kiosk user, 7
including the user's: 8
a. Name; 9
b. Date of birth; 10
c. Telephone number; 11
d. Physical address; and 12
e. Email address. 13
(c) A virtual currency kiosk operator and its agents shall not allow a virtual 14
currency kiosk user to engage in a virtual currency kiosk transaction under 15
or using any name, account, or identity that is not the user's own true name, 16
account, or identity. 17
(d) A virtual currency kiosk operator and its agents shall b e strictly liable for 18
any violation of this subsection. 19
(5) (a) Except as provided in paragraph (b) of this subsection, upon request of a 20
virtual currency kiosk user, a virtual currency kiosk operator and its agents 21
shall issue a refund of all virtual curr ency kiosk charges to the user for 22
each virtual currency kiosk transaction that satisfies all of the following: 23
1. The user was fraudulently induced to engage in the transaction; 24
2. The user reported the fraud within ninety (90) days of the transaction 25
to: 26
a. The operator or agent; and 27
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b. One (1) of the following: 1
i. The department; 2
ii. The Attorney General; or 3
iii. Any relevant state or local law enforcement agency; and 4
3. The user submitted proof of the fraud to the operator or agent and the 5
person referenced in subparagraph 2.b. of this paragraph, which may 6
include one (1) of the following: 7
a. A police report; or 8
b. A sworn statement made to the department, Attorney General, 9
operator, or agent; 10
that details the fraudulent nature of the transaction. 11
(b) 1. In addition to any other remedies and penalties available under this 12
subtitle or any other statutory or common law, a virtual currency kiosk 13
operator and its agents shall issue a refund to a virtual currency kiosk 14
user in the full amount of any virtual cu rrency kiosk transaction, 15
including all virtual currency kiosk charges, if the user submits proof, 16
which may be in the form of a police report or sworn statement, that 17
the operator or agent, or an employee or other representative of the 18
operator or agent, defrauded, deceived, or mislead the user in 19
connection with the transaction. 20
2. A virtual currency kiosk user shall submit the proof required under 21
this paragraph in accordance with the requirements of paragraph (a) 22
of this subsection, except the user shall be required to submit the proof 23
within any applicable statute of limitations associated with the 24
violation or offense, which shall not be less than one (1) year after the 25
transaction. 26
(c) The refund required under paragraph (a) or (b) of this subsection shall be: 27
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1. Paid in the originating currency; and 1
2. Made to a virtual currency kiosk user by the virtual currency kiosk 2
operator or agent within seventy-two (72) hours after the requirements 3
of paragraph (a) or (b) of this subsection, as applicable, are satisfied. 4
(6) (a) A virtual currency kiosk operator and its agents shall provide a dedicated 5
and frequently monitored communications line for law enforcement, the 6
department, and the Attorn ey General, via a United States telephone 7
number or email address posted on each virtual currency kiosk in 8
accordance with Section 17 of this Act, to be used by the agencies to 9
facilitate communications with the operator or agent in the event of a report 10
from a virtual currency kiosk user of fraud or suspected fraud. 11
(b) Upon request from law enforcement, the department, or the Attorney 12
General, a virtual currency kiosk operator and its agents shall: 13
1. Provide the agency with its trace findings; and 14
2. Grant the agency assistance with blockchain analytics to assist in any 15
fraud investigation. 16
(c) A virtual currency kiosk operator and its agents shall cooperate with law 17
enforcement, the department, and the Attorney General in the investigation 18
of fraud and other unlawful activity, which shall include without limitation: 19
1. Promptly complying with lawful subpoenas, court orders, and other 20
official requests for records or information relating to virtual currency 21
kiosk transactions or virtual currency kiosk users; 22
2. Responding in good faith to lawful requests relating to fraud involving 23
a virtual currency kiosk; and 24
3. Designating a point of contact for communication with law 25
enforcement, the department, and the Attorney General regarding 26
fraud-related matters. 27
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(7) (a) Each virtual currency kiosk operator shall designate a qualified natural 1
person to serve as the operator's chief compliance officer for virtual 2
currency kiosk business conducted in this state. 3
(b) The chief compliance officer shall be responsible f or coordinating, 4
monitoring, and ensuring the operator's and its agents' compliance with: 5
1. This section; and 6
2. All other applicable state and federal laws, including all 7
administrative regulations, rules, and orders promulgated or issued 8
thereunder. 9
SECTION 19. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 10
IS CREATED TO READ AS FOLLOWS: 11
It shall be a violation of this subtitle for an applicant, a licensee, a virtual currency 12
kiosk operator, an agent, or any other person to do any of the following: 13
(1) With regard to virtual currency kiosk business in this state, whether or not the 14
person is required to have a license: 15
(a) Directly or indirectly employ any scheme, device, or artifice to defraud or 16
mislead, when the app licant, licensee, operator, agent, or person should 17
have known that the scheme, device, or artifice was defrauding or 18
misleading; or 19
(b) Engage in any: 20
1. Unfair or deceptive practice; or 21
2. Other act or conduct that would warrant the denial, suspension, o r 22
revocation of a license under Section 25 of this Act; 23
(2) Negligently make any false statement, or knowingly or willfully make any 24
omission of material fact, in connection with: 25
(a)_ Any information or reports relating to virtual currency kiosk business in 26
this state filed with: 27
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1. A state or federal government agency; 1
2. The registry, as defined in Section 5 of this Act; or 2
3. Any agency or authority, as part of a nationwide licensing system, that 3
is designated by the commissioner to accept filings under Section 5 of 4
this Act; or 5
(b) Any investigation or examination conducted by the commissioner or any 6
other state or federal gov ernment agency relating to virtual currency kiosk 7
business in this state; or 8
(3) Fail to truthfully account for any assets in connection with any virtual currency 9
kiosk transaction. 10
SECTION 20. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 11
IS CREATED TO READ AS FOLLOWS: 12
In addition to the requirements of this subtitle, every virtual currency kiosk operator 13
and its agents shall comply with all applicable federal and state laws. 14
SECTION 21. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 15
IS CREATED TO READ AS FOLLOWS: 16
(1) Any person may file a written complaint with the commissioner relating to: 17
(a) Virtual currency kiosk business in this state; or 18
(b) The c onduct of any person engaged or participating in virtual currency 19
kiosk business in this state. 20
(2) The commissioner may conduct an investigation, upon complaint or otherwise, of 21
any virtual currency kiosk operator or other person within or outside this st ate 22
that he or she deems necessary to: 23
(a) Discover violations of this subtitle, including violations of any 24
administrative regulation promulgated, or order issued, under this subtitle; 25
or 26
(b) Secure information necessary for the proper enforcement of this subtitle. 27
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(3) (a) The commissioner may conduct routine examinations of the virtual 1
currency kiosk affairs, business, offices, books, accounts, and records of 2
licensees and agents of licensees. 3
(b) A licensee shall pay a reasonable fee sufficient to cover the cost of each 4
routine examination based upon fair compensation for time and actual 5
expenses. 6
(c) Upon written notice of the amount assessed under paragraph (b) of this 7
subsection, the licensee shall become liable for and pay the assessment to 8
the department. 9
(4) To the extent necessary to conduct any investigation or examination authorized 10
under this section, the commissioner may: 11
(a) Compel the attendance of any person or obtain any books, accounts, or 12
records by subpoenas; 13
(b) Administer oaths and affirmations; 14
(c) Examine under oath or affirmation all persons whose testimony he or she 15
may require; and 16
(d) To the extent permitted under federal law, access and review records and 17
related information relating to compliance with federal anti -money 18
laundering laws, including suspicious activity reports filed pursuant to the 19
Bank Secrecy Act, 31 U.S.C. sec. 5311 et seq., as amended. 20
(5) As a condition of licensure under this subtitle, a licensee and its agents shall, by 21
operation of law, be deemed to consent t o any examination or investigation 22
conducted under this section, whether or not prior notice is given to the licensee 23
or agent. 24
(6) When conducting an investigation or examination, the commissioner may do any 25
of the following: 26
(a) Conduct an on-site or off-site investigation or examination; 27
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(b) Participate in a joint or concurrent investigation or examination with one 1
(1) or more states or federal agencies, including a multistate investigation 2
or examination; and 3
(c) Accept and rely upon an investigation or examination report of one (1) or 4
more states or federal agencies, including a multistate investigation or 5
examination report. 6
(7) (a) Except as provided in paragraph (b) of this subsection and Section 22 of 7
this Act , a routine examination report, related correspondence, and 8
examination-related information shall: 9
1. Be considered confidential by law and privileged; and 10
2. Not be subject to disclosure under KRS 61.870 to 61.884. 11
(b) A licensee: 12
1. May disclose a Kentuc ky routine examination report to a financial 13
institution upon written request from the financial institution for the 14
purpose of assisting the financial institution in its compliance with the 15
Bank Secrecy Act, 31 U.S.C. secs. 5311 to 5332 and 31 C.F.R. pt. 103; 16
and 17
2. Shall provide written notice to the commissioner of a disclosure made 18
under this paragraph at the same time that the disclosure is made. 19
SECTION 22. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 20
IS CREATED TO READ AS FOLLOWS: 21
(1) Except as otherwise provided in subsection (3) of this section, any document, 22
material, report, or other information in the possession or control of the 23
commissioner that is provided to the commissioner according to this subtitle 24
shall: 25
(a) Be confidential by law and privileged; 26
(b) Not be subject to disclosure under KRS 61.870 to 61.884; and 27
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(c) Not be subject to subpoena or discovery, or admissible as evidence in any 1
civil action, unless the commissioner determines or, after notice to the 2
commissioner and a hearing, a court of competent jurisdiction determines 3
that the commissioner would not be prejudiced by disclosure of the 4
document, material, report, or information. 5
(2) (a) The commissioner shall not be required to testify in any civil action 6
concerning any document, material, report, or information that is 7
confidential under subsection (1) of this section. 8
(b) Any person who received documents, materials, reports, or other 9
information that is confidential under subsection (1) of this section while 10
acting under the authority of the commissioner shall not be required to 11
testify in any civil action concerning the documents, materials, reports, or 12
other information. 13
(3) In order to assist in the performance of the commissioner's dutie s, the 14
commissioner may do all of the following: 15
(a) Share or disclose documents, materials, reports, and other information in 16
the commissioner's possession or control, including otherwise confidential 17
and privileged documents, materials, reports, and other information: 18
1. In accordance with Section 5 of this Act; 19
2. In accordance with a joint, concurrent, or multistate investigation or 20
examination conducted under Section 21 of this Act; or 21
3. With the following, if the recipient agrees to maintain the 22
confidentiality and privileged status of shared documents, materials, 23
reports, and information: 24
a. Other state, federal, and international regulatory agencies; 25
b. Organizations made up of other state regulators of virtual 26
currency businesses; and 27
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c. Local, sta te, federal, and international law enforcement 1
authorities; 2
(b) Report apparent violations of law to: 3
1. Other state, federal, and international regulators of virtual currency 4
businesses; 5
2. The registry, as defined in Section 5 of this Act; or 6
3. Local, state, federal, and international law enforcement authorities; 7
(c) Disclose to the public: 8
1. A list of licensees and agents; 9
2. A licensee's registered agent for service of process in this state; 10
3. The aggregate financial or other data of persons regulated under this 11
subtitle; or 12
4. Violations of this subtitle, enforcement actions, and other relevant 13
information that the commissioner deems necessary to carry out the 14
requirements and purposes of this subtitle; 15
(d) Disclose and use documents, materia ls, reports, and other information in 16
the commissioner's possession or control, including otherwise confidential 17
and privileged documents, materials, reports, and other information, in 18
furtherance of any regulatory or legal action brought as part of the 19
commissioner's official duties; 20
(e) Receive any documents, materials, reports, or other information, including 21
otherwise confidential and privileged documents, materials, reports, or 22
other information, from any source; 23
(f) Agree to maintain the confidentiali ty and privileged status of any 24
documents, materials, reports, or information received; 25
(g) Enter into agreements or relationships with other government officials, 26
federal and state regulatory agencies, and regulatory associations; 27
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(h) Use, hire, contract, or employ analytical systems, methods, or software; 1
(i) Consider, accept, and rely upon audit reports prepared by an independent 2
certified public accountant or other qualified third -party auditor for any 3
person subject to this subtitle; or 4
(j) Incorporate all or part of any audit report referenced in paragraph (i) of 5
this subsection into an examination or investigation report. 6
(4) A waiver of any applicable privilege or claim of confidentiality in documents, 7
materials, reports, or other information shall not occur as a result of a disclosure: 8
(a) To the commissioner under this section; or 9
(b) That is made under subsection (3)(a) of this section. 10
SECTION 23. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 11
IS CREATED TO READ AS FOLLOWS: 12
The commissioner shall prepare and publish for public distribution on the 13
department's website an annual report that details and summarizes, in composite form: 14
(1) The data received from virtual currency kiosk operators relating to virtual 15
currency kiosk business conducted in this state; and 16
(2) Information about the licensing of virtual currency kiosk business in this state, 17
including the following information, by calendar year: 18
(a) The number of applications made for a license; 19
(b) The numbe r of applicants who have a license to engage in money 20
transmission; 21
(c) The number of licenses granted; 22
(d) The number of applicants who have been denied a license; and 23
(e) A list of fees that applicants are required to pay. 24
SECTION 24. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 25
IS CREATED TO READ AS FOLLOWS: 26
(1) As used in this section: 27
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(a) "Applicant" includes: 1
1. With respect to conditions placed on, or denial of an application for, 2
an approval to engage in virtual currency kiosk business through an 3
agent in this state, a proposed agent; and 4
2. With respect to a denial of an application for approval of a change of 5
control, a person that filed the application seeking the change of 6
control; and 7
(b) "Person" means any applicant, licensee, virtual currency kiosk operator, 8
agent, or other person. 9
(2) The commissioner shall serve written notice on an applicant prior to: 10
(a) Placing conditions on: 11
1. A license; or 12
2. An approval to engage in virtual currency kiosk business at a location, 13
or through an agent, in this state; or 14
(b) Denying any license or application made under this subtitle. 15
(3) An applicant that is served a notice of intent to deny any license or application 16
made under this subtitle shall be entitled to an administrative hearing on the 17
notice conducted in accordance with KRS Chapter 13B if the applicant files a 18
written request for a hearing with the commissio ner within twenty (20) days of 19
the date of service. 20
(4) (a) The commissioner shall serve an administrative complaint on a person: 21
1. Prior to doing any of the following: 22
a. Taking an adverse action against the person under subsection 23
(1)(a)4. of Section 25 of this Act; 24
b. Issuing a cease and desist order against the person under 25
Section 27 of this Act; or 26
c. Issuing an order that directs the person to: 27
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i. Pay any fee or civil penalty; 1
ii. Provide any remedy; or 2
iii. Be subject to a penalty; and 3
2. Simultaneous with the service of an emergency order on the person 4
under Section 26 of this Act. 5
(b) Except as provided in paragraph (c) of this subsection, a person that is 6
served an administrative complaint under paragraph (a) of this subsection 7
shall be entitled to an administrative hearing on the complaint conducted in 8
accordance with KRS Chapter 13B if the person files both of the following 9
with the commissioner within twenty (20) days of the date of service: 10
1. A written answer to the complaint; and 11
2. A request for hearing. 12
(c) A person that complies with paragraph (b) of this subsection in response to 13
an administrative complaint and emergency order issued under Section 25 14
of this Act shall be entitled to an emergency administrative hearing 15
conducted in accordance with KRS 13B.125. 16
(5) (a) Except as provided in paragraph (b) of this subsection, the commissioner 17
shall serve any notice, complaint, or emergency order referenced in this 18
section by certified mail or personal delivery to the person's last known 19
address or upon the person's agent for service of process. 20
(b) If the commissioner is unable to reasonably determine a person's last 21
known address or agent for service of process, the commissioner may serve 22
a notice, a complaint, or an emergency order by certified mail or personal 23
delivery t o any owner or operator of the premises or real property upon 24
which the person's virtual currency kiosk or kiosks are located. 25
(6) Service by certified mail shall be complete as provided in KRS 13B.050(2). 26
(7) If any person fails to timely file a request f or hearing under subsection (3) of this 27
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section, or a written answer and request for hearing under subsection (4) of this 1
section, the commissioner may, as applicable and subject to KRS Chapter 13B, 2
issue a final order: 3
(a) Taking the action that was: 4
1. Set forth in the notice; or 5
2. Sought in the complaint; or 6
(b) Affirming the emergency action that was taken. 7
(8) All other requirements of and rights arising under KRS Chapter 13B shall apply 8
to administrative hearings conducted and orders issued under this subtitle. 9
(9) The commissioner may, at any time, enter into a consent order with any person to 10
resolve a matter arising under this subtitle. 11
SECTION 25. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 12
IS CREATED TO READ AS FOLLOWS: 13
(1) As used in this section: 14
(a) "Adverse action" means to take any of the following actions: 15
1. Deny or condition a license; 16
2. Deny, in whole or in part, an application to engage in virtual currency 17
kiosk business at one (1) or more locatio ns, or through one (1) or 18
more agents, in this state; 19
3. Condition an approval: 20
a. To engage in virtual currency kiosk business at a location in this 21
state; or 22
b. Of an agent to engage in virtual currency kiosk business in this 23
state on behalf of an applicant or licensee; or 24
4. Suspend, revoke, or refuse to renew: 25
a. A license; 26
b. An approval to engage in virtual currency kiosk business at a 27
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location in this state; or 1
c. An approval of an agent to engage in virtual currency kiosk 2
business in this state on behalf of a licensee; 3
(b) "Regulated person" means any applicant, licensee, or agent; and 4
(c) 1. "Unsafe or unsound act or practice" means an act or practice that: 5
a. Creates a likelihood of material loss, insolvency, or dissipation of 6
a regulated person's assets; or 7
b. Materially prejudices the: 8
i. Financial condition of a regulated person; or 9
ii. Interests of a regulated person's customers. 10
2. In determining whether a regulated person has engaged, or is 11
engaging, in an unsafe or unsound act or practice, the commissioner 12
may consider: 13
a. The size and condition of the person's business; 14
b. The magnitude of the loss; 15
c. The gravity of the violation of this subtitle; 16
d. Any action taken by another state or federal government against 17
the person; and 18
e. The previous conduct of the person. 19
(2) Subject to Section 24 of this Act and KRS 335B.020, the commissioner may take 20
an adverse action against a regulated person if the commi ssioner finds one (1) or 21
more of the following: 22
(a) The regulated person has: 23
1. Violated any: 24
a. Provision of this subtitle; 25
b. Other state or federal law related to money transmission or 26
virtual currency kiosk business; or 27
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c. Consent order or compliance agreement entered into with the 1
commissioner; 2
2. Engaged in: 3
a. An unsafe or unsound act or practice; 4
b. An unfair, deceptive, or dishonest act or practice; 5
c. Fraud, an intentional misrepresentation, or gross negligence; or 6
d. A misappropriation of legal tender, virtual currency, or other 7
assets; 8
3. Misrepresented material facts or made a false promise likely to 9
influence, persuade, or induce a virtual currency kiosk user to engage 10
in a virtual currency kiosk transaction; 11
4. Misrepresented or concealed a m aterial fact, term, or condition of a 12
virtual currency kiosk transaction; 13
5. Knowingly engaged in a transaction, practice, or course of business 14
that perpetrates a fraud upon any person in connection with a virtual 15
currency kiosk transaction; 16
6. Failed to exchange, transfer, or store, without just cause, any funds in 17
accordance with any agreement connected with a virtual currency 18
kiosk business; 19
7. Failed to timely re mit, account for, or deliver to any person any legal 20
tender, virtual currency, precious metals, electronic certificates, or 21
other assets legally due to the person; 22
8. Failed to implement reasonable risk -mitigation measures to prevent 23
fraudulent activity by third parties in connection with a virtual 24
currency kiosk transaction; 25
9. Been found to have violated any of the recordkeeping and reporting 26
requirements of the United States government, including 31 U.S.C. 27
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secs. 5311 to 5332 and 31 C.F.R. pt. 103; 1
10. Been convicted of, pled guilty to, or pled nolo contendere, or 2
knowingly employed or contracted with a responsible individual that 3
has been convicted of, pled guilty to, or pled nolo contendere, to a: 4
a. Felony; or 5
b. A misdemeanor: 6
i. Related to money trans mission or virtual currency kiosk 7
business; or 8
ii. Involving theft, fraud, or breach of trust; or 9
11. Has had any license, registration, claim of exemption, or other 10
authorization to do business relating to the financial services industry 11
denied, revoked, suspended, conditioned, restricted, probated, or 12
terminated by any state, federal, or foreign jurisdiction; 13
(b) The regulated person: 14
1. Is insolvent; 15
2. Has suspended payment of its obligations or made a general 16
assignment for the benefit of its creditors; 17
3. Has: 18
a. Become the debtor, alleged debtor, respondent, or person in a 19
similar capacity in a case or other proceeding under any 20
bankruptcy, reorganization, arrangement, readjustment, 21
insolvency, receivership, dissolution, liquidation, or similar law; 22
and 23
b. Not obtained from a court, within a reasonable time, 24
confirmation of a plan or dismissal of the case or proceeding; or 25
4. Has applied for, or has permitted the appointment of, a receiver, 26
trustee, or other agent of a court for itself or for a substan tial part of 27
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its assets; 1
(c) The regulated person has knowingly made or provided, or caused to be 2
made or provided, to the commissioner one (1) or more of the following: 3
1. A material misrepresentation; or 4
2. A false or fraudulent: 5
a. Material fact; or 6
b. Financial statement; 7
(d) The applicant or licensee suppressed or withheld from the commissioner 8
any information which, if submitted by the applicant or licensee, warrants 9
or would have warranted the commissioner denying a license; 10
(e) The applicant or lice nsee failed to terminate or suspend the authority of its 11
responsible individual or agent to act on its behalf when the applicant or 12
licensee knew, or was given reasonable notice, that its responsible 13
individual or agent: 14
1. Violated, or was about to violat e, a material provision of this subtitle, 15
including any administrative regulation or order promulgated or 16
issued by the commissioner; or 17
2. Engaged in, or was about to engage in, an act or practice that would 18
warrant an adverse action under this section; 19
(f) Any of the following are listed on the specially designated nationals and 20
blocked persons list prepared by the United States Department of the 21
Treasury or the United States Department of State under Presidential 22
Executive Order No. 13224 as a potential threat to commit terrorist acts or 23
to finance terrorist acts: 24
1. The regulated person; 25
2. An executive officer of the regulated person; 26
3. A director of the regulated person; 27
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4. A key shareholder of the regulated person; 1
5. A person in control of the regulated person; or 2
6. A responsible individual of the applicant or licensee; 3
(g) The competence, experience, character, or general fitness of an agent, or a 4
person in control of the agent, indicates that it is not in the public interest to 5
permit the agent to be engaged in virtual currency kiosk business in this 6
state; 7
(h) The applicant or licensee no longer meets the requirements of this subtitle 8
to: 9
1. Hold a license; or 10
2. Engage in virtual currency kiosk business at one (1) or more locations 11
in this state; or 12
(i) Any fact or condition exists that, if it existed at the time the applicant or 13
licensee applied for a license, or approval to engage in virtual currency 14
kiosk business at one (1) or more locations, or through one (1) or more 15
agents, in this state, would have been grounds for denying the application. 16
(3) Subsection (2)(a)1. of this section includes all of the following: 17
(a) Violating any administrative regulation promulgated , or order of general 18
application issued, under this subtitle; 19
(b) Failing to pay any fee, civil penalty, or remedy that is owed under this 20
subtitle; 21
(c) Violating the written conditions under which a license or approval was 22
issued, renewed, or maintained under this subtitle; 23
(d) Refusing to permit, or failing to cooperate substantially with, an 24
investigation or examination under this subtitle; 25
(e) Failing, within a reasonable time, to furnish any information or file any 26
notice or report required or otherwi se requested by the commissioner under 27
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this subtitle; and 1
(f) Failing to comply with a lawful order or subpoena issued by the 2
commissioner. 3
(4) Subject to Section 24 of this Act: 4
(a) The commissioner may, at any time, issue a notice of intent to impose 5
conditions on a license, or approval to engage in virtual currency kiosk 6
business at one (1) or more locations, or through one (1) or more agents, in 7
this state if the commissioner finds that the conditions, including any 8
additional bond amount specified by t he commissioner under Section 9 of 9
this Act, are necessary for a licensee to continue to satisfy the requirements 10
of this subtitle for licensure; 11
(b) A notice of intent issued under paragraph (a) of this subsection shall specify 12
the additional conditions that are required for the licensee and any agent; 13
(c) The commissioner may impose conditions on a license, or approval to 14
engage in virtual currency kiosk business at one (1) or more locations, or 15
through one (1) or more agents, in this state if the license e, agent, or both, 16
as applicable, files a written acceptance of the conditions specified in the 17
notice issued under paragraph (a) of this subsection to the licensee, agent, 18
or both within thirty (30) days after service of the notice; and 19
(d) If the departm ent does not receive a written acceptance of the conditions 20
specified in a notice issued under paragraph (a) of this subsection to a 21
licensee, agent, or both within thirty (30) days after service of the notice, the 22
commissioner shall serve an administrativ e complaint on the licensee, 23
agent, or both, as applicable, seeking to take an appropriate adverse action 24
under subsection (1)(a)4. of this section relating to the license or approval. 25
(5) Any person or person in control whose license, or agent or person i n control of 26
an agent whose approval as an agent, has been: 27
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(a) Denied shall not be eligible to apply for a license, to serve as an agent, or to 1
serve as a person in control of a licensee or agent for one (1) year after the 2
date of denial; or 3
(b) Revoked shall not be eligible to apply for a license, to serve as an agent, or 4
to serve as a person in control of a licensee or agent: 5
1. For the first revocation, until three (3) years after the date of 6
revocation; and 7
2. For any subsequent revocation, permanently. 8
(6) The surrender or expiration of a license, or an agent designation, shall not affect 9
a proceeding to suspend or revoke the license or approval of the agent. 10
SECTION 26. A NE W SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 11
IS CREATED TO READ AS FOLLOWS: 12
(1) As used in this section: 13
(a) "Emergency order" means an order that does one (1) or more the following 14
without prior notice and hearing: 15
1. Suspends or conditions: 16
a. Any license; or 17
b. An approval to engage in virtual currency kiosk business at a 18
location, or through an agent, in this state; or 19
2. Directs any peace officer to: 20
a. Seize or impound a virtual currency kiosk, including any 21
contents thereof; or 22
b. Render a virtual currency kiosk inoperable; and 23
(b) "Person" means any licensee, virtual currency kiosk operator, agent, or 24
other person. 25
(2) Subject to Section 24 of this Act, the commissioner may issue an emergency order 26
against any person, pending further investigation, th e entry of a final order, or 27
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other final legal action, if the commissioner has reason to believe or determines 1
one (1) or more of the following: 2
(a) The person is acting in violation of Section 4 of this Act; 3
(b) The licensee is not in compliance with Section 9 of this Act; 4
(c) The person has committed a material violation of this subtitle that poses an 5
immediate and irreparable harm to the public health, safety, or welfare; 6
(d) Subject to KRS 335B.020, the licensee or agent has been convicted of, pled 7
guilty to, or pled nolo contendere, or the licensee is knowingly employing or 8
contracting with a responsible individual that has been convicted of, pled 9
guilty to, or pled nolo contendere, to a: 10
1. Felony involving theft, fraud, or breach of trust; or 11
2. A crime under the USA PATRIOT Act of 2001, Pub. L. No. 107-56; 12
(e) The licensee has had any license, registration, claim of exemption, or other 13
authorization to do business relating to money transmission or virtual 14
currency kiosk business denied, revoked, suspe nded, or terminated by any 15
state, federal, or foreign jurisdiction; 16
(f) The licensee, agent, the licensee's responsible individual, or any key 17
shareholder, executive officer, director, or other person in control of the 18
licensee or agent is listed or become s listed on the specially designated 19
nationals and blocked persons list prepared by the United States 20
Department of the Treasury or United States Department of State under 21
Presidential Executive Order No. 13224 as a potential threat to commit 22
terrorist acts or to finance terrorist acts; or 23
(g) The licensee or agent is insolvent or otherwise satisfies one (1) of the 24
grounds listed in subsection (2)(b) of Section 25 of this Act. 25
(3) An emergency order issued under this section shall: 26
(a) Pursuant to KRS 13B.1 25, become effective when served by the 27
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commissioner; and 1
(b) Remain in effect until it is: 2
1. Stayed, withdrawn, suspended, or superseded by order of the 3
commissioner; or 4
2. Terminated by court order. 5
SECTION 27. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 6
IS CREATED TO READ AS FOLLOWS: 7
(1) Subject to Section 24 of this Act, the commissioner may issue a cease and desist 8
order requiring an applicant, a licensee, a virtual currency kiosk operator, an 9
agent, o r any other person to cease and desist from violating one (1) or more 10
identified provisions of the following, if the commissioner has reason to believe or 11
determines that the violations have occurred or will occur: 12
(a) This subtitle; 13
(b) An administrative regulation promulgated under this subtitle; 14
(c) An order issued under this subtitle; or 15
(d) An agreement entered with the commissioner relating to compliance with 16
this subtitle. 17
(2) A cease and desist order issued under this section shall remain in effect until it is: 18
(a) Stayed, withdrawn, suspended, or superseded by order of the commissioner; 19
or 20
(b) Terminated by court order. 21
SECTION 28. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 22
IS CREATED TO READ AS FOLLOWS: 23
(1) As used in this section, "person" means any applicant, licensee, virtual currency 24
kiosk operator, agent, or other person. 25
(2) Subject to Section 24 of this Act, the commissioner may do one (1) or more of the 26
following: 27
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(a) Issue an order against any person to: 1
1. Refund any amount charged or collected in violation of this subtitle; 2
or 3
2. Pay any fee or civil penalty, or provide any other remedy, authorized 4
under this subtitle; 5
(b) Levy a civil penalty against any person that violates, or participates in the 6
violation of, any: 7
1. Provision of this subtitle; 8
2. Administrative regulation promulgated under this subtitle; 9
3. Order issued under this subtitle; or 10
4. Agreement with the commissioner relating to compliance with this 11
subtitle; and 12
(c) For any virtual c urrency kiosk operator or its agent that is subject to a civil 13
penalty under paragraph (b) of this subsection, issue an order directing any 14
peace officer to: 15
1. Seize or impound the operator's or agent's virtual currency kiosk, 16
including any contents thereof; or 17
2. Render the operator's or agent's virtual currency kiosk inoperable. 18
(3) The civil penalty levied under subsection (2)(b) of this section: 19
(a) Shall be not less than one thousand dollars ($1,000) nor more than five 20
thousand dollars ($5,000) per violation; and 21
(b) May: 22
1. Be assessed for each day the violation is outstanding; and 23
2. Include an or der for the person to pay the state's costs and expenses 24
for the examination, investigation, and prosecution of the matter, 25
including reasonable attorney's fees and court costs. 26
SECTION 29. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 27
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IS CREATED TO READ AS FOLLOWS: 1
(1) A person that intentionally or knowingly makes a false statement, 2
misrepresentation, false certification, or false entry, or omits a material entry, in 3
a record filed or required to be maintained under this subtitle is guilty of a Class 4
D felony. 5
(2) A person that intentionally or knowingly engages in virtual currency kiosk 6
business in this state for which a license is required under this subtitle without 7
being licensed under this subtitle is guilty of a Class C felony. 8
Section 30. KRS 286.2-015 is amended to read as follows: 9
(1) Except as provided in KRS 41.470 to 41.476 and 41.480, and 10
subsections[subsection] (3) and (4) of this sectio n, all political subdivisions of the 11
Commonwealth shall be prohibited from enacting and enforcing ordinances, 12
resolutions, and regulations pertaining to the financial or lending activities of 13
persons or entities that: 14
(a) Are subject to: 15
1. The jurisdiction of the department; or 16
2. The provisions of this chapter; 17
(b) Are subject to the jurisdiction or regulatory supervision of the Board of 18
Governors of the Federal Reserve System, the Office of the Comptroller of 19
the Currency, the National Credit Union Admin istration, the Farm Credit 20
Administration, the Federal Deposit Insurance Corporation, or the United 21
States Department of Housing and Urban Development; or 22
(c) Originate, purchase, sell, assign, securitize, assist, facilitate, or service 23
property interests or obligations created by financial transactions or loans 24
made, executed, or originated by persons or entities referred to in paragraph 25
(a) or (b) of this subsection. 26
(2) The requirements of this section shall apply to all ordinances, resolutions, or 27
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regulations pertaining to financial or lending activities, including any ordinances, 1
resolutions, or regulations that: 2
(a) Limit or disqualify persons or entities from doing business with a political 3
subdivision based upon financial or lending activities; or 4
(b) Impose additional reporting requirements or other obligations on persons or 5
entities referred to in subsection (1) of this section seeking to do business with 6
a political subdivision. 7
(3) Nothing in this section shall be interpreted as preventing the enf orcement of 8
ordinances, regulations, or resolutions of political subdivisions of the 9
Commonwealth pertaining to civil rights. 10
(4) (a) Political subdivisions of this Commonwealth may enact and enforce 11
ordinances, regulations, and resolutions pertaining to v irtual currency 12
kiosk business that are not in direct conflict with state law. 13
(b) Ordinances, regulations, and resolutions of political subdivisions of the 14
Commonwealth that impose greater requirements or restrictions on virtual 15
currency kiosk business th an the requirements or restrictions set forth in 16
Subtitle 13 of KRS Chapter 286 shall not be considered in direct conflict 17
with state law. 18
Section 31. KRS 431.073 is amended to read as follows: 19
(1) Any person who has been: 20
(a) Convicted of a Class D felony violation of Section 29 of this Act or KRS 21
17.175, 186.990, 194A.505, 194B.505, 217.181, 217.207, 217.208, 218A.140, 22
218A.1415, 218A.1416, 218A.1417, 218A.1418, 218A.1423, 218A.1439, 23
218A.282, 218A.284, 218A.286, 218A.3 20, 218A.322, 218A.324, 218A.500, 24
244.165, 286.11 -057, 304.47 -025, 324.990, 365.241, 434.155, 434.675, 25
434.850, 434.872, 511.040, 512.020, 514.030, 514.040, 514.050, 514.060, 26
514.065, 514.070, 514.080, 514.090, 514.100, 514.110, 514.120, 514.140, 27
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514.150, 514.160, 516.030, 516.060, 516.090, 516.108, 517.120, 518.040, 1
522.040, 524.100, 525.113, 526.020, 526.030, 528.020, 528.040, 528.050, 2
530.010, or 530.050; 3
(b) Convicted of a series of Class D felony violations of one (1) or more statutes 4
enumerated in paragraph (a) of this subsection arising from a single incident; 5
(c) Granted a full pardon; or 6
(d) Convicted of a Class D felony, or an offense prior to January 1, 1975 which 7
was punishable by not more than five (5) years' incarceration, which was not a 8
violation of KRS 189A.010, 508.032, or 519.055, abuse of public office, a sex 9
offense, or an offense committed against a child, and did not result in serious 10
bodily injury or death; or of multiple felony offenses eligible under this 11
paragraph; 12
may file with the court in which he or she was convicted an application to have the 13
judgment vacated. The application shall be filed as a motion in the original criminal 14
case. The person shall be informed of the right at the time of adjudication. 15
(2) (a) A verified application to have the judgment vacated under this section shall be 16
filed no sooner than five (5) years after the completion of the person's 17
sentence, or five (5) years after the successful completion of the person's 18
probation or parole, whichever occurs later. 19
(b) Upon the payment of the filing fee and the filing of the application, the Circuit 20
Court clerk shall serve a notice of filing upon the office of the 21
Commonwealth's attorney or county attorney that prosecuted the case and the 22
county attorney of the county where the judgment was entered. The office of 23
the Commonwealth's attorney or county attorney that prosecuted the case 24
shall file a response within sixty (60) days after being served with the notice 25
of filing. That time period may be extended for good cause, but the hearing on 26
the application to vacate the judgment shall occur no later than one hundred 27
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twenty (120) days following the filing of the application. The inability to 1
determine the location of the crime victim shall constitute goo d cause for an 2
extension of time. No hearing upon the merits of the application shall be 3
scheduled until the Commonwealth's response has been filed, or if no 4
response is received, no later than one hundred twenty (120) days after the 5
filing of the application. 6
(c) In any case in which the Commonwealth objects that the application is grossly 7
incomplete, the court shall order the person or agency originating the 8
application to supplement the application. 9
(3) Upon the filing of the Commonwealth's response to a n application, or if no 10
response is received, no later than one hundred twenty (120) days after the filing of 11
the application, the court shall set a date for a hearing and the Circuit Court clerk 12
shall notify the office of the Commonwealth's attorney or co unty attorney that 13
prosecuted the case. The office of the Commonwealth's attorney or county attorney 14
that prosecuted the case shall notify the victim of the crime, if there was an 15
identified victim. The Commonwealth's attorney or county attorney shall be 16
authorized to obtain without payment of any fee information from the 17
Transportation Cabinet regarding the crime victim's address on file regarding any 18
vehicle operator's license issued to that person. 19
(4) (a) In an application pursuant to subsection (1)(d) of this section, upon the filing 20
of the Commonwealth's response objecting to the vacating of a judgment and 21
expungement of a record, the court shall schedule a hearing within one 22
hundred twenty (120) days of the Commonwealth's response. The prosecutor 23
shall specify in the objection the reasons for believing a denial of the 24
application is justified. At the hearing at which the applicant or his or her 25
attorney must be present, the applicant must prove by clear and convincing 26
evidence that: 27
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1. Vacating the jud gment and expunging the record is consistent with the 1
welfare and safety of the public; 2
2. The action is supported by his or her behavior since the conviction or 3
convictions, as evidenced that he or she has been active in rehabilitative 4
activities in prison and is living a law-abiding life since release; 5
3. The vacation and expungement is warranted by the interests of justice; 6
and 7
4. Any other matter deemed appropriate or necessary by the court to make 8
a determination regarding the petition for expungement is met. 9
(b) At the hearing, the applicant may testify as to the specific adverse 10
consequences he or she may be subject to if the application is denied. The 11
court may hear testimony of witnesses and any other matter the court deems 12
proper and relevant to it s determination regarding the application. The 13
Commonwealth may present proof of any extraordinary circumstances that 14
exist to deny the application. A victim of any offense listed in the application 15
shall have an opportunity to be heard at any hearing held under this section. 16
(c) If the court determines that circumstances warrant vacation and expungement 17
and that the harm otherwise resulting to the applicant clearly outweighs the 18
public interest in the criminal history record information being publicly 19
available, then the original conviction or convictions shall be vacated and the 20
records shall be expunged. The order of expungement shall not preclude a 21
prosecutor's office from retaining a nonpublic record for law enforcement 22
purposes only. 23
(5) The court may order the judgment vacated, and if the judgment is vacated the court 24
shall dismiss with prejudice any charges which are eligible for expungement under 25
subsection (1) of this section or KRS 431.076 or 431.078, and, upon full payment of 26
the fee in subsection (11) of this section, order expunged all records in the custody 27
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of the court and any records in the custody of any other agency or official, including 1
law enforcement records, if the court finds that: 2
(a) The person had not in the five (5) years prior to the filing of the application to 3
have the judgment vacated been convicted of a felony or a misdemeanor; 4
(b) No proceeding concerning a felony or misdemeanor is pending or being 5
instituted against the person; and 6
(c) For an application pursuant to subsectio n (1)(d) of this section, the person has 7
been rehabilitated and poses no significant threat of recidivism. 8
(6) If the court has received a response from the office of the Commonwealth's attorney 9
or county attorney that prosecuted the case stating no object ion to the application to 10
have the judgment vacated, or if one hundred twenty (120) days have elapsed since 11
the filing of the application and no response has been received from the victim or 12
the office of the Commonwealth's attorney or county attorney that prosecuted the 13
case, the court may, without a hearing, vacate the judgment in the manner 14
established in subsection (5) of this section. 15
(7) Upon entry of an order vacating and expunging a conviction, the original conviction 16
shall be vacated and, upon full payment of the fee in subsection (11) of this section, 17
the record shall be expunged. The court and other agencies shall cause records to be 18
deleted or removed from their computer systems so that the matter shall not appear 19
on official state -performed background checks. The court and other agencies shall 20
reply to any inquiry that no record exists on the matter. The person whose record is 21
expunged shall not have to disclose the fact of the record or any matter relating 22
thereto on an application for employmen t, credit, or other type of application. If the 23
person is not prohibited from voting for any other reason, the person's ability to 24
vote shall be restored and the person may register to vote. 25
(8) An order vacating a conviction under this section shall not e xtend or revive an 26
expired statute of limitations, shall not constitute a finding of legal error regarding 27
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the proceedings leading to or resulting in the conviction, shall not nullify any 1
findings of fact or conclusions of law made by the trial court or an y appellate court 2
regarding the conviction, and shall not constitute a finding of innocence regarding 3
the conviction. 4
(9) The Administrative Office of the Courts shall establish a form application to be 5
used in filing an application to have judgment vacated and records expunged. 6
(10) The filing fee for an application to have judgment vacated and records expunged 7
shall be fifty dollars ($50), which shall be deposited into a trust and agency account 8
for deputy clerks and shall not be refundable. 9
(11) (a) Upon the issuance of an order vacating and expunging a conviction pursuant 10
to this section, the applicant shall be charged an expungement fee of two 11
hundred fifty dollars ($250), which may be payable by an installment plan in 12
accordance with KRS 534.020. 13
(b) When the order is issued, the court shall set a date, no sooner than eighteen 14
(18) months after the date of the order, by which the defendant must comply 15
with the installment payment plan. The applicant shall be given notice of the 16
total amount due, the pay ment frequency, and the date by which all payments 17
must be made. The notice shall state that the expungement cannot be 18
completed until full payment is received, and that if the applicant has not 19
completed the installment payment plan by the scheduled date, he or she shall 20
appear on that date to show good cause as to why he or she is unable to satisfy 21
the obligations. Notwithstanding provisions of KRS 534.020 to the contrary, 22
no applicant shall be ordered to jail for failure to complete an installment plan 23
ordered pursuant to this section. 24
(c) The revenues and interest from the expungement fee shall be deposited in the 25
expungement fund created in KRS 431.0795. 26
(12) This section shall be retroactive. 27
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SECTION 32. A NEW SECTIO N OF KRS CHAPTER 367 IS CREATED TO 1
READ AS FOLLOWS: 2
(1) Any of the following shall be deemed an unfair, false, misleading, or deceptive act 3
or practice in the conduct of trade or commerce in violation of KRS 367.170: 4
(a) On and after April 30, 2027, a violation of any provision of Subtitle 13 of 5
KRS Chapter 286 by a person subject to regulation as a virtual currency 6
kiosk operator or agent under that subtitle; and 7
(b) A violation of Section 33 of this Act. 8
(2) All of the remedies, powers, and duties provided to the Attorney General or any 9
other person under KRS 367.110 to 367.300, and the penalties provided in KRS 10
367.990, pertaining to acts and practices declared unlawful by KRS 367.170, shall 11
apply with equal force and effect to any of the following: 12
(a) On and after April 30, 2027, a violation of any provision of Subtitle 13 of 13
KRS Chapter 286 by a person subject to regulation as a virtual currency 14
kiosk operator or agent under that subtitle; and 15
(b) A violation of Section 33 of this Act. 16
(3) (a) The remedies and penalties prescribed in this section shall be cumulative. 17
(b) This section shall not be construed to limit or restrict the powers, duties, 18
remedies, or penalties available to the Attorney General, the 19
Commonwealth, or any other person under any other statutory or common 20
law. 21
SECTION 33. A NEW SECTION OF KRS 369.130 TO 369.139 IS CREATED 22
TO READ AS FOLLOWS: 23
(1) As used in this section, "hardware wallet provider" or "provider" means a 24
person that offers or provides a hardware wallet. 25
(2) (a) A hardware wallet provider sh all provide the following disclosures to 26
customers for all hardware wallets sold in Kentucky: 27
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1. All information that a customer should retain, maintain, and store in 1
order to: 2
a. Access the contents of a wallet; and 3
b. Backup and restore a wallet; and 4
2. If applicable: 5
a. The provider does not retain, maintain, or store the information 6
that a customer needs to: 7
i. Access the contents of a wallet; or 8
ii. Backup and restore a wallet; and 9
b. The customer's loss of the information referenced in 10
subparagraph 1. of this paragraph will likely result in a total loss 11
of the contents of a wallet. 12
(b) The disclosures required under paragraph (a) of this subsection shall be: 13
1. Displayed during wallet setup; 14
2. Contained in product packaging; 15
3. On the provider's website; 16
4. Furnished together in a clear and coherent manner; 17
5. In the same color, font, and size as the other language primarily used 18
for the wallet setup, in the product packaging, or on the provider's 19
website, as applicable; and 20
6. Available in a format that can be easily downloaded, printed, or 21
otherwise retained by the customer. 22
(3) A violation of this section shall be deemed unlawful as provided in Section 32 of 23
this Act. 24
(4) (a) The remedies and penalties prescribed in this section shall be cumulative. 25
(b) This section shall not be construed to limit or restrict the powers, duties, 26
remedies, or penalties available to the Attorney General, the 27
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Commonwealth, or any other person under any other statutory or common 1
law. 2
(5) The Attorney General may promulgate administrative regulations in accordance 3
with KRS Chapter 13A necessary to effectuate, or as an aid to the effectuation of, 4
the proper enforcement of this section. 5
Section 34. Sections 1 to 31 of this Act take effect April 30, 2027. 6
Section 35. On or before January 1, 2027, the commissioner of the Kentucky 7
Department of Financial Institutions shall promulgate any emergency and ordinary 8
administrative regulations required under Sections 1 to 30 of this Act. 9