SF3868

Purpose

• Prohibit placing or operating a virtual currency kiosk in Minnesota.
• Repeal current Minnesota statutes related to virtual currency kiosks and replace them with a new framework that subjects virtual currency businesses to licensing, disclosures, and consumer protections (even though kiosks are banned, the bill also lays out a broader regulatory structure for virtual currency activities).
• Establish rules around disclosure, recordkeeping, risk warnings, and consumer protections for anyone engaged in virtual currency business activity.

Main Provisions

• Prohibition of kiosks

  • A person may not place or operate a virtual currency kiosk in Minnesota.

• Repeals and new regulatory framework

  • Repeals multiple sections of Minnesota Statutes 2024 (sections 53B.69, 53B.70, 53B.71, 53B.72, 53B.73, 53B.74, 53B.75 and parts of 53B.69) and replaces them with new definitions and rules.
  • Adds new definitions applicable to virtual currency under 53B.69, including terms such as:
  • control of virtual currency, exchange, transaction hash, new customer, existing customer, transfer, United States dollar equivalent of virtual currency, virtual currency address, virtual currency wallet, virtual currency kiosk operator, and virtual currency kiosk transaction.
  • Sets scope and exemptions (53B.70) that clarify what is and isn’t covered, including certain activities regulated by federal law and certain low-risk or intermediary cases.

• Licensing and activity requirements (53B.71–53B.74)

  • Virtual currency business activity generally requires licensing in Minnesota or an exemption; if licensed, the activity is treated as money transmission and subject to these rules.
  • Requires disclosures to people using licensed products/services, including fees, insurance coverage, liability, and other protections.
  • Requires specific transaction disclosures before and during each virtual currency transaction, including:
  • transaction amount, fees, exchange rates, type/nature of transaction, irrevocability, and right to stop payment where applicable.
  • Requires a confirmation/receipt after a transaction with details such as date/time, transaction hash, addresses, and the licensee’s contact information.
  • Establishes a daily transaction limit for new customers and leaves a separate limit for existing customers to be set by the operator (in line with federal law).
  • Addresses risk warnings and consumer protections around fraud, irreversible transactions, and potential losses.

• Virtual currency kiosks (53B.75)

  • Specifies disclosures on material risks before a new transaction, including that virtual currency is not government-backed and that values may be volatile.
  • Requires an additional prominent warning about losses due to fraud and that transactions can be irreversible.
  • Requires new-customer refunds within 72 hours if fraud is suspected, with conditions (fraudulently induced transactions and reporting to authorities).
  • Mandates that kiosk operators provide clear disclosures of terms, including liability, refunds, and policy changes, and obtain acknowledgment from the customer before completing a transaction.
  • Requires issuance of a receipt with transaction details and a description of the operator’s liability and refund policy.
  • Requires five years of recordkeeping for all virtual currency activity with customers, including transaction details, identities, aggregate totals, general ledgers, and bank statements.

• Property interests and entitlement rules

  • Licensees must maintain control of the virtual currency to satisfy customers’ entitlements; customers’ interests are treated as property and not the licensee’s property.

• Recordkeeping and financial reporting

  • Licensees must maintain extensive records for all virtual currency activity with customers, including identities, transaction forms, amounts, dates, and counterparties.
  • Records must be kept in a way that allows the commissioner to verify compliance.

Significant Changes to Existing Law

• Dramatic shift in regulation

  • Establishes a licensing framework for virtual currency business activity (treated as money transmission) and imposes consumer disclosures, risk warnings, receipts, and refunds.
  • Repeals large portions of the current 53B provisions, effectively replacing the prior structure with a comprehensive new set of definitions and requirements.

• Consumer protections and disclosures

  • Adds robust, mandatory disclosures about fees, insurance, irrevocability, liability, and rights before, during, and after transactions.
  • Requires explicit risk warnings about volatility, lack of government backing, and irreversibility.

• New customer protections

  • Creates a defined “new customer” and “existing customer” framework, with specific transaction limits for new customers (daily limit of 2,000 USD) and operator-determined limits for existing customers (in line with federal law).

• Refunds and fraud response

  • Adds a 72-hour refund window for new customers if fraud is suspected, with conditions to involve authorities.

• Recordkeeping and transparency

  • Requires long-term, detailed recordkeeping for all virtual currency activity, including transaction-specific data, identities, and aggregate metrics.

Definitions and Terms to Know

• Virtual currency kiosk: the physical device for buying/selling virtual currency at a kiosk.
• Virtual currency: digital representation of value used as a form of currency that may be exchanged electronically.
• New customer / Existing customer: classifications based on duration of relationship with a kiosk operator.
• Transaction hash: a unique digital identifier for a transaction recorded on a blockchain.
• Virtual currency address and wallet: identifiers and storage mechanisms for holding/transferring virtual currency.
• Licensee: a person licensed to engage in virtual currency business activity.
• Commissioner: the regulatory authority (Minnesota commerce regulator) overseeing licensing and compliance.
• Money transmission: the activity of moving or exchanging money or value, applied to virtual currency activities.
• Fees, disclosures, confirmations: required consumer-facing information and records.
• Daily transaction limit: maximum allowed transactions per day for new customers (2,000 USD).

Relevant Terms - virtual currency - virtual currency kiosk - virtual currency kiosk operator - new customer - existing customer - transaction - transaction hash - virtual currency address - virtual currency wallet - exchange - control of virtual currency - licensee / licensing - commissioner - money transmission - disclosures - receipt / confirmation - refunds - fraud - irrevocable transaction - United States dollar equivalent (USD equivalent) - FDIC / SIPC (insurance references) - five-year recordkeeping - scope / exemptions - prospective exemptions (e.g., attorneys, title insurers, securities/commodity intermediaries, low transaction volume, data storage, connectivity software)