HB 883 — An Act providing for collateral requirements for virtual currency lenders and for segregation of funds; and imposing penalties.

PRINTER'S NO.   921

                    THE GENERAL ASSEMBLY OF PENNSYLVANIA



                        HOUSE BILL
                        No. 883
                                              Session of
                                                2025

     INTRODUCED BY WAXMAN, PIELLI, MALAGARI, GIRAL, SANCHEZ, NEILSON,
        HANBIDGE, OTTEN AND FRIEL, MARCH 11, 2025

     REFERRED TO COMMITTEE ON COMMERCE, MARCH 11, 2025


                                   AN ACT
 1   Providing for collateral requirements for virtual currency
 2      lenders and for segregation of funds; and imposing penalties.
 3      The General Assembly of the Commonwealth of Pennsylvania
 4   hereby enacts as follows:
 5   Section 1.   Short title.
 6      This act shall be known and may be cited as the Digital Asset
 7   Regulation Act.
 8   Section 2.   Definitions.
 9      The following words and phrases when used in this act shall
10   have the meanings given to them in this section unless the
11   context clearly indicates otherwise:
12      "Cash equivalent."   Securities, including treasury bills,
13   commercial paper, marketable securities, money market funds,
14   short-term government bonds, a certificate of deposit or a
15   banker's acceptance.
16      "Client."   A third party, other than the virtual currency
17   lender or a virtual currency, that uses a virtual currency
18   lender for the lending of virtual currency.
 1      "Collateral."    Money or an item of value pledged as security
 2   for repayment in the event of a default.
 3      "Department."    The Department of Banking and Securities of
 4   the Commonwealth.
 5      "Digital asset."    A representation of economic, proprietary
 6   or access rights that is stored in a machine-readable format and
 7   has a transaction history that is recorded in a distributed,
 8   digital ledger or digital data structure in which consensus is
 9   achieved through a mathematically verifiable process. The term
10   includes digital consumer assets and virtual currency.
11      "Digital consumer asset."    A digital asset that is primarily
12   for consumptive, personal or household purposes, including
13   access to goods, services or content. The term includes any
14   other digital asset that is not virtual currency.
15      "Lending."    Engaging in the business of receiving monetary
16   value for transmission to a location inside or outside of the
17   United States by any means, including wire, facsimile or
18   electronic transfer.
19      "Money."    As defined in section 1 of the act of September 2,
20   1965 (P.L.490, No.249), referred to as the Money Transmission
21   Business Licensing Law.
22      "Virtual currency."    A digital asset that is used as a medium
23   of exchange, unit of account or store of value and is not
24   recognized as legal tender by the Federal Government.
25      "Virtual currency lender."    A person that is regularly
26   engaged in the lending of virtual currency or digital assets
27   used for financial purposes.
28   Section 3.    Applicability.
29      This act shall apply to any virtual currency lender,
30   institution or any other person that lends virtual currency to a

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 1   third party in this Commonwealth.
 2   Section 4.     Notice of intent to conduct business.
 3      No later than 90 days before conducting business in this
 4   Commonwealth, a virtual currency lender shall send a letter to
 5   the department notifying the department that the virtual
 6   currency lender intends to conduct virtual currency lending in
 7   this Commonwealth. The virtual currency lender shall include all
 8   of the following information in the letter:
 9            (1)   The virtual currency lender's name.
10            (2)   Parent companies and subsidiaries of the virtual
11      currency lender.
12            (3)   A statement explaining the virtual currency lender's
13      intention on lending virtual currency in this Commonwealth
14      and include any Internet websites or branding that the
15      virtual currency lender wishes to offer.
16            (4)   A statement that the virtual currency lender is in
17      compliance with applicable Federal and State laws.
18            (5)   Any other information deemed relevant and as
19      specified by the department.
20   Section 5.     Collateral requirements for virtual currency
21                  lenders.
22      (a)   Collateral required.--A virtual currency lender shall
23   require collateral, in connection with the services provided as
24   a virtual currency lender, to be held in a trust for all digital
25   consumer assets.
26      (b)   Collateral amount.--A virtual currency lender shall
27   secure a minimum of 100% of the value of the virtual currency
28   exchanged in money or cash equivalents to serve as collateral
29   under subsection (a). The money or cash equivalent may be
30   increased or decreased depending on the market price of the

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 1   virtual currency.
 2      (c)   Use of collateral.--In the event of a default or other
 3   circumstance that results in a client losing access to any
 4   account with the virtual currency lender, the client's virtual
 5   currency or the client's money, through fraud or other
 6   malfeasance or through a technical failure, a virtual currency
 7   lender shall use collateral to reimburse a client.
 8      (d)   Agreement required.--A virtual currency lender shall
 9   require an agreement to be signed by both a client and the
10   virtual currency lender regarding the collateral required under
11   this section.
12      (e)   Penalties.--
13            (1)   Failure by a virtual currency lender to establish
14      policies in accordance with the requirements under this
15      section shall constitute a violation of this section, and the
16      virtual currency lender shall be subject to the following
17      fines imposed by the department:
18                  (i)    $5,000 for the first violation.
19                  (ii)    $10,000 for a second violation.
20                  (iii)    $20,000 for a third and each subsequent
21            violation.
22            (2)   After a third violation of this section, the
23      department may conduct a review of the virtual currency
24      lender and may prohibit the virtual currency lender from
25      operating within this Commonwealth.
26   Section 6.     Segregation of funds.
27      (a)   Segregation required.--A virtual currency lender shall,
28   in connection with the services provided as a virtual currency
29   lender, manage a consumer's money and digital consumer assets
30   separately from the virtual currency lender's own money and

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 1   digital assets in accordance with the regulations promulgated
 2   under section 7.
 3      (b)   Penalties.--
 4            (1)   Failure by a virtual currency lender to establish
 5      policies in accordance with the requirements under this
 6      section shall constitute a violation of this section, and the
 7      virtual currency lender shall be subject to the following
 8      fines imposed by the department:
 9                  (i)     $5,000 for the first violation.
10                  (ii)    $10,000 for a second violation.
11                  (iii)    $20,000 for a third and each subsequent
12            violation.
13            (2)   After a third violation of this section, the
14      department may conduct a review of the virtual currency
15      lender and may prohibit the virtual currency lender from
16      operating within this Commonwealth.
17   Section 7.     Regulations.
18      The department shall promulgate regulations necessary to
19   implement and enforce this act.
20   Section 8.     Effective date.
21      This act shall take effect in 60 days.




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