A bill

 

TO AMEND THE SOUTH CAROLINA CODE OF LAWS BY ADDING ARTICLE 13 TO CHAPTER 3, TITLE 34 SO AS TO PROVIDE VENDING OF DIGITAL ASSET DEFINITIONS AND TO PROVIDE THAT OWNERS AND OPERATORS OF VIRTUAL CURRENCY KIOSKS MUST HAVE MONEY TRANSMITTER LICENSES AND MUST PROVIDE CERTAIN DISCLOSURES ON THE SCREENS OF THE VIRTUAL CURRENCY KIOSKS.

 

Be it enacted by the General Assembly of the State of South Carolina:

 

SECTION 1.  Chapter 3, Title 34 of the S.C. Code is amended by adding:

 

Article 13

 

Vending of Digital Assets

 

    Section 34-3-910.  As used in this article:

       (1) "Blockchain technology" means a mathematically secured, chronological, decentralized, distributed, and digital ledger or database that consists of records of transactions that cannot be altered retroactively.

       (2)(a) "New customer" means a customer transacting at a virtual currency kiosk in this State who has been a customer of an owner or operator of a virtual currency kiosk for less than seven days.

           (b) Seven days after a customer first transacts with an owner or operator of a virtual currency kiosk, the customer is considered an existing customer and is not subject to the new customer transaction limit described in Section 34-3-920.

       (3) "Transaction hash" means a unique identifier made up of a string of characters that acts as a record and provides proof that a transaction was verified and added to blockchain technology.

       (4)(a) "Virtual currency" means a type of digital unit that is used as a medium of exchange or a form of digitally stored value or that is incorporated into payment system technology.

           (b) "Virtual currency" includes digital units that:

               (i) have a centralized repository or administrator;

               (ii) are decentralized and have no centralized repository or administrator; or

               (iii) may be created or obtained by computing or manufacturing effort.

           (c) "Virtual currency" does not include digital units that:

               (i) are used solely within online gaming platforms, with no market or application outside the gaming platforms;

               (ii) are used exclusively as part of a consumer affinity or rewards program and can be applied as payment for purchases with the issuer or other designated merchants but cannot be converted into or redeemed for fiat currency; or

               (iii) are used as part of a consumer affinity or rewards program offered through an institution that is insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration.

       (5) "Virtual currency address" means an alphanumeric identifier representing a destination for a virtual currency transfer that is associated with a virtual currency wallet.

       (6) "Virtual currency kiosk" means an electronic terminal acting as a mechanical agent of the owner or operator to enable the owner or operator to facilitate the exchange of virtual currency for other virtual currency or fiat currency, including by:

           (a) connecting to a separate virtual currency exchanger that performs the actual virtual currency transmission; or

           (b) drawing upon the virtual currency in the possession of the owner or operator of the electronic terminal.

       (7) "Virtual currency wallet" means a software application or other mechanism providing a means for holding, storing, and transferring virtual currency.

 

    Section 34-3-920.  (A)(1) An owner or operator of a virtual currency kiosk must obtain a money transmitter license.

       (2) Before entering into a virtual currency transaction for, on behalf of, or with a customer, the owner or operator of a virtual currency kiosk shall disclose to the customer in clear and conspicuous writing in the English language all material risks associated with virtual currency. The disclosures must be displayed on the screen of the virtual currency kiosk with the ability for a customer to acknowledge receipt of the disclosures. The disclosures must include at least the following statement:

"WARNING: THIS TECHNOLOGY CAN BE USED TO DEFRAUD YOU. IF YOU HAVE BEEN DIRECTED TO THIS MACHINE BY SOMEONE CLAIMING TO BE A GOVERNMENT AGENT, BILL COLLECTOR, LAW ENFORCEMENT OFFICER, OR ANYONE YOU DO NOT KNOW PERSONALLY, STOP THIS TRANSACTION IMMEDIATELY AND CONTACT YOUR FINANCIAL ADVISOR AND LOCAL LAW ENFORCEMENT."

       (3) If the owner or operator of a virtual currency kiosk fails to provide the statement described in item (2), his license must be revoked.

    (B) When opening an account for a customer, the owner or operator of a virtual currency kiosk shall disclose to the customer in clear and conspicuous writing in the English language all relevant terms and conditions associated with the products, services, and activities of the owner or operator and virtual currency generally, including the following:

       (1) the customer's liability for unauthorized virtual currency transactions;

       (2) under which circumstances the owner or operator will, absent a court or government order, disclose information concerning the customer's account to third parties;

       (3) the customer's right to receive periodic account statements and valuations from the owner or operator;

       (4) the customer's right to receive a receipt, a trade ticket, or other evidence of a virtual currency transaction; and

       (5) the customer's right to prior notice of a change in the rules or policies of the owner or operator.

    (C) Prior to a transaction in virtual currency for, on behalf of, or with a customer, the owner or operator of a virtual currency kiosk shall disclose to the customer in clear and conspicuous writing in the English language the terms and conditions of the virtual currency transaction, including the following:

       (1) the amount of the transaction;

       (2) the fees, expenses, and charges borne by the customer, including applicable exchange rates;

       (3) the type and nature of the transaction;

       (4) a warning that, once completed, the transaction is irreversible, if applicable;

       (5) the difference in the virtual currency's sale price versus the current market price; and

       (6) other disclosures that are customarily given in connection with a virtual currency transaction.

    (D) The owner or operator of a virtual currency kiosk shall ensure that each customer acknowledges receipt of all disclosures required under this section.

    (E) Upon the completion of a virtual currency transaction, the owner or operator of a virtual currency kiosk shall provide the customer an electronic receipt containing the following information:

       (1) the name of and contact information for the owner or operator, including a telephone number established by the owner or operator to answer questions and register complaints;

       (2) the type, value, date, and precise time of the virtual currency transaction, the transaction hash, and each virtual currency address;

       (3) the fee charged;

       (4) the exchange rate, if applicable;

       (5) a statement of the liability of the owner or operator for nondelivery or delayed delivery of the currency for which the customer exchanged virtual currency; and

       (6) a statement of the refund policy of the owner or operator.

    (F)(1) For a new customer, the maximum daily transaction limit of a virtual currency kiosk is two thousand dollars for each customer.

       (2) For an existing customer, the maximum daily transaction limit of a virtual currency kiosk is ten thousand five hundred dollars for each customer.

    (G)(1) The owner or operator of a virtual currency kiosk shall, at the expense of the owner or operator, allow a customer to cancel and receive a full refund for a virtual currency transaction if:

           (a) the virtual currency transaction was the customer's first virtual currency transaction;

           (b) the virtual currency transaction was to a virtual currency wallet or exchange located outside of the United States; and

           (c) within sixty days after the virtual currency transaction, the customer contacts the owner or operator of the virtual currency kiosk and a government or law enforcement entity regarding the fraudulent nature of the transaction and submits proof of the fraud, such as a police report or notarized declaration detailing the fraudulent nature of the virtual currency transaction.

       (2) If the conditions of item (1) are met, the owner or operator shall issue a full refund within seventy-two hours after being notified that the virtual currency transaction was fraudulent.

 

SECTION 2.  This act takes effect upon approval by the Governor.

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