Bill Summary – FastDemocracy

       Florida Senate - 2024                                     SB 914
       
       
        
       By Senator Perry
       
       
       
       
       
       9-00756-24                                             2024914__
                      A bill to be entitled                      
       An act relating to digital trust business; creating s.
       658.996, F.S.; defining terms; providing legislative
       intent; prohibiting certain entities from engaging in
       digital trust business without an application to and
       prior approval by the Office of Financial Regulation;
       specifying the requirements of such application;
       authorizing a state bank or state trust company to
       exclusively engage in virtual trust business under
       certain circumstances; authorizing certain companies
       to submit an application to the office to organize as
       a state trust company to exclusively engage in virtual
       trust business; specifying the requirements of such
       application and that such application is deemed to
       satisfy certain provisions; requiring the office to
       consider specified factors when acting on applications
       to engage in digital trust business; specifying the
       timeframe for the office to grant or deny an
       application to engage in digital trust business;
       providing that such application will be deemed
       approved if the office fails to render a decision
       within a specified timeframe; authorizing the
       Financial Services Commission to adopt rules;
       specifying the requirements for such rules; requiring
       the commission to adopt rules regarding a failed state
       bank or state trust company and compliance with
       certain procedures; requiring the commission to ensure
       that the state bank’s or state trust company’s
       policies and procedures satisfy certain requirements;
       requiring the commission to establish standards by
       rule which relate to stablecoin; providing
       requirements for such standards; authorizing the
       commission to establish by rule certain requirements
       and standards; authorizing the office to require state
       banks or state trust companies engaged in digital
       trust business and their affiliates to file reports;
       specifying the contents of the reports; providing
       construction; providing an effective date.
        
Be It Enacted by the Legislature of the State of Florida:

       Section 1. Section 658.996, Florida Statutes, is created to
read:
       658.996 Digital trust business.—
       (1) As used in this section, the term:
       (a) “Digital trust business” means any of the following
activities, in either a fiduciary or nonfiduciary capacity:
       1. Receiving virtual currency for transmission or
transmitting virtual currency, except where the transaction is
undertaken for nonfinancial purposes and does not involve the
transfer of more than a nominal amount of virtual currency.
       2. Storing, holding, or maintaining custody or safekeeping
of virtual currency on behalf of a customer.
       3. Buying and selling virtual currency.
       4. Performing exchange services related to virtual
currency, regardless of whether directly or indirectly,
including by affiliating with or being an affiliate of a company
that performs such services.
       5. Controlling, administering, or issuing virtual currency.
       (b) “Stablecoin” means a virtual currency designed to
maintain a stable value relative to a national currency or other
reference assets, which may include a commodity.
       (c) “Virtual currency” has the same meaning as in s.
560.103.
       (2) It is the intent of the Legislature to authorize state
banks and trust companies to engage in digital trust business.
It is the intent of the Legislature that such institutions
wishing to engage in such business shall conduct due diligence
and carefully examine the risks involved in virtual currency
activities through a methodical and comprehensive risk
assessment process consistent with best practices, including
those identified by the office. The Legislature intends that the
office continue to charter state banks and state trust companies
to engage in digital trust business consistent with historical
practice and the requirements of this section.
       (3) A state bank, state trust company, or other company may
not engage in digital trust business, except by application to
and with prior approval of the office.
       (4) The commission shall prescribe by rule the requirements
of the application, but the application must, at minimum,
contain all of the following:
       (a) The applicant’s legal name, including any fictitious or
trade names used by the applicant in the conduct of its
business, the form of business organization of the applicant,
and the date and place of organization of the applicant.
       (b) An organizational chart of the applicant and its
management structure, including its principal officers or senior
management, indicating lines of authority and the allocation of
duties among its principal officers or senior management.
       (c) A list of all of the applicant’s affiliates and an
organizational chart illustrating the relationship among the
applicant and such affiliates.
       (d) A list of, and detailed biographical information for,
each director, principal officer, principal stockholder, and
principal beneficiary of the applicant, as applicable, including
such individual’s name, physical and mailing addresses, and
information and documentation regarding such individual’s
personal history, experience, and qualification, which must be
accompanied by a form of authority, executed by such individual,
to release information to the office.
       (e) For each principal officer, principal stockholder, and
principal beneficiary of the applicant, as applicable, a
background report prepared by an independent investigatory
agency acceptable to the office.
       (f) For each principal officer, principal stockholder, and
principal beneficiary of the applicant, as applicable, and for
all individuals employed by the applicant who have access to any
customer funds, whether denominated in fiat currency or virtual
currency, all of the following:
       1. A set of completed fingerprints to the office or vendor
authorized by s. 943.053(13). The office or vendor shall forward
the fingerprints to the Florida Department of Law Enforcement
for state processing, and the Department of Law Enforcement
shall forward the fingerprints to the Federal Bureau of
Investigation for national processing.
       2. Two portrait-style photographs of the individuals,
measuring not more than 2 inches by 2 inches.
       (g) A current financial statement for the applicant and
each principal officer, principal stockholder, and principal
beneficiary of the applicant, as applicable, and a projected
balance sheet and income statement for the applicant’s
operations for the first 12 to 24 months, as the office
determines appropriate. Such financial statements and balance
statements must be audited or compiled by an independent
certified public accountant (CPA).
       (h) A description of the proposed, current, and historical
business of the applicant, including detail on the products and
services provided and to be provided, all associated website
addresses, the jurisdictions in which the applicant is engaged
in business, the principal place of business, the primary market
of operation, the projected customer base, any specific
marketing targets, and the physical address of any operation in
this state.
       (i) A detailed explanation of all banking arrangements.
       (j) An affidavit describing any pending or threatened
administrative, civil, or criminal action, litigation, or
proceeding before any governmental agency, court, or arbitration
tribunal against the applicant or any of its directors,
principal officers, principal stockholders, or principal
beneficiaries, as applicable, including the names of the
parties, the nature of the proceeding, and the current status of
the proceeding.
       (k) A copy of any insurance policies maintained for the
benefit of the applicant, its directors or officers, or its
customers, as applicable.
       (l) An explanation of the methodology used to calculate the
value of virtual currency in fiat currency.
       (5) A state bank or state trust company may, after being
approved to engage in virtual trust business by the office,
limit its business activities exclusively to persons engaging in
digital trust business by providing written notice to the
office. A company, other than an existing state bank or state
trust company, may submit an application to the office for the
authority to organize as a state trust company to exclusively
engage in digital trust business. Such application must comply
with the requirements of this section and is deemed to satisfy
the application requirements of s. 658.19.
       (6) In acting on an application to engage in digital trust
business, the office shall consider all of the following:
       (a) The financial and managerial resources of an applicant
to conduct digital trust business. The consideration of the
managerial resources of an applicant must include consideration
of the competence, experience, and integrity of the officers,
directors, and principal shareholders of the applicant.
       (b) The financial projections of an applicant, including
the reasonable promise of successful operation of the
applicant’s proposed digital trust business. The consideration
of financial projections must include consideration of the
reasonable likelihood that an applicant will be profitable in
the first 3 to 5 years of operation based on the applicant’s
business plan and product offerings.
       (c) The ability of an applicant to conduct digital trust
business in a safe and sound manner and in compliance with laws
and regulations. In considering such ability, the office shall
consider all of the following:
       1. The ability of the office to obtain such information on
the operations or activities of an applicant, and any affiliate
of an applicant, as the office determines to be appropriate to
supervise and regulate the applicant as well as to determine and
enforce compliance with applicable laws, regulations, orders, or
directives of the office.
       2. The risks associated with an applicant’s digital trust
business, including those relating to cybersecurity and
information technology; network design and maintenance and
related technology and operational considerations; Bank Secrecy
Act, Pub. L. No. 91-508; anti-money laundering and sanctions
compliance; the protection of customer funds, assets, and data
privacy; and the stability and integrity of the payment system,
as applicable.
       (7)(a) The office shall grant or deny any application to
engage in digital trust business within 60 calendar days after
receiving a completed application but may extend the period for
acting on the application for an additional 60 calendar days by
notifying the applicant. Any decision to grant or deny an
application to engage in digital trust business must be made
public, and the office shall provide a statement of the basis
for the decision.
       (b) An application is deemed approved if the office fails
to render a decision within 120 days of the filing of such
application.
       (8) The commission may adopt rules regarding minimum
capital and liquidity requirements and protection of customer
assets for state banks or state trust companies engaged in
digital trust business.
       (a) In establishing capital requirements, the commission
shall ensure that such requirements reflect the risks and value
associated with engaging in the digital trust business. The
office shall also ensure such requirements reflect that the bank
or company engaging in the digital trust business does not hold
customer virtual currency assets in a principal capacity.
       (b) If required by the commission, evidence of a customer’s
virtual currency assets may include a balance sheet of the state
bank or state trust company engaging in the digital trust
business, consistent with federal regulatory guidance.
       (c) In establishing liquidity requirements, the commission
shall, at all times, ensure that a state bank or state trust
company engaged in digital trust business maintains sufficient
liquidity in a form satisfactory to the office, which may
include virtual currency and precious metal, in an amount at
least equal to 180 days’ coverage of operating expenses, after
accounting for liabilities on the state bank’s or state trust
company’s balance sheet which reflect an obligation to repay
funds to any party.
       (d) In establishing protection of customer asset rules, the
commission shall ensure that digital trust business customers
are recognized as the owners of funds, deposits, and assets they
have placed in custody with a state bank or state trust company
and that the funds, deposits, and assets do not constitute the
property of the state bank or state trust company in a
bankruptcy, receivership, or other dissolution, as applicable.
The office may require or prohibit, as appropriate, the use of
contract terms in order to ensure that customers are recognized
as the owners of funds, deposits, or assets held by a state bank
or state trust company serving as custodian of such funds,
deposits, or assets so that they do not constitute the property
of the state bank or state trust company in a bankruptcy,
receivership, or other dissolution, as applicable.
       (e) The commission may require that a state bank or state
trust company engaged in digital trust business maintain,
enhance, and, as necessary, develop written procedures that:
       1. Are consistent with the state bank’s or state trust
company’s products, services, and customer base;
       2. In the event of the state bank’s or state trust
company’s bankruptcy, receivership, or other dissolution, as
applicable, are reasonably designed to track, trace, and return
customer funds, deposits, and assets to their proper owner,
including where relevant to the applicable token holders of
record, to the greatest extent possible;
       3. Are reasonably designed to monitor and guard against
fraud and mismanagement; and
       4. Have sufficient independent accounting, audit, and
operation controls or technical infrastructure.
       (9) The commission shall adopt rules ensuring, in the event
of a bankruptcy, receivership, or other dissolution of a state
bank or state trust company engaged in digital trust business,
that the office has the ability to take control of the assets of
the failed state bank or state trust company, act quickly to
protect the customers of such bank or company, and return all
assets belonging to the appropriate owners or holders of record
as soon as possible.
       (10) The commission shall, by rule, ensure that a state
bank or state trust company engaged in digital trust business
maintains, enhances, and, as necessary, develops written
policies and procedures relating to compliance with anti-money
laundering (AML) sections of the Florida Statutes, the Bank
Secrecy Act (BSA), Pub. L. No. 91-508, as amended, and the
regulations of the Office of Foreign Assets Control (OFAC).
       (11) The commission shall require that the state bank's or
state trust company’s BSA/AML policies and procedures do all of
the following:
       (a) Provide for a system of internal controls and processes
to manage and mitigate identified risks.
       (b) Provide for independent testing of a state bank’s or
state trust company’s compliance by qualified parties.
       (c) Designate a qualified BSA/AML compliance officer.
       (d) Ensure that the BSA/AML compliance officer has
appropriate authority, independence, and access to resources to
administer an adequate BSA/AML compliance program based on a
state bank’s or state trust company’s risk profile.
       (e) Provide training for board members and all appropriate
personnel.
       (12) The commission shall require that the state bank’s or
state trust company’s p