PRINTER'S NO. 1964
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 1370
Session of
2021
INTRODUCED BY N. NELSON, PISCIOTTANO, KENYATTA, RYAN, JAMES,
SANCHEZ AND LEE, JULY 30, 2021
REFERRED TO COMMITTEE ON COMMERCE, JULY 30, 2021
AN ACT
1 Allowing for a waiver for innovative financial products or
2 services; providing for duties of the Secretary of the
3 Department of Banking and Securities and the Secretary of the
4 Commonwealth; and establishing the Pennsylvania Economic
5 Growth and State Utility Account.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. Short title.
9 This act shall be known and may be cited as the Pennsylvania
10 Economic Growth and State Utility Act.
11 Section 2. Findings.
12 The General Assembly finds and declares:
13 (1) It is declared to be the policy of the State to
14 promote a vigorous and growing economy, to prevent economic
15 stagnation, and to encourage the creation of new job
16 opportunities in order to ameliorate the hazards of
17 unemployment and underemployment, reduce the level of public
18 assistance, increase revenues to the State and its
19 municipalities and to achieve a stable diversified economy.
 1 (2) The General Assembly understands that to compete in
2 the 21st century, the Commonwealth must offer one of the best
3 business environments in the United States for blockchain and
4 technology innovators and should offer a comprehensive
5 regulatory technology sandbox for these innovators to develop
6 the next generation of digital products and services in the
7 Commonwealth.
8 (3) Building a more robust public-private partnership
9 framework is mandatory for economic success.
10 (4) The Commonwealth understands that further developing
11 technology industries within a robust public-private
12 partnership brings better efficiency, trust and
13 accountability between the Commonwealth, businesses and
14 residents.
15 (5) The Commonwealth understands a public-private
16 partnership developing an immutable interagency-industry-
17 operability blockchain filing system is vital and
18 redevelopment investment in opportunity zones that shall
19 install, maintain and organize within the system of
20 blockchain records throughout the State is advantageous.
21 (6) Financial and health technology is undergoing a
22 transformational period in which new technologies are
23 providing greater automation, connectivity and transparency
24 for provenance of products and services. Additionally:
25 (i) Existing legal frameworks are restricting
26 technology innovation because these frameworks were
27 largely established at a time when technology was not a
28 fundamental component of products and services.
29 (ii) Technology innovators require a supervised,
30 flexible regulatory sandbox to test new products and
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 1 services using waivers of specified statutes and rules
2 under defined conditions.
3 (iii) Jurisdictions which establish regulatory
4 sandboxes are more likely to provide a welcoming business
5 environment for technology innovators and may experience
6 significant business growth.
7 (iv) Other jurisdictions have enacted, or are
8 considering, regulatory sandboxes for financial
9 technology innovators in their jurisdictions.
10 (v) Other jurisdictions have enacted, or are
11 considering public-private partnerships for health
12 technology innovators in their jurisdictions.
13 (vi) Other jurisdictions have enacted or are
14 considering blockchain track and trace identifiers for
15 highly regulated products and industry such as hemp
16 while recognizing there are legitimate concerns on
17 implementing a widespread hemp industry in the State,
18 necessitating incremental rollout of newly licensed and
19 credentialed entities to best ensure public health and
20 safety.
21 (vii) The General Assembly seeks to establish a best
22 in the nation blockchain technology hub for 21st century
23 commerce that will increase economic opportunity,
24 including highly regulated industries that otherwise left
25 unchecked could cause continued harm to public health and
26 safety.
27 (7) The rapid innovation of blockchain technology,
28 including the growing use of virtual currency and other
29 digital assets has resulted in many blockchain innovators
30 being unable to access secure and reliable banking services
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 1 thereby hampering development of blockchain services and
2 products in the marketplace.
3 (8) Federally insured financial institutions are not
4 generally permitted to manage accounts in virtual currency or
5 hold other digital assets.
6 (9) Blockchain innovators have greater compliance
7 challenges with Federal customer identification, anti-money
8 laundering and beneficial ownership requirements because of
9 the complex nature of these obligations and the unfamiliarity
10 of regulators with blockchain innovators' businesses.
11 (10) These intricate obligations have resulted in many
12 financial institutions in this Commonwealth and across the
13 United States refusing to provide banking services to
14 blockchain innovators and also refusing to accept deposits in
15 United States currency obtained from the sale of virtual
16 currency or other digital assets.
17 (11) Compliance with applicable Federal and State laws
18 is critical to ensuring the future growth and reputation of
19 the blockchain and technology industries as a whole.
20 (12) Most financial institutions today do not have the
21 requisite expertise or familiarity with the challenges facing
22 blockchain innovators which is required to provide secure and
23 reliable banking services to these innovators.
24 (13) A new type of financial payments and depository
25 institution that has expertise with customer identification,
26 anti-money laundering and beneficial ownership requirements
27 could seamlessly integrate these requirements into its
28 operating model in this Commonwealth.
29 (14) Authorizing special purpose depository institutions
30 to be chartered in this Commonwealth will provide a necessary
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 1 and valuable service to blockchain innovators, emphasize the
2 Commonwealth's partnership with the technology and financial
3 industry and safely grow the State's developing financial
4 sector.
5 Section 3. Definitions.
6 The following words and phrases when used in this act shall
7 have the meanings given to them in this section unless the
8 context clearly indicates otherwise:
9 "Blockchain." A digital ledger or database which is
10 chronological, consensus-based, decentralized and mathematically
11 verified in nature.
12 "Consumer." A person in this Commonwealth that purchases or
13 enters into an agreement to receive an innovative financial
14 product or service made available through the financial
15 technology sandbox.
16 "Financial product or service." A product or service related
17 to finance, including banking, securities, consumer credit or
18 money transmission, which is subject to statutory requirements
19 and is under the jurisdiction of the secretary or the Secretary
20 of the Commonwealth.
21 "Financial technology sandbox." The program created by this
22 act which allows a person to make an innovative financial
23 product or service available to consumers during a sandbox
24 period through a waiver of statutory requirements.
25 "Innovative." The use or incorporation of a new idea, a new
26 or emerging technology or a new use of existing technology,
27 including blockchain technology, to address a problem, provide a
28 benefit or otherwise offer a product, service, business model or
29 delivery mechanism.
30 "PEGASUS Account." The Pennsylvania Economic Growth and
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 1 State Utility Systems Account.
2 "Sandbox period." The period of time, initially not longer
3 than 24 months, in which the secretary or Secretary of the
4 Commonwealth has authorized an innovative financial product or
5 service to be made available to consumers, including an
6 extension granted under section 9.
7 "Secretary." The Secretary of Banking and Securities of the
8 Commonwealth.
9 "Statute." A statute or regulation of this Commonwealth.
10 Section 4. Financial technology sandbox waiver.
11 (a) Waiver.--Notwithstanding any other provision of law, a
12 person that makes an innovative financial product or service
13 available to consumers in the financial technology sandbox may
14 be granted a waiver of specified requirements imposed by statute
15 listed under this subsection, if the statute does not permit the
16 product or service to be made available to consumers. A waiver
17 under this subsection shall be no broader than necessary to
18 accomplish the purposes and standards set forth in this act. The
19 following may be waived under this subsection:
20 (1) A statute that regulates licensing of a product in
21 order for the product to be offered to a consumer.
22 (2) A statute that regulates disclosures, except if the
23 disclosure is required under Federal law.
24 (3) A statute that regulates interest rates.
25 (4) A statute that regulates the taking of a deposit.
26 (5) A statute that provides for anti-fraud regulations
27 that require issuers of securities to be registered and to
28 disclose details of the issuer's offerings.
29 (6) A statute that regulates cryptocurrency.
30 (b) Liability.--
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 1 (1) Subject to paragraph (2), a person that makes an
2 innovative financial product or service available to a
3 consumer in the financial technology sandbox shall:
4 (i) not be immune from civil damages for acts and
5 omissions relating to this act; and
6 (ii) be subject to criminal and consumer protection
7 laws.
8 (2) A person that makes an innovative financial product
9 or service available to a consumer in the financial
10 technology sandbox shall not be subject to a higher level of
11 liability than the person would be subject to if the
12 innovative financial product or service was made available to
13 a consumer outside of the financial technology sandbox.
14 (c) Enforcement.--The secretary or the Secretary of the
15 Commonwealth may refer suspected violations of law relating to
16 this act to appropriate Federal or State agencies for
17 investigation, prosecution, civil penalties and other
18 appropriate enforcement actions.
19 (d) Service of process.--If service of process on a person
20 making an innovative financial product or service available to
21 consumers in the financial technology sandbox is not feasible,
22 service on the Secretary of the Commonwealth shall be deemed
23 service on the person.
24 Section 5. Financial technology sandbox application and
25 approval.
26 (a) Application.--The following apply:
27 (1) A person shall apply to the secretary or the
28 Secretary of the Commonwealth to make an innovative financial
29 product or service available to consumers in the financial
30 technology sandbox, based on the agency that administers the
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 1 statute for which a waiver is sought. If both the secretary
2 and the Secretary of the Commonwealth jointly administer a
3 statute, or if the appropriate office is not known, an
4 application may be filed with either the secretary or the
5 Secretary of the Commonwealth.
6 (2) If an application is filed with an office that does
7 not administer the statute for which a waiver is sought, the
8 receiving office shall forward the application to the correct
9 office. The person shall specify in an application the
10 statutory requirements for which a waiver is sought and the
11 reasons why the requirements prohibit the innovative
12 financial product or service from being made available to
13 consumers. The application shall contain the elements
14 required for authorization under subsection (f). The
15 secretary and the Secretary of the Commonwealth shall each,
16 by rule, prescribe a method of application.
17 (b) Business entities.--A business entity making an
18 application under this section must be a domestic corporation or
19 other organized domestic entity with a physical presence, other
20 than that of a registered office or agent located in this
21 Commonwealth.
22 (c) Consent required.--Before an employee applies on behalf
23 of an institution, firm or other entity intending to make an
24 innovative financial product or service available through the
25 financial technology sandbox, the employee must obtain the
26 consent of the institution, firm or entity before filing an
27 application under this section.
28 (d) Background check.--
29 (1) The individual filing an application under this
30 section and the individuals who are substantially involved in
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 1 the development, operation or management of the innovative
2 financial product or service must submit the following
3 information with an application filed under this section:
4 (i) Under 18 Pa.C.S. Ch. 91 (relating to criminal
5 history record information), a report of criminal history
6 record information from the Pennsylvania State Police or
7 a statement from the Pennsylvania State Police that the
8 Pennsylvania State Police central repository contains no
9 criminal history record information relating to that
10 individual. The criminal history record information shall
11 be limited to that which is disseminated under 18 Pa.C.S.
12 § 9121(b)(2) (relating to general regulations).
13 (ii) A report of Federal criminal history record
14 information.
15 (2) An individual submitting information under paragraph
16 (1)(ii) must submit a full set of fingerprints to the
17 Pennsylvania State Police for the purpose of a record check
18 and the Pennsylvania State Police or its authorized agent
19 shall submit the fingerprints to the Federal Bureau of
20 Investigation for the purpose of verifying the identity of
21 the applicant and obtaining a current record of criminal
22 arrests and convictions.
23 (e) Fee.--An application made under this section must be
24 accompanied by a fee of $500. The fee shall be deposited into
25 the PEGASUS Account as provided in section 6.
26 (f) Approvals and denials.--The secretary or the Secretary
27 of the Commonwealth, as applicable, shall authorize or deny a
28 financial technology sandbox application in writing within 90
29 days of receiving the application. The secretary or the
30 Secretary of the Commonwealth and the person that made an
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 1 application may jointly agree to extend the time beyond 90 days.
2 The secretary or the Secretary of the Commonwealth may impose
3 conditions on an authorization, consistent with this act. In
4 determining whether to authorize or deny an application under
5 this subsection, the secretary or the Secretary of the
6 Commonwealth shall consider each of the following:
7 (1) The nature of the innovative financial product or
8 service proposed to be made available to consumers in the
9 sandbox, including relevant technical details, which may
10 include if the product or service utilizes blockchain
11 technology.
12 (2) The potential risk to consumers and methods which
13 will be used to protect consumers and resolve complaints
14 during the sandbox period.
15 (3) A business plan proposed by the person applying,
16 including a statement of arranged capital.
17 (4) If the person has the necessary personnel, adequate
18 financial and technical expertise and a sufficient plan to
19 test, monitor and assess the innovative financial product or
20 service.
21 (5) If a person substantially involved in the
22 development, operation or management of the innovative
23 financial product or service has been convicted of, or is
24 currently under investigation for, fraud, Federal or State
25 securities violations or any property-based offense.
26 (6) A copy of the disclosures required under section
27 7(c) that will be provided to consumers.
28 (7) If a competitor to the applicant was recently
29 granted ac