HF4335

Purpose

• Update Minnesota law to regulate virtual currency kiosks more strictly and improve consumer protections.
• Expand how operators must disclose information, verify users, keep records, and monitor transactions for fraud.
• Require the use of blockchain analytics to detect suspicious activity and block certain transfers.
• Reorganize and replace parts of existing statutes related to virtual currency kiosks.

Key terms defined in the bill

• blockchain analytics: analysis of data from blockchains or public ledgers and related transaction information.
• blockchain analytics and tracing software: a software service that uses blockchain data to provide risk-related information and tracing of virtual currency wallet addresses.
• User: a person who initiates, authorizes, or completes a virtual currency transaction at a kiosk.
• Virtual currency kiosk: an electronic terminal that helps a kiosk operator exchange virtual currency for money, bank credit, or other virtual currency.
• New customer: a consumer transacting at a kiosk in Minnesota who has been a customer for less than 72 hours.
• Existing customer: a consumer who has been a customer for more than 72 hours.
• The bill also repeals older definitions related to new/existing customers and replaces them with the above terms.

Main Provisions and how they work

• Expanded disclosures and risk warnings
  • Operators must display material risk disclosures on the kiosk screen before initial transactions, including that virtual currency is not legal tender and can fluctuate in value.
  • A separate bold, prominently displayed warning about fraud and scams must be shown, with guidance to contact law enforcement immediately if suspicious activity occurs.
  • Operators must provide standard disclosures about terms and conditions, such as liability, ability to stop payments, receipt of evidence of a transaction, and notices of rule changes.
• Transaction disclosures and limits
  • Before each transaction, operators must clearly disclose transaction terms including amount, fees, type of transaction, whether a transaction can be reversed, and a daily transaction limit.
  • New customer daily transaction limit: up to $2,000.
  • Existing customer daily transaction limit: up to $1,000, with the exact limit set by the operator in line with federal law.
• Identity verification and records
  • Operators must verify a user’s identity before accepting payment by collecting government-issued ID, name, date of birth, telephone number, mailing address, and email.
  • Identity information must be kept for five years and cannot be used to transact under another name or identity.
  • A detailed, long-term record of each person’s transactions and related data must be kept, including transaction date, amount, payment instructions, IDs, and addresses of involved parties, as well as a general ledger and bank records.
• Access to live support and receipts
  • Operators must offer live, toll-free customer service during operating hours (at least 8:00 a.m. to 10:00 p.m. Central Time) and display the toll-free number at the kiosk.
  • Upon completion of a transaction, operators must provide a receipt (physical or electronic) with details such as operator contact info, transaction type, date/time, transaction hash, virtual currency addresses, fees, exchange rate, liability statements, refund policies, and a contact for fraud reporting.
• Refunds for new customers
  • New customers may be eligible for a full refund of all transactions within the 72-hour new customer period if fraud is suspected; refunds may require reporting to law enforcement within 14–30 days of the last transaction.
• Blockchain analytics and anti-fraud measures
  • All operators must use blockchain analytics and tracing software to detect patterns of fraud or illicit activity.
  • Operators must block transactions to wallets linked to overseas exchanges not accessible to Minnesota users.
  • The Commerce department may request evidence of current use of blockchain analytics from operators.
• Fees
  • Operators cannot charge a single transaction fee higher than 3% of the USD value of the virtual currency involved.
• Enforcement and compliance
  • Violations of these provisions are treated as violations of existing consumer protection statutes (and related enforcement provisions).
  • The Department of Commerce’s fraud-reporting channels apply for violations and enforcement.
• Location and reporting requirements
  • Operators must provide a list of all kiosk locations and report any additions or closings within one month.
  • Operators must keep records, provide periodic reports, and comply with law and regulatory orders.
• Repeals and updates to law
  • Subdivisions defining new/existing customers from the old statute (3b and 3c) are repealed and replaced with the new definitions above.

Significant changes to existing law

• Introduces formal, broad-use blockchain analytics requirements for virtual currency kiosk operators.
• Replaces the old new/existing customer framework with new, time-based definitions and stricter transaction limits.
• Establishes detailed recordkeeping, identity verification, and receipt requirements.
• Imposes a hard cap on per-transaction fees (maximum 3% of the USD value).
• Adds explicit fraud warnings and a mandatory refund provision for new customers under certain fraud conditions.
• Requires ongoing monitoring, blocking of certain overseas-wallet transfers, and explicit daily transaction limits by customer type.
• Repeals certain earlier subsections and updates related definitions to align with the new framework.

Practical impact and who is affected

• Virtual currency kiosk operators: more stringent licensing, reporting, identity verification, disclosures, and fraud-prevention requirements; must implement blockchain analytics and live support systems; must enforce new transaction limits and fee caps.
• Minnesota users: stronger consumer protections, clearer disclosures, identity verification, fraud warnings, and potential refunds for new customers in fraud cases.
• Regulators: increased authority to require analytics evidence, monitor compliance, and enforce penalties for violations.

Note on enforcement and oversight

• The bill assigns regulatory authority to the Department of Commerce for enforcement and to provide input on fraud reporting; it also allows the department to request evidence of blockchain analytics usage from operators.

Relevant Terms blockchain analytics; blockchain analytics and tracing software; virtual currency kiosk; user; new customer; existing customer; tangible net worth; disclosures; risk disclosures; fees; transaction limits; daily limit; transaction hash; wallet addresses; overseas exchanges; fraud; government-issued identification; Department of Commerce; compliance; receipt; verification of user identity; refunds; regulatory enforcement.