Office of Financial Regulation hails new crypto oversight

Three of the four bills that Russell Weigel, Florida’s top financial regulator, was hopeful to see pass made it through Legislature this month. These bills aim to modernize Florida banking with cryptocurrency control, an identification fix and banking modernization.

The one bill that was not passed was Securities Reform under Office and Sales of Securities. That bill sought to exclude certain securities offers and sales by a specified person from the exemption from specified registration requirements, revising the information and documents that the Office of Financial Regulation may require for securities registration.

The Digital Currency Expansion bill brings cryptocurrency into the category of money services businesses. It revises provisions related to violations of money services, business activities and penalties for violations and provides requirements for money transmitters that receive virtual currency.

“Florida is the first state to officially regulate and step into the virtual currency world,” said Mr. Weigel, who heads the state’s Office of Financial Regulation. “There is the potential underpinning of digital asset banking. If that is something a bank would like to do in Florida, the cryptocurrency feature is useful… We put out guidance in January to our chartered banking constitutions reminding them that they’re under existing legal authority.”

“Florida does provide a lot of breadth for institutions thinking of doing things like digital assets and do so under our authority,” he said. “It’s not a legislation change but a reminder that we have fair flexibility in the state scheme.”

The Bank Modernization bill that passed “allows banks to propose an online presence as opposed to geographic,” Mr. Weigel said, and will keep all banks from having to have a “brick-and-mortar” footprint.

“Banking will evolve from a concept, geographically focused concept of brick-and-mortar to one that includes a target market,” he said. Banks can now propose business plans that are not geographically focused like the past but are able to propose business plans around the categories or people as their focus, Mr. Weigel said.

The third bill passed was the FBI Fingerprint Fix bill. “It took substantial time and effort to get that hammered out with the legislative and committee staff,” Mr. Weigel said. “It’s a redefinition of what a control person is, so [the legislature] wanted to have their hand in articulating what it looked like.”

The FBI Fingerprint Fix bill provides that a control person, or anyone who has the term of president or a person who holds the officer position in the money services of a business’s governing documents has a liability for the Department of Law Enforcement to do a criminal background check through the FBI.

Each control employee listed is required to undergo live-scanning fingerprint processing and must be submitted electronically and entered into a statewide identification system.

“The Fingerprint Bill is really a re-definition of statutory authority of the class of person of those who wish to apply for a Fintech license,” Mr. Weigel said. The Financial Technology Sandbox can prorate license renewal fees if the person is under investigation.

The bills that passed and await the governor’s signature to become law, he summarized, will help moderate cryptocurrency under federal safety, allow banks to focus on their clients rather than geographic location and redefine the FBI’s screening process.