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LEGISLATIVE BILL 649
Approved by the Governor May 25, 2021
Introduced by Flood, 19; Vargas, 7; Blood, 3; Lindstrom, 18.
A BILL FOR AN ACT relating to banking and finance; to amend section 8-115,
Reissue Revised Statutes of Nebraska, sections 8-101.02, 8-101.03, 8-102,
8-113, 8-148.09, 8-1,140, 8-601, 8-602, 8-701, 8-702, 8-1120, and 8-2724,
Revised Statutes Cumulative Supplement, 2020, and sections 1-201, 9-102,
9-301, 9-310, 9-312, 9-314, 9-331, and 9-406, Uniform Commercial Code,
Reissue Revised Statutes of Nebraska; to adopt the Nebraska Financial Innovation Act; to authorize digital asset depository entities and provide for the charter, operation, supervision, and regulation of such entities;
to transfer funds; to adopt Uniform Commercial Code provisions on
controllable electronic records; to harmonize provisions; to provide operative dates; and to repeal the original sections.
Be it enacted by the people of the State of Nebraska,
Section 1. Sections 1 to 31 of this act shall be known and may be cited as the Nebraska Financial Innovation Act.
Sec. 2. The Legislature finds and declares that:
(1) Economic development initiatives demand buy-in and input from community stakeholders across multiple industries. The Legislature should send
a strong message that Nebraska wants to bring high-tech jobs and digital asset operations to our state. Nebraska has an incredible opportunity to be a leader in this emerging technology;
(2) Nebraska desires to create an entrepreneurial ecosystem where young talent can be paired with private investors in order to create jobs, enhance our quality of life, and prevent the brain drain that is particularly acute in
rural Nebraska. If Nebraska does not make intentional and meaningful changes to
how it recruits and retains young people, Nebraska will be left behind;
(3) The rapid innovation of blockchain and digital ledger technology,
including the growing use of virtual currency, digital assets, and other controllable electronic records has complicated the development of blockchain services and products in the marketplace;
(4) Blockchain innovators are able and willing to address banking compliance challenges such as federal customer identification, anti-money laundering, and beneficial ownership requirements to comply with regulators'
concerns;
(5) Compliance with federal and state laws, including, but not limited to,
know-your-customer and anti-money-laundering rules and the federal Bank Secrecy Act, is critical to ensuring the future growth and reputation of the blockchain and technology industries as a whole; and
(6) Authorizing digital asset depositories in Nebraska will provide a necessary and valuable service to blockchain innovators and customers,
emphasize Nebraska's partnership with the technology and financial industry,
safely grow this state's ever-evolving financial sector, and afford more opportunities for Nebraska residents.
Sec. 3. For purposes of the Nebraska Financial Innovation Act:
(1) Blockchain means a distributed digital record of controllable electronic record transactions;
(2) Centralized finance means centralized digital asset exchanges,
businesses, or organizations with a valid physical address;
(3) Control has the following meaning:
(a) A person has control of a controllable electronic record if:
(i) The following conditions are met:
(A) The controllable electronic record or the system in which it is recorded, if any, gives the person:
(I) The power to derive substantially all the benefit from the controllable electronic record;
(II) Subject to subdivision (b) of this subdivision, the exclusive power to prevent others from deriving substantially all the benefit from the controllable electronic record; and
(III) Subject to subdivision (b) of this subdivision, the exclusive power to transfer control of the controllable electronic record to another person or
cause another person to obtain control of a controllable electronic record that derives from the controllable electronic record; and
(B) The controllable electronic record, a record attached to or logically associated with the controllable electronic record, or the system in which the controllable electronic record is recorded, if any, enables the person to
readily identify itself as having the powers specified in subdivision (a)(i) of this subdivision; or
(ii) Another person obtains control of the controllable electronic record on behalf of the person, or having previously obtained control of the controllable electronic record, acknowledges that it has control on behalf of
the person.
(b) A power specified in subdivisions (3)(a)(i)(A)(II) or (III) of this section can be exclusive, even if:
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(i) The controllable electronic record or the system in which it is recorded, if any, limits the use to which the controllable electronic record may be put or has protocols that are programmed to result in a transfer of
control; and
(ii) The person has agreed to share the power with another person.
(c) For the purposes of subdivision (3)(a)(i)(B) of this section, a person may be identified in any way, including by name, identifying number,
cryptographic key, office, or account number;
(4) Controllable electronic borrowing means the act of receiving digital assets or the use of digital assets from a lender in exchange for the payment to the lender of digital assets, interest, fees, or rewards;
(5) Controllable electronic record means an electronic record that can be
subjected to control. The term has the same meaning as digital asset and does not include electronic chattel paper, electronic documents, investment property, and transferable records under the Uniform Electronic Transactions Act;
(6) Controllable electronic record exchange means a business that allows customers to purchase, sell, convert, send, receive, or trade digital assets for other digital assets;
(7) Controllable electronic record lending means the act of providing digital assets to a borrower in exchange for digital assets, interest, fees, or rewards;
(8) Controllable electronic records staking means the act of pledging a digital asset or token with an expectation of gaining digital assets, interest,
fees, or other rewards on such act;
(9) Customer means a digital asset depositor or digital asset account holder;
(10) Decentralized finance means digital asset exchanges, businesses, or organizations operating independently on blockchains;
(11) Department means the Department of Banking and Finance;
(12) Digital asset depository means a financial institution that securely holds liquid assets when such assets are in the form of controllable electronic records, either as a corporation organized, chartered, and operated pursuant to
the Nebraska Financial Innovation Act as a digital asset depository institution or a financial institution operating a digital asset depository business as a digital asset depository department under a grant of authority by the director;
(13) Digital asset depository department means a financial institution operating a digital asset depository business as a digital asset depository department under a grant of authority by the director;
(14) Digital asset depository institution means a corporation operating a digital asset depository business organized and chartered pursuant to the Nebraska Financial Innovation Act;
(15) Director means the Director of Banking and Finance;
(16) Financial institution means a bank, savings bank, building and loan association, savings and loan association, whether chartered by the United States, the department, or a foreign state agency; or a trust company;
(17) Fork means a change to the protocol of a blockchain network;
(18) Independent node verification network means a shared electronic data base where copies of the same information are stored on multiple computers; and
(19) Stablecoin means a cryptocurrency designed to have a stable value that is backed by a reserve asset.
Sec. 4. The director shall have the power to issue to corporations desiring to transact business as a digital asset depository institution charters of authority to transact digital asset depository business as defined in the Nebraska Financial Innovation Act. The director shall have general supervision and control over such digital asset depositories.
Sec. 5. (1)(a) A digital asset depository may:
(i) Make contracts as a corporation under Nebraska law;
(ii) Sue and be sued;
(iii) Receive notes as permitted by federal law;
(iv) Carry on a nonlending digital asset banking business for customers,
consistent with subdivision (2)(b) of this section;
(v) Provide payment services upon the request of a customer; and
(vi) Make an application to become a member bank of the federal reserve system.
(b) A digital asset depository shall maintain its main office and the primary office of its chief executive officer in Nebraska.
(c) As otherwise authorized by this section, a digital asset depository may conduct business with customers outside this state.
(2)(a) A digital asset depository institution, consistent with the Nebraska Financial Innovation Act, shall be organized as a corporation under the Nebraska Model Business Corporation Act to exercise the powers set forth in
subsection (1) of this section.
(b) A digital asset depository institution shall not accept demand deposits of United States currency or United States currency that may be
accessed or withdrawn by check or similar means for payment to third parties and except as otherwise provided in this subsection, a digital asset depository institution shall not make any consumer loans for personal, property or
household purposes, mortgage loans, or commercial loans of any fiat currency including, but not limited to, United States currency, including the provision of temporary credit relating to overdrafts. Notwithstanding this prohibition against fiat currency lending by a digital asset depository institution, a digital asset depository institution may facilitate the provision of digital
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asset business services resulting from the interaction of customers with centralized finance or decentralized finance platforms including, but not limited to, controllable electronic record exchange, staking, controllable electronic record lending, and controllable electronic record borrowing. A
digital asset depository institution may purchase debt obligations specified by
subdivision (2)(c) of section 9 of this act.
(c) Subject to the laws of the host state, a digital asset depository institution may open a branch in another state in the manner set forth in
section 8-157 or 8-2303. A digital asset depository institution, including any branch of the digital asset depository institution, may only accept digital asset deposits or provide other digital asset business services under the Nebraska Financial Innovation Act to individual customers or a customer that is
a legal entity other than a natural person engaged in a bona fide business which is lawful under the laws of Nebraska, the laws of the host state if the entity is headquartered in another state, and federal law.
(3) The deposit limitations of subdivision (2)(a)(ii) of section 8-157
shall not apply to a digital asset depository.
(4) Any United States currency coming into an account established by a customer of a digital asset depository institution shall be held in a financial institution, the deposits of which are insured by the Federal Deposit Insurance Corporation, which maintained a main-chartered office in this state, any branch thereof in this state, or any branch of the financial institution which maintained the main-chartered office in this state prior to becoming a branch of such financial institution.
(5) A digital asset depository institution shall establish and maintain programs for compliance with the federal Bank Secrecy Act, in accordance with
12 C.F.R. 208.63, as the act and rule existed on January 1, 2021.
(6) A digital asset depository shall help meet the digital financial needs of the communities in which it operates, consistent with safe and sound operations, and shall maintain and update a public file and on any Internet web site it maintains containing specific information about its efforts to meet community needs, including:
(a) The collection and reporting of data;
(b) Its policies and procedures for accepting and responding to consumer complaints; and
(c) Its efforts to assist with financial literacy or personal finance programs to increase knowledge and skills of Nebraska students in areas such as
budgeting, credit, checking and savings accounts, loans, stocks, and insurance.
Sec. 6. A digital asset depository institution shall be subject to the Interstate Branching and Merger Act, the Nebraska Bank Holding Company Act of
1995, and Chapter 8, articles 6, 8, 13, 14, 15, 16, 19, 20, 25, 26, and 29
unless otherwise limited or excluded or the context otherwise requires.
Sec. 7. (1) No customer shall open or maintain an account with a digital asset depository or otherwise receive any services from the digital asset depository unless the customer meets the criteria of this subsection. A
customer shall:
(a) Make sufficient evidence available to the digital asset depository to
enable compliance with anti-money laundering, customer identification, and beneficial ownership requirements, as determined by the federal Bank Secrecy Act guidance and the policies and practices of the institution; and
(b) If the customer is a legal entity other than a natural person:
(i) Be in good standing with the jurisdiction in the United States in
which it is incorporated or organized; and
(ii) Be engaged in a business that is lawful and bona fide in Nebraska, in the host state, if applicable, and under federal law consistent with subsection
(3) of this section.
(2) A customer which meets the criteria of subsection (1) of this section may be issued a digital asset depository account and otherwise receive services from the digital asset depository, contingent on the availability of sufficient insurance under subsection (5) of section 23 of this act.
(3) Consistent with subdivisions (1)(a)(iv) and (v) of section 5 of this act, and in addition to any requirements specified by federal law, a digital asset depository shall require that any potential customer that is a legal entity other than a natural person provide reasonable evidence that the entity is engaged in a business that is lawful and bona fide in Nebraska, in the host state, and under federal law or is likely to open a lawful, bona fide business within a federal Bank Secrecy Act compliant time frame, as the act existed on
January 1, 2021. For purposes of this subsection, reasonable evidence includes business entity filings, articles of incorporation or organization, bylaws,
operating agreements, business plans, promotional materials, financing agreements, or other evidence.
Sec. 8. The terms and conditions of a customer's digital asset depository account at a digital asset depository shall be disclosed at the time the customer contracts for a digital asset business service. Such disclosure shall be full and complete, contain no material misrepresentations, be in readily understandable language, and shall include, as appropriate and to the extent applicable:
(1) A schedule of fees and charges the digital asset depository may assess, the manner by which fees and charges will be calculated if they are not set in advance and disclosed, and the timing of the fees and charges;
(2) A statement that the customer's digital asset depository account is
not protected by the Federal Deposit Insurance Corporation;
(3) A statement whether there is support for forked networks of each
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digital asset;
(4) A statement that investment in digital assets is volatile and subject to market loss;
(5) A statement that investment in digital assets may result in total loss of value;
(6) A statement that legal, legislative, and regulatory changes may impair the value of digital assets;
(7) A statement that customers should perform research before investing in
digital assets;
(8) A statement that transfers of digital assets are irrevocable, if applicable;
(9) A statement how liability for an unauthorized, mistaken, or accidental transfer shall be apportioned;
(10) A statement that digital assets are not legal tender in any jurisdiction;
(11) A statement that digital assets may be subject to cyber theft or
theft and become unrecoverable;
(12) A statement about who maintains control, ownership, and access to any private key related to a digital assets customer's digital asset account; and
(13) A statement that losing private key information may result in
permanent total loss of access to digital assets.
Sec. 9. (1) At all times, a digital asset depository shall maintain unencumbered liquid assets denominated in United States dollars valued at not less than one hundred percent of the digital assets in custody.
(2) For purposes of this section, liquid assets means:
(a) United States currency held on the premises of the digital asset depository that is not a digital asset depository institution;
(b) United States currency held for the digital asset depository by a federal reserve bank or a Federal Deposit Insurance Corporation-insured financial institution which has a main-chartered office in this state, any branch thereof in this state, or any branch of the financial institution which maintained a main-chartered office in this state prior to becoming a branch of
such financial institution; or
(c) Investments which are highly liquid and obligations of the United States treasury or other federal agency obligations, consistent with rules and regulations or order adopted by the director.
Sec. 10. A digital asset depository shall comply with all state and fe