2026 Ky. Acts Ch. 126 (SB 189), An Act relating to the regulation of digital asset business
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CHAPTER 126 1
CHAPTER 126
( SB 189 )
AN ACT relating to the regulation of digital asset business.
Be it enacted by the General Assembly of the Commonwealth of Kentucky:
SECTION 1. SUBTITLE 13 OF KRS CHAPTER 286 IS ESTABLISHED, AND A NEW SECTION
THEREOF IS CREATED TO READ AS FOLLOWS:
As used in this subtitle, unless the context requires otherwise:
(1) "Affiliate" means a person that, either directly or indirectly through one (1) or more intermediaries,
controls, is controlled by, or is under common control with another person;
(2) "Agent":
(a) Means a person authorized by written agreement and designated by a virtual currency kiosk operator
to engage in virtual currency kiosk business in this state on behalf of the operator;
(b) Includes, as the context requires, a person that an applicant proposes to engage in virtual currency
kiosk business in this state as an agent on behalf of the applicant; and
(c) Does not include an employee of a virtual currency kiosk operator or applicant;
(3) "Control" means one (1) or more of the following:
(a) The power to direct the management, operations, or policies of a person, which power may be:
1. Direct or indirect; and
2. Obtained:
a. Through legal or beneficial ownership of voting power in the person; or
b. Under a contract, arrangement, or understanding;
(b) The power to vote, directly or indirectly, at least twenty-five percent (25%) of the outstanding voting
shares or voting interests of a person or a person in control of the person;
(c) The power to elect or appoint a majority of a person's executive officers, managers, directors,
trustees, or other persons exercising managerial authority of a person or a person in control of the
person;
(d) The power to exercise, directly or indirectly, a controlling influence over the management or policies
of a person or a person in control of the person; and
(e) Any other set of facts or circumstances, as determined by the commissioner through promulgation of
an administrative regulation in accordance with KRS Chapter 13A, that constitutes control;
(4) "Director" means any of the following:
(a) A member of a corporation's board of directors;
(b) A manager of a limited liability company;
(c) A partner of a partnership; or
(d) A member of any other entity's governing body;
(5) "Executive officer" means:
(a) A president, chairperson of the executive committee, responsible individual, or chief financial
officer; or
(b) Any other natural person who performs similar functions for an applicant, licensee, or agent;
(6) "Fiat currency" means a government-issued currency that is:
(a) Backed by the government's authority; and
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(b) Not backed by a physical commodity;
(7) "Key shareholder" means any person, or group of persons acting in concert, that is the owner of twenty
percent (20%) or more of any voting class of the stock of an applicant, licensee, or agent;
(8) "Legal tender":
(a) Means a medium of exchange or unit of value, including the coin or paper money of the United
States, that is:
1. Issued by:
a. The United States; or
b. Another government; or
2. Recognized by the Commonwealth of Kentucky, as permitted under Article 1, Section 10, of
the Constitution of the United States; and
(b) Does not include any medium of exchange or unit of value authorized, recognized, or adopted by a
foreign government if the medium of exchange or unit of value was a virtual currency before the
government authorized, recognized, or adopted the medium of exchange or unit of value;
(9) "License" means a license issued by the commissioner under this subtitle;
(10) "Licensee" means a person issued a license;
(11) "Material litigation":
(a) Means litigation that according to generally accepted accounting principles:
1. Is significant to the financial health of an applicant, licensee, or agent; and
2. Would be required to be disclosed in the applicant's, licensee's, or agent's annual audited
financial statements, report to shareholders, or similar records; and
(b) Includes any adjudication against an applicant, licensee, or agent by a federal or state administrative
or regulatory agency relating to a violation of the Bank Secrecy Act, 31 U.S.C. secs. 5311 to 5332 and
31 C.F.R. pt. 103, regardless of whether liability or fault has been admitted;
(12) "Responsible individual":
(a) Means a natural person who:
1. Is employed by a virtual currency kiosk operator; and
2. Has principal managerial authority over the virtual currency kiosk operator's virtual currency
kiosk business in this state; and
(b) Includes, as the context requires, a natural person who:
1. Is employed by an applicant; and
2. The applicant proposes to have principal managerial authority over its virtual currency kiosk
business in this state;
(13) "Virtual currency":
(a) Except as provided in paragraph (b) of this subsection, means a digital representation of value that
is:
1. Used as a:
a. Medium of exchange;
b. Unit of account; or
c. Store of value; and
2. Not legal tender, whether or not denominated in legal tender; and
(b) Does not include:
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1. A transaction in which a merchant grants, as part of an affinity or rewards program, value
that cannot be taken from or exchanged with a merchant for legal tender, bank credit, or
virtual currency; or
2. A digital representation of value:
a. Issued by or on behalf of a publisher; and
b. Used solely within an online game, game platform, or family of games:
i. Sold by the same publisher; or
ii. Offered on the same game platform;
(14) (a) "Virtual currency kiosk" means a physical electronic terminal acting as a mechanical agent of a
virtual currency kiosk operator to enable the operator to facilitate the exchange of one (1) or more of
the following:
1. Fiat currency for virtual currency;
2. Virtual currency for fiat currency; and
3. Virtual currency for other virtual currency.
(b) As used in this subsection, "facilitate" includes:
1. Connecting directly to a separate virtual currency exchanger that performs the exchange; and
2. Drawing upon the virtual currency or fiat currency in the possession or control of the virtual
currency kiosk operator to perform the exchange;
(15) "Virtual currency kiosk charges" means all of the following:
(a) Fees and expenses charged to a virtual currency kiosk user; and
(b) The difference between the market price of virtual currency and the price of the virtual currency
charged to a virtual currency kiosk user;
(16) "Virtual currency kiosk operator" or "operator" means a person, including a licensee, that engages in
virtual currency kiosk business in this state;
(17) "Virtual currency kiosk transaction" means any transaction:
(a) Conducted or performed by electronic means via a virtual currency kiosk located in this state; or
(b) Made at a virtual currency kiosk located in this state to purchase, sell, transfer, or otherwise
exchange virtual currency; and
(18) "Virtual currency kiosk user" or "user" means a person, other than a virtual currency kiosk operator, that
initiates, authorizes, completes, or engages in a virtual currency kiosk transaction.
SECTION 2. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
This subtitle shall not apply to:
(1) The United States or any department, agency, or instrumentality thereof;
(2) A state or any agency, department, or political subdivision of a state;
(3) A state-chartered or federally chartered bank, savings bank, savings and loan association, trust company,
or credit union;
(4) A bank holding company, as defined in 12 U.S.C. sec. 1841, as amended;
(5) A subsidiary, affiliate, or service corporation of a person referenced in subsection (3) or (4) of this section;
(6) An office of an international banking corporation;
(7) A branch of a foreign bank;
(8) A bank service company, as defined in 12 U.S.C. sec. 1861, as amended;
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(9) A corporation organized under the Edge Act, 12 U.S.C. sec. 611, et seq., as amended; or
(10) A service provider that:
(a) Pursuant to a written agreement, acts on behalf of an entity referenced in subsection (3), (4), (5), (6),
(7), (8), or (9) of this section; and
(b) Allows the state or federal regulators with regulatory jurisdiction over the entity on whose behalf the
service provider is acting to examine and inspect the service provider's applicable records, books, and
transactions.
SECTION 3. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) (a) The commissioner:
1. Shall enforce the provisions of this subtitle; and
2. Subject to paragraph (b) of this subsection, may promulgate administrative regulations in
accordance with KRS Chapter 13A that the commissioner determines are necessary to
effectuate, or aid in the effectuation of, this subtitle.
(b) The discretion to promulgate administrative regulations under paragraph (a)2. of this subsection
shall be supplemental to any other provisions of this subtitle relating to the promulgation of
administrative regulations.
(2) (a) The commissioner may, by order, require licensees to file with the commissioner any:
1. Special report that the commissioner determines is necessary for the proper supervision of
virtual currency kiosk business under this subtitle; and
2. Regular report that is:
a. Developed as a uniform report by state regulators; and
b. Submitted in accordance with Section 5 of this Act.
(b) All reports filed under this subtitle shall contain a certification by an executive officer or director of
the licensee that attests to the truth and correctness of the report.
(3) The commissioner may invoke the aid of the courts through injunction or other proper process to:
(a) Enjoin any existing or threatened violation of this subtitle; or
(b) Enforce any proper order or action issued or taken by the commissioner.
(4) (a) The remedies and penalties set forth in this subtitle shall be cumulative.
(b) This subtitle shall not be construed to limit or restrict the powers, duties, remedies, or penalties
available to the commissioner or any other person under any other statutory or common law.
SECTION 4. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) (a) A person shall not engage in virtual currency kiosk business in this state without:
1. A license; and
2. First obtaining, for each:
a. Agent, the written approval of the commissioner to designate the agent to engage in
virtual currency kiosk business in this state on behalf of the person; and
b. Location at which the person, or an agent of the person, engages in virtual currency
kiosk business in this state:
i. Any license, permit, registration, or other authorization required for the person,
agent, or location under any applicable local ordinance, resolution, or
regulation; and
ii. The written approval of the commissioner to do business at the location, as
provided in Section 8 of this Act.
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(b) Except as provided in paragraph (c) of this subsection, a person shall be deemed to be engaged in
virtual currency kiosk business in this state if the person:
1. Owns, operates, solicits, markets, or advertises a virtual currency kiosk located in this state; or
2. Engages in, or holds out as being able to engage in, a virtual currency kiosk transaction with
or on behalf of any virtual currency kiosk user.
(c) A person shall not be deemed to be engaged in virtual currency kiosk business in this state solely
because the person leases space to, or otherwise contracts for or allows, a virtual currency kiosk
operator to locate a virtual currency kiosk at a store or locale in this state.
(2) A license shall:
(a) Be valid unless it is:
1. Revoked or suspended by the commissioner;
2. Surrendered by the licensee; or
3. Expired;
(b) Except as provided in Section 12 of this Act, not be transferred or assigned; and
(c) Expire on December 31 of the year in which it is issued, unless renewed or reinstated in accordance
with Section 11 of this Act.
SECTION 5. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) As used in this section, "registry" means the State Regulatory Registry, LLC, or its successor organization.
(2) When an application, report, or approval request is required to be filed with the commissioner under this
subtitle, the commissioner may require that the filing, including any applicable fees and supporting
documentation, be submitted to:
(a) The registry or its successor organization;
(b) The registry's parent, affiliate, or operating subsidiary; or
(c) Other agencies or authorities as part of a nationwide licensing system;
which may act as an agent for receiving, requesting, and distributing information to and from any source
directed by the commissioner.
(3) The commissioner:
(a) May report violations of this subtitle, enforcement actions, and other relevant information that the
commissioner deems necessary to carry out the purpose of this section to the registry or its affiliated
entities; and
(b) Shall establish a process whereby licensees may challenge information entered into the registry by
the commissioner.
(4) The commissioner shall annually request:
(a) Audited financial reports, including inquiring as to the budget and fees collected, both proposed and
actual, from the registry; and
(b) Any nonconfidential protocols or reports for the security and safeguarding of personal information
maintained by the registry, including inquiring as to:
1. Whether the system has implemented and complied with the data security guidelines set forth
in the Gramm-Leach-Bliley Act, 15 U.S.C. sec. 6801;
2. The results of any nonconfidential periodic data protection audits that the system may
conduct; and
3. Whether any security breaches have occurred resulting in the substantial likelihood that
personal information may be misused or stolen.
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(5) The commissioner may establish relationships and contracts with other governmental agencies or entities
affiliated with the registry that the commissioner deems necessary to carry out this section.
(6) For purposes of this section, the commissioner may use other governmental agencies or the registry or its
affiliated entities as an agent for requesting information from, and distributing information to, the United
States Department of Justice or other governmental agencies.
SECTION 6. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) (a) A person seeking to become a licensee shall file a complete application for a license with the
commissioner.
(b) An application for a license shall not be complete unless it:
1. Is made in writing, under oath or affirmation;
2. Is in the format required by the commissioner;
3. Contains, and is accompanied by, the information, documentation, and evidence required
under Section 7 of this Act;
4. Contains an attestation that the applicant is in, and will maintain, compliance with Section 10
of this Act;
5. Is accompanied by evidence that the requirements of Section 9 of this Act have been satisfied;
and
6. Is accompanied by a nonrefundable application fee that is determined by the commissioner in
accordance with Section 13 of this Act.
(2) Within ninety (90) days after receipt of a complete application for a license, which period may be extended
by the commissioner for good cause, the commissioner shall:
(a) Review the application and all attachments for compliance with the requirements of this subtitle;
(b) Investigate the following of the applicant, including for each person in control of the applicant and
each responsible individual:
1. Competence;
2. Experience;
3. Character;
4. Financial condition; and
5. Responsibility; and
(c) Subject to Section 24 of this Act and subsection (4) of this section, issue:
1. An unconditional license to the applicant to engage in virtual currency kiosk business at one
(1) or more locations in this state;
2. A notice of intent to issue a conditional license to the applicant to engage in virtual currency
kiosk business at one (1) or more locations in this state; or
3. A notice of intent to deny the applicant's application for a license.
(3) As part of the review and investigation of an application under subsection (2) of this section, the
commissioner may, in his or her discretion, investigate an applicant's business premises.
(4) (a) The commissioner shall issue an unconditional license to an applicant to engage in virtual currency
kiosk business at one (1) or more locations in this state if the commissioner determines that the
applicant:
1. Is in compliance with the requirements of this subtitle;
2. Has reasonably demonstrated that it has the competence, experience, character, financial
condition, and responsibility to continue to satisfy the requirements of this subtitle; and
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3. Has satisfied the requirements of subsection (3)(a)1. and 2. of Section 8 of this Act for at least
one (1) location in this state.
(b) 1. The commissioner may issue a notice of intent to issue a conditional license to an applicant to
engage in virtual currency kiosk business at one (1) or more locations in this state if the
commissioner determines that the conditions, including any additional bond amount specified
by the commissioner under Section 9 of this Act, are necessary for the applicant to satisfy the
requirements of paragraph (a)1., 2., and 3. of this subsection.
2. A notice of intent issued under subparagraph 1. of this paragraph shall specify the additional
conditions that are required for the applicant to obtain and maintain a license.
3. The commissioner may issue a conditional license to an applicant to engage in virtual
currency kiosk business at one (1) or more locations in this state if the applicant files with the
commissioner a written acceptance of the conditions specified in the notice issued under
subparagraph 1. of this paragraph to the applicant within thirty (30) days after service of the
notice.
4. If the department does not receive an applicant's written acceptance of the conditions specified
in the notice issued under subparagraph 1. of this paragraph to the applicant within thirty (30)
days after service of the notice, the commissioner shall issue a notice of intent to deny the
applicant's application for a license.
(c) 1. Except as provided in paragraph (b) of this subsection, the commissioner shall issue a notice
of intent to deny an applicant's application for a license if the commissioner determines that:
a. Denial of the license is warranted under Section 25 of this Act; or
b. The requirements of paragraph (a)1., 2., and 3. of this subsection are not satisfied.
2. A notice of intent to deny an applicant's application for a license shall specify the reasons for
the determination.
SECTION 7. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
An application filed under Section 6 of this Act shall provide all of the following information, documentation, and
evidence unless the commissioner, for good cause, waives any requirement of this section with respect to a license
application:
(1) The following for the applicant, each executive officer, director, key shareholder, and person in control of
the applicant, and each responsible individual and agent, as applicable:
(a) Legal name;
(b) Any former names used, including former fictitious or trade names;
(c) Any fictitious or trade names used;
(d) Business addresses;
(e) Residential addresses;
(f) Social Security number;
(g) Employment history for the ten (10) year period preceding the application filing; and
(h) A description of the activities conducted by the person and a history of operations, including a
description of any money or virtual currency services, money transmission, or virtual currency kiosk
business that has been previously conducted in this state;
(2) The physical address of each proposed virtual currency kiosk in this state;
(3) A copy of any agreement between the applicant and each responsible individual and agent;
(4) A list of each license or other authorization the applicant holds to conduct money or virtual currency
services, money transmission, or virtual currency kiosk business in any state, federal, or foreign jurisdiction
and the date each license or authorization expires;
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(5) A list of all regulatory revocations, suspensions, restrictions, and other disciplinary actions in any state,
federal, or foreign jurisdiction, including all rejected applications, taken against any of the following:
(a) The applicant;
(b) A responsible individual; or
(c) An agent;
(6) (a) A list and description of all criminal convictions, deferred prosecution agreements, and pending
criminal proceedings, other than traffic violations, in any jurisdiction for the ten (10) year period
preceding the filing of the application against any of the following:
1. The applicant;
2. A responsible individual;
3. An agent;
4. An executive officer of the applicant; or
5. A key shareholder of the applicant.
(b) The commissioner may request a copy of any criminal conviction, which shall be promptly provided
within ten (10) working days of the request;
(7) (a) A list and description of all material litigation for the ten (10) year period preceding the filing of the
application against any of the following:
1. The applicant;
2. A responsible individual;
3. An agent;
4. An executive officer of the applicant; or
5. A key shareholder of the applicant.
(b) The commissioner may request a copy of any material litigation, which shall be promptly provided
within ten (10) working days of the request;
(8) A list of all bankruptcy and receivership proceedings in any jurisdiction for the past ten (10) years in which
any of the following was a debtor:
(a) The applicant;
(b) A responsible individual;
(c) An agent;
(d) A person in control of the applicant; or
(e) A person over which the applicant has control;
(9) The name, business address, and telephone number of each financial institution in which the applicant and
its agents plan to deposit or clear funds obtained by or through its virtual currency kiosk business in this
state;
(10) A description of the source of funds and credit to be used by the applicant and its agents to conduct virtual
currency kiosk business in this state;
(11) A sample contract for an agent;
(12) A copy of the written procedures that will be provided by the applicant or licensee to its responsible
individuals and agents;
(13) The physical address and email address to which communications from the department may be sent;
(14) The name, physical address, email address, and telephone number of the applicant's registered agent for
service of process in this state;
(15) The name, business address, email address, and telephone number of the applicant's chief compliance
officer for virtual currency kiosk business conducted in this state;
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(16) With respect to the applicant's virtual currency kiosk business in this state, a copy of the certificate of
coverage for each liability, casualty, business interruption, and cybersecurity insurance policy maintained
by the applicant for any of the following:
(a) Itself;
(b) A responsible individual;
(c) An agent;
(d) An affiliate of the applicant;
(e) A person in control of the applicant; or
(f) A person over which the applicant has control;
(17) If applicable:
(a) The date on which, and the state where, the applicant is formed;
(b) A copy of any current certificate of good standing issued by the state where the applicant is formed;
(c) A copy of the applicant's filed articles of incorporation;
(d) Evidence that the applicant is registered or qualified to do business in this state;
(e) The name, business address, and telephone number of each affiliate of the applicant;
(f) A description of the control relationship between the applicant and each affiliate of the applicant;
and
(g) A description of the corporate or business structure of the applicant, including:
1. The identity of any parent and subsidiary of the applicant; and
2. Disclosure of whether any parent or subsidiary of the applicant is publicly traded on any stock
exchange;
(18) A copy of the following for the most recent fiscal year and, if available, for the two (2) year period preceding
filing of the application:
(a) The applicant's audited annual financial statements; or
(b) If the applicant is a wholly owned subsidiary of another corporation:
1. The audited consolidated annual financial statement of the parent corporation; or
2. The applicant's audited consolidated annual financial statements;
(19) A copy of the applicant's unconsolidated financial statements, whether audited or not, for:
(a) The current fiscal year; and
(b) If available, for the two (2) year period preceding the filing of the application;
(20) If the applicant is publicly traded in the United States, a copy of the most recent report filed by the person
pursuant to 15 U.S.C. sec. 78m, as amended;
(21) If a person in control of the applicant is publicly traded in the United States, a copy of the:
(a) Audited financial statements of the person for the most recent fiscal year; or
(b) Most recent report filed by the person pursuant to 15 U.S.C. sec. 78m, as amended;
(22) If a person in control of the applicant is publicly traded outside the United States, a copy of the most recent
documentation filed by the person with a relevant foreign regulator in the person's domicile that is similar
to that required in subsection (20) of this section;
(23) If the applicant or its agents are required to register with the Financial Crimes Enforcement Network of the
United States Department of the Treasury as a money service business, evidence of the registration;
(24) Any substituted information, documentation, or evidence the commissioner, for good cause, permits for any
license application in lieu of the information, documentation, or evidence required by this section; and
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(25) Any other information, documentation, or evidence the commissioner reasonably requires to determine
whether an applicant satisfies the requirements of this subtitle.
SECTION 8. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) (a) An applicant or licensee seeking to engage in virtual currency kiosk business at one (1) or more
locations in this state, either directly or through an agent, shall file a complete application for
approval of the location or locations with the commissioner.
(b) An applicant or licensee seeking to designate one (1) or more agents to engage in virtual currency
kiosk business on behalf of the applicant or licensee in this state shall file a complete application for
approval of the agent or agents with the commissioner.
(2) (a) Subject to paragraph (b) of this subsection, an application for approval to engage in virtual currency
kiosk business at one (1) or more locations, or through one (1) or more agents, in this state shall not
be complete unless it:
1. Is made in writing, under oath or affirmation;
2. Is in a format required by the commissioner;
3. Contains, and is accompanied by, the information, documentation, and evidence required or
permitted under Section 7 of this Act that the commissioner determines is necessary and
appropriate for the purpose of making the determination under subsection (3) of this section;
and
4. Is accompanied by a nonrefundable fee for each location and agent that is determined by the
commissioner in accordance with Section 13 of this Act, except the commissioner may waive
the nonrefundable fee for any application that is made at the same time as a license
application under Section 6 of this Act.
(b) When an applicant seeks approval to engage in virtual currency kiosk business at one (1) or more
locations, or through one (1) or more agents, in this state at the same time as filing a license
application under Section 6 of this Act, the commissioner may:
1. Accept the license application as the complete application required under this section; or
2. Require the applicant to submit additional information to the commissioner as part of the
license application for each location, agent, or location and agent.
(3) Upon receipt of a complete application in accordance with subsection (2) of this section, and subject to
Section 24 of this Act, the commissioner shall do one (1) of the following for each proposed location and
agent:
(a) The commissioner shall issue an unconditional approval to the applicant or licensee to engage in
virtual currency kiosk business at the location, or through the agent, in this state if, after
investigation, the commissioner determines that:
1. The applicant or licensee will conduct business at the location, or through the agent, in a
lawful and proper manner; and
2. The interest of the public will not be jeopardized by the applicant or licensee conducting
business at the location or through the agent;
(b) 1. The commissioner may issue a notice of intent to issue a conditional approval to the applicant
or licensee to engage in virtual currency kiosk business at the location, or through the agent,
in this state if the commissioner, after investigation, determines that the conditions, including
any additional bond amount specified by the commissioner under Section 9 of this Act, are
necessary for the applicant or licensee to satisfy the requirements of paragraph (a)1. and 2. of
this subsection.
2. A notice of intent issued under subparagraph 1. of this paragraph shall specify the additional
conditions that are required for the applicant or licensee to engage in the proposed activity.
3. The commissioner may issue a conditional approval to an applicant or licensee to engage in
virtual currency kiosk business at the location, or through the agent, in this state if the
applicant or licensee files a written acceptance of the conditions specified in the notice issued
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under subparagraph 1. of this paragraph to the applicant or licensee within thirty (30) days
after service of the notice.
4. If the department does not receive an applicant's or a licensee's written acceptance of the
conditions specified in the notice issued under subparagraph 1. of this paragraph to the
applicant or licensee within thirty (30) days after service of the notice, the commissioner shall
issue a notice of intent to deny the applicant's or licensee's application for approval to engage
in the proposed activity; or
(c) 1. Except as provided in paragraph (b) of this subsection, the commissioner shall issue a notice
of intent to deny the applicant's or licensee's application to engage in virtual currency kiosk
business at the location, or through the agent, in this state if, after investigation, the
commissioner determines that:
a. For a proposed agent, denial is warranted under Section 25 of this Act; or
b. The requirements of paragraph (a)1. and 2. of this subsection are not satisfied.
2. A notice of intent to deny an applicant's or licensee's application to engage in virtual currency
kiosk business at a location, or through an agent, shall specify the reasons for the
determination.
SECTION 9. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) As used in this section:
(a) "Bond" means:
1. A surety bond; or
2. Another similar security acceptable to the commissioner;
(b) "Net worth" means assets less liabilities as determined by generally accepted accounting principles;
and
(c) "Person" includes any applicant and licensee.
(2) (a) Except as otherwise provided in paragraph (b) of this subsection, an applicant shall submit with its
license application, and a licensee shall at all times maintain, a bond in an amount that is not less
than five hundred thousand dollars ($500,000).
(b) The commissioner may require an applicant to submit before a license is issued, and a licensee to
maintain at all times, a bond in an amount in excess of five hundred thousand dollars ($500,000) but
not exceeding five million dollars ($5,000,000) if the commissioner determines the additional amount
is necessary to cover the nature and extent of risks associated with the virtual currency kiosk
business activity in this state of the:
1. Applicant and its proposed agents; or
2. The licensee and its agents.
(c) An applicant or a licensee that is required to increase its bond under paragraph (b) of this subsection
shall submit to the commissioner evidence that it has secured the additional bond amount not later
than thirty (30) days after the applicant or licensee is notified by the commissioner in writing of the
required increase.
(3) (a) The bond required under this section shall:
1. Be in a form satisfactory to the commissioner;
2. Hold and bind the principal and surety to the Commonwealth of Kentucky for the benefit of
any claimants against the person and its agents to secure the faithful performance of the
obligations of the person and its agents in accordance with the requirements of this subtitle,
including the payment of unpaid fee amounts and civil monetary penalties due to the
department under this subtitle;
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3. Except as provided in paragraph (e) of this subsection, cover claims brought by a claimant for
as long as the commissioner specifies, but not less than five (5) years after the later of the
following:
a. The date of any violation of this subtitle by the person or its agents; or
b. The date the person ceases to do business in this state;
4. Be continuous and remain in effect until canceled;
5. Require the person and surety to provide the commissioner at least thirty (30) days written
notice of an intent to cancel the bond; and
6. Provide that cancellation of the bond shall not affect any liability incurred or accrued under
the bond during the thirty (30) day notice period required under subparagraph 5. of this
paragraph.
(b) The aggregate liability on a bond shall not exceed the principal sum of the bond.
(c) A claimant may maintain a civil action on a bond.
(d) The commissioner may maintain a civil action on a bond on behalf of the department or any other
claimant in the Franklin Circuit Court or in any other court of competent jurisdiction, either in one
(1) action or successive actions.
(e) The commissioner may permit the amount of a bond to be reduced or eliminated after a person
ceases to do business in this state to the extent the amount of a person's and its agents' outstanding
obligations in this state are reduced.
(4) In addition to the bond required under this section, an applicant shall submit with its license application,
and a licensee shall at all times maintain, evidence of a net worth that is not less than five hundred
thousand dollars ($500,000).
(5) The commissioner may promulgate an administrative regulation in accordance with KRS Chapter 13A or
issue an order to:
(a) Exercise his or her discretion under this section; or
(b) Otherwise carry out the requirements of this section.
SECTION 10. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
Every applicant and licensee shall, at the time of filing a license application and at all times during the
consideration of the application and licensure:
(1) Be in good standing in its state of incorporation or formation;
(2) Be registered or qualified to do business in this state;
(3) Maintain a registered agent for service of process in this state; and
(4) (a) File a written report with the commissioner within fifteen (15) business days of knowledge of any of
the following events:
1. A material change in the information provided in:
a. A license application;
b. An application for approval to engage in virtual currency kiosk business at one (1) or
more locations, or through one (1) or more agents, in this state; or
c. Any report filed under this subtitle;
2. A failure to satisfy the requirements of Section 9 of this Act;
3. Insolvency, the filing for bankruptcy, reorganization, dissolution, or receivership under the
United States bankruptcy code or any other law, or the making of a general assignment for the
benefit of creditors by:
a. The applicant or licensee;
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b. A responsible individual;
c. An agent;
d. An executive officer of the applicant or licensee; or
e. A director of the applicant or licensee;
4. The filing of any material litigation against the applicant or licensee by any state, federal, or
foreign governmental authority; or
5. The applicant or licensee, a responsible individual or agent, or an executive officer or director
of the applicant, the licensee, or an agent has been:
a. Indicted for or convicted of any felony; or
b. Convicted of a misdemeanor involving fraud, theft, breach of trust, or virtual currency
kiosk business in this state.
(b) The report required under paragraph (a) of this subsection shall describe the event and its expected
impact on:
1. The applicant's proposed activities in this state; or
2. The licensee's activities in this state.
SECTION 11. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) As used in this section, "United States dollar equivalent of virtual currency" means the equivalent value of
virtual currency in United States dollars shown on a virtual currency exchange based in the United States
for a particular date or period.
(2) On or before December 31 of each year, each licensee shall:
(a) Pay a nonrefundable annual renewal fee to the department that is determined by the commissioner in
accordance with Section 13 of this Act; and
(b) File the licensee's annual renewal report with the commissioner in accordance with subsection (5) of
this section.
(3) The failure of a licensee to comply with subsection (2) of this section shall result in the expiration of the
licensee's license by operation of law on January 1 of the following year.
(4) (a) The commissioner may reinstate an expired license if, before February 1 of the calendar year in
which the license expired, the licensee:
1. Pays the annual renewal fee and files the annual renewal report required under subsection (2)
of this section; and
2. Pays a civil penalty to the department that is equal to the amount of the annual renewal fee
determined by the commissioner in accordance with Section 13 of this Act.
(b) Any reinstatement of a license under paragraph (a) of this subsection shall be retroactive to January
1 of the calendar year in which the license expired.
(5) Except as provided in subsection (6) of this section, each licensee shall file an annual renewal report with
the commissioner that contains all of the following:
(a) A copy of:
1. The licensee's most recent audited annual financial statement; or
2. If the licensee is a wholly owned subsidiary of another corporation, the:
a. Most recent audited consolidated annual financial statement of the parent corporation;
or
b. Licensee's most recent audited consolidated annual financial statements;
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(b) A description of the following, if the information has not been previously reported to the
commissioner on any other report filed under this subtitle:
1. Any material changes to any of the information submitted by the licensee on its original
application; and
2. Any data security breach involving the licensee;
(c) A list of the licensee's permissible investments under Section 16 of this Act;
(d) A certification from the licensee that the licensee continues to maintain permissible investments in
accordance with Section 16 of this Act;
(e) A list of each location where the licensee, or an agent of the licensee, conducts virtual currency kiosk
business in this state;
(f) For January 1 to December 31 of the preceding calendar year and January 1 to September 30 of the
current year:
1. The number of virtual currency kiosk transactions at each location in this state where the
licensee, or an agent of the licensee, conducts virtual currency kiosk business;
2. The United States dollar amount of virtual currency kiosk transactions at each location in this
state where the licensee, or an agent of the licensee, conducts virtual currency kiosk business;
and
3. The total number and dollar amount of refund requests received by the licensee, or an agent
of the licensee, from virtual currency kiosk users that were:
a. Granted by the licensee or agent; and
b. Denied by the licensee or agent;
(g) As of December 31 of the preceding calendar year and September 30 of the current year:
1. The amount of United States dollar equivalent of virtual currency in the possession or control
of the licensee or an agent of the licensee;
2. The number of virtual currency kiosk users for whom the licensee, or an agent of the licensee,
had possession or control of virtual currency; and
3. The amount of United States dollar equivalent of virtual currency in the possession or control
of the licensee, or an agent of the licensee, on behalf of virtual currency kiosk users;
(h) Evidence that the licensee continues to satisfy the requirements of Section 9 of this Act;
(i) The name, business address, email address, and telephone number of the licensee's chief compliance
officer for virtual currency kiosk business conducted in this state; and
(j) Any other information the commissioner determines is necessary to aid in the enforcement of this
subtitle.
(6) A licensee that was not licensed in Kentucky at any time between January 1 and October 31 of a calendar
year shall not be required to file an annual renewal report for the following year.
SECTION 12. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) A person shall not take any action that results in a change of control of a licensee without:
(a) Providing the notice required under subsection (2) of this section; and
(b) Obtaining the prior written approval of the commissioner in accordance with subsection (3) of this
section, except this paragraph shall not apply to:
1. A person that acts as a proxy for the sole purpose of voting at a designated meeting of the
security holders or holders of voting interests of a licensee or person in control of a licensee;
2. A person that acquires control of a licensee by devise or descent;
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3. A person that acquires control as a personal representative, custodian, guardian, conservator,
or trustee, or as an officer appointed by a court of competent jurisdiction or by operation of
law;
4. A public offering of securities under the laws of the United States; or
5. a. Any other person or circumstance that the commissioner determines is exempted from
compliance with this paragraph in an administrative regulation promulgated in
accordance with KRS Chapter 13A.
b. The commissioner may promulgate an administrative regulation to exempt a person or
circumstance from compliance with this paragraph if the commissioner determines that
the exemption is necessary to serve the public interest.
(2) (a) A licensee shall file a complete notice of a:
1. Change of control of the licensee under subsection (1)(b)1. to 5. of this section with the
commissioner within fifteen (15) days of learning of the change of control; and
2. Proposed change of control of the licensee, other than a change of control under subsection
(1)(b)1. to 5. of this section, with the commissioner:
a. Within fifteen (15) days of learning of the proposed change of control; and
b. At least thirty (30) days prior to the proposed change of control.
(b) A notice of a change of control, or a proposed change of control, of a licensee shall not be complete
unless it:
1. Is made in writing, under oath or affirmation;
2. Is in a format required by the commissioner; and
3. Contains the information that the commissioner determines is necessary to provide reasonable
notice of the licensee's change of control or proposed change of control.
(3) (a) Except as provided in subsection (1) of this section, a person seeking to acquire control of a licensee
shall file a complete application for approval of the change of control with the commissioner at least
thirty (30) days prior to the proposed change of control.
(b) An application for approval of a change of control shall not be complete unless it:
1. Is made in writing, under oath or affirmation;
2. Is in the format required by the commissioner;
3. Contains, and is accompanied by, any or all of the information, documentation, and evidence
required or permitted for an applicant under Section 7 of this Act that the commissioner
determines is necessary and appropriate for the purpose of making the determination under
paragraph (c) of this subsection; and
4. Is accompanied by a nonrefundable investigation fee of one hundred dollars ($100).
(c) Upon receipt of a complete application for approval of a change of control and subject to Section 24
of this Act, the commissioner shall:
1. Approve the application if the commissioner determines that the person satisfies the
requirements of this subtitle for obtaining a license; or
2. a. Issue a notice of intent to deny the application if the commissioner determines that the
person does not satisfy the requirements of this subtitle for obtaining a license.
b. A notice of intent to deny an application for approval of a change of control shall
specify the requirements of this subtitle that the person does not satisfy.
(4) (a) The commissioner may determine whether any set of facts or a proposed transaction constitutes, or
would constitute, control for purposes of this section.
(b) Any of the following may make a request to the commissioner for a determination under paragraph
(a) of this subsection:
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1. A licensee; or
2. A person that seeks to enter a proposed transaction with a licensee.
(5) (a) A licensee shall file a complete notice of the termination or resignation of a responsible individual or
agent with the commissioner within fifteen (15) days of the termination or resignation.
(b) A notice of termination or resignation of a licensee's responsible individual or agent shall not be
complete unless it:
1. Is made in writing, under oath or affirmation;
2. Is in a format required by the commissioner; and
3. Contains the information that the commissioner determines is necessary to provide reasonable
notice of the licensee's change in responsible individual or agent.
(6) (a) A licensee shall obtain the prior written approval of the commissioner in accordance with this
subsection prior to adding or replacing a responsible individual.
(b) A licensee shall file a complete application for approval of the addition or replacement of a
responsible individual with the commissioner.
(c) An application for approval of the addition or replacement of a responsible individual shall not be
complete unless it:
1. Is made in writing, under oath or affirmation;
2. Is in the format required by the commissioner; and
3. Contains, and is accompanied by, any or all of the information, documentation, and evidence
required or permitted under Section 7 of this Act that the commissioner determines is
necessary and appropriate for the purpose of making the determination under paragraph (d)
of this subsection.
(d) Upon receipt of a complete application for approval of the addition or replacement of a responsible
individual and subject to Section 24 of this Act, the commissioner shall:
1. Approve the application if the commissioner determines that the licensee will continue to
satisfy the requirements of this subtitle for maintaining a license after the addition or
replacement; or
2. a. Issue a notice of intent to deny the application if the commissioner determines that the
addition or replacement will cause the licensee to no longer satisfy the requirements of
this subtitle for maintaining a license.
b. A notice of intent to deny an application for approval of the addition or replacement of
a responsible individual shall specify the requirements of this subtitle that the licensee
will not satisfy if the addition or replacement is made.
SECTION 13. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) Subject to subsection (2) of this section, the commissioner shall promulgate administrative regulations in
accordance with KRS Chapter 13A to establish:
(a) The format of, and manner of submission for, applications, notices, and reports required under this
subtitle;
(b) The nonrefundable application fees required under Sections 6 and 8 of this Act;
(c) The nonrefundable annual renewal fee required under Section 11 of this Act;
(d) Any additional information, documentation, or evidence that the commissioner may require under
Section 7 of this Act; and
(e) The information, documentation, and evidence that shall be contained in or accompany an
application or notice filed under Section 8 or 12 of this Act.
(2) (a) The nonrefundable fees required under Sections 6, 8, and 11 of this Act shall be determined based on
a reasonable estimation of the amount required to cover the reasonable costs to the department to:
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1. Review, investigate, and process the relevant applications and reports; and
2. Enforce the requirements of this subtitle.
(b) The determination made under paragraph (a) of this subsection shall take into account any other
costs, fees, and expenses that are otherwise payable to the commissioner under this subtitle.
SECTION 14. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) Virtual currency kiosk operators desiring to engage in virtual currency kiosk business through agents shall
authorize each agent to operate pursuant to an express written contract, which shall include the following
provisions:
(a) That the operator designates the person as its agent with authority to engage in virtual currency
kiosk business on behalf of the operator as authorized under this subtitle;
(b) That the agent shall operate in full compliance with this subtitle, administrative regulations
promulgated under this subtitle, and any order issued by the commissioner pursuant to this subtitle;
(c) That both the operator and the agent shall not authorize subagents;
(d) That the agent shall timely remit all legal tender and virtual currency legally due to the operator in
accordance with the terms of the written contract between the operator and the agent;
(e) That the operator and agent are subject to regulation by the commissioner; and
(f) That the operator and agent shall comply with all applicable federal and state laws.
(2) An agent shall not make any fraudulent statements or misrepresentations to:
(a) The virtual currency kiosk operator; or
(b) The commissioner, including any person acting under the commissioner's authority.
(3) All virtual currency kiosk business conducted by agents shall be strictly conducted in accordance with the
virtual currency kiosk operator's written procedures provided to the agent.
(4) (a) An agent shall timely remit all legal tender and virtual currency legally due to the virtual currency
kiosk operator in accordance with the terms of the written contract between the licensee and the
agent.
(b) The commissioner shall have the discretion to set, by administrative regulation or order, the
maximum remittance time.
(5) An agent shall act only as authorized under the written contract with the virtual currency kiosk operator.
(6) (a) All funds, less fees, received by an agent of a virtual currency kiosk operator from virtual currency
kiosk business shall, from the time the funds are received by the agent until such time when the
funds or an equivalent amount are remitted by the agent to the operator, constitute trust funds owned
by and belonging to the operator.
(b) If an agent commingles any of these funds with any other funds or property owned or controlled by
the agent, then all commingled proceeds and other property shall be impressed with a trust in favor
of the virtual currency kiosk operator in an amount equal to the amount of the proceeds due the
operator.
(7) An agent shall report to the virtual currency kiosk operator the theft, forgery, or loss of the operator's or a
virtual currency kiosk user's funds within twenty-four (24) hours from the time the agent learned of the
theft, forgery, or loss.
SECTION 15. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) Each virtual currency kiosk operator and its agents shall:
(a) Maintain the books, accounts, and records of its virtual currency kiosk business activities in this state
that are required under subsection (2) of this section; and
(b) Keep the books, accounts, and records referenced in paragraph (a) of this subsection for:
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1. A period of time determined by the commissioner in an administrative regulation promulgated
in accordance with KRS Chapter 13A; or
2. For a period that is longer than the period referenced in subparagraph 1. of this paragraph if
required by:
a. Other state or federal law; or
b. The commissioner to resolve any examination, investigation, or claim.
(2) The following books, accounts, and records shall be maintained:
(a) For each virtual currency kiosk transaction:
1. The amount, date, and precise time of the transaction;
2. Any payment instructions for the transaction;
3. The total amount of virtual currency kiosk charges received by and paid to the virtual
currency kiosk operator or agent, including any virtual currency kiosk charges received on
behalf of the operator or agent;
4. The exchange rate of the virtual currency to the United States dollar; and
5. The names, account numbers, and physical addresses of the parties to the transaction;
(b) A general ledger containing all assets, liabilities, ownership equity, income, and expense accounts;
(c) Bank statements and bank reconciliation records;
(d) Any receipts, statements, and valuations provided to virtual currency kiosk users and account
holders;
(e) Records or minutes of meetings of the board of directors or an equivalent governing body of the
virtual currency kiosk operator or agent;
(f) Records demonstrating compliance with applicable state and federal anti-money laundering laws,
including virtual currency kiosk user and account holder identification and verification documents,
records linking virtual currency kiosk users and account holders to their respective accounts and
balances, and a record of any compliance breaches;
(g) Communications and documentation related to:
1. Investigations of virtual currency kiosk user and account holder complaints; and
2. Transaction error resolutions;
(h) The policies required under Section 18 of this Act; and
(i) Any other books, accounts, or records that are required by the commissioner in an administrative
regulation promulgated in accordance with KRS Chapter 13A for determining whether a virtual
currency kiosk operator or agent is in compliance with this subtitle, including whether an operator or
agent is in compliance with any administrative regulation promulgated, or order issued, under this
subtitle.
(3) The books, accounts, and records that are required to be maintained under this section:
(a) May be maintained in any electronic format consistent with the virtual currency kiosk operator's or
agent's ordinary business practices unless the operator or agent receives specific written instructions
from the commissioner to the contrary;
(b) Shall be maintained separate and apart from any other business in which the virtual currency kiosk
operator or agent is involved;
(c) Shall be kept at the virtual currency kiosk operator's or agent's principal office or an office located
in this state unless otherwise permitted in writing by the commissioner; and
(d) Shall be made available for review or examination at a nonresidential location approved by the
commissioner.
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(4) Books, accounts, or records of any person described in this section may be maintained at a location outside
of this state so long as they are made accessible to the commissioner upon seven (7) business days' written
notice.
SECTION 16. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) Every virtual currency kiosk operator shall, at all times, maintain permissible investments that:
(a) Have a market value that is computed in accordance with generally accepted accounting principles;
and
(b) Are not less than the aggregate amount of all of the operator's and its agents' outstanding virtual
currency kiosk transactions.
(2) Except to the extent otherwise limited in subsection (3) of this section, the investments permitted under KRS
286.11-015 are permissible for a virtual currency kiosk operator.
(3) The commissioner may:
(a) Limit the extent to which a type of investment within a class of permissible investments may be
considered a permissible investment, except for money, time deposits, savings deposits, demand
deposits, and certificates of deposit issued by a federally insured financial institution; and
(b) By administrative regulation or order allow other types of investments that the commissioner
determines to be substantially equivalent to other permissible investments in regards to safety and
soundness.
(4) Permissible investments, even if commingled with other assets of the virtual currency kiosk operator, shall
be deemed by operation of law to be held in trust for the benefit of the purchasers and holders of the
operator's outstanding virtual currency kiosk transactions in the event of the operator's insolvency or
bankruptcy.
SECTION 17. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) As used in this section:
(a) "New virtual currency kiosk user":
1. Means a virtual currency kiosk user:
a. On the day of the user's first virtual currency kiosk transaction with the virtual
currency kiosk operator; and
b. For twenty-nine (29) calendar days thereafter; and
2. Does not include a virtual currency kiosk user on any day that the user enters a virtual
currency kiosk transaction with the virtual currency kiosk operator following twenty-nine (29)
calendar days after the user's first virtual currency kiosk transaction with the operator;
(b) "Virtual currency kiosk operator" includes an agent of the virtual currency kiosk operator;
(c) "Virtual currency wallet" means a software application or other mechanism providing a means to
hold the keys necessary to access and transfer virtual currency; and
(d) "Virtual currency wallet address" means an alphanumeric identifier associated with a virtual
currency wallet that identifies the location to which a virtual currency transaction can be sent.
(2) A virtual currency kiosk operator shall:
(a) Have maximum virtual currency kiosk transaction limits that do not exceed:
1. Two thousand dollars ($2,000), or the equivalent in virtual currency, per day for all virtual
currency kiosk transactions entered with a virtual currency kiosk user; and
2. Ten thousand five hundred dollars ($10,500), or the equivalent in virtual currency, for all
virtual currency kiosk transactions entered with a new virtual currency kiosk user;
(b) Either:
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1. Wait seventy-two (72) hours before processing a virtual currency kiosk transaction for a new
virtual currency kiosk user; or
2. At the operator's cost, allow a new virtual currency kiosk user to cancel, and receive a full
refund for, a virtual currency kiosk transaction within seventy-two (72) hours after the
transaction;
(c) Not collect, directly or indirectly, virtual currency kiosk charges from a virtual currency kiosk user
for any single virtual currency kiosk transaction that exceeds the greater of:
1. Five dollars ($5); or
2. Eighteen percent (18%) of the value, in United States dollars, of the transaction;
(d) Provide live customer service via a toll-free telephone number during the operating hours of each
virtual currency kiosk in this state; and
(e) Provide the following notices at each virtual currency kiosk in this state:
1. The following warning, stating in substantially similar form:
"WARNING: This technology can be used to defraud you.
If someone asked you to deposit money in this machine and/or is on the phone with you and
claims to be a:
- Friend or family member;
- Government agent;
- Computer software representative;
- Bill collector;
- Law enforcement officer; or
- Anyone you do not know personally;
STOP THIS TRANSACTION IMMEDIATELY and contact your local law enforcement and
the virtual currency kiosk operator. This may be a scam. NEVER SEND MONEY to someone
you don't know.";
2. That virtual currency kiosk users can contact the following to report fraud or suspected fraud:
a. Any relevant state and local law enforcement;
b. The department; and
c. The Attorney General;
3. The contact information, including a telephone number, for each of the agencies referenced
in subparagraph 2. of this paragraph;
4. The name, address, and toll-free customer service telephone number of the virtual currency
kiosk operator;
5. The days, times, and means by which a virtual currency kiosk user can contact the virtual
currency kiosk operator for assistance; and
6. The operator's dedicated United States telephone number or email address for law
enforcement, the department, and the Attorney General, as required under subsection (6) of
Section 18 of this Act.
(3) The notices required under subsection (2)(e) of this section shall be:
(a) 1. On the virtual currency kiosk;
2. Near, and within readable sight of, the virtual currency kiosk; or
3. On the first screen of the virtual currency kiosk, which shall be viewable by any person
without requiring the person to input money, virtual currency, data, or information; and
(b) Displayed prominently and in bold type.
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(4) (a) Prior to entering a virtual currency kiosk transaction with a virtual currency kiosk user, a virtual
currency kiosk operator shall:
1. Provide accurate and appropriate disclosures to the user; and
2. Obtain an acknowledgment from the user that the user received the disclosures.
(b) The disclosures required under paragraph (a) of this subsection shall:
1. Describe the terms and conditions of the transaction, which shall include but not be limited to:
a. The amount of the transaction;
b. A description of all virtual currency kiosk charges, which shall be disclosed to the user
in United States dollars; and
c. The exchange rate of the virtual currency to the United States dollar;
2. Describe all material risks associated with the virtual currency kiosk transaction, including
the following:
a. Virtual currency is not legal tender in the United States, is not backed by the United
States government, and accounts and value balances are not subject to Federal Deposit
Insurance Corporation, National Credit Union Administration, or Securities Investor
Protection Corporation protections;
b. Legislative and regulatory changes or actions at the state, federal, or international level
may adversely affect the value of virtual currency;
c. Virtual currency value relative to the United States dollar may fluctuate significantly;
d. Transactions in virtual currency may be irreversible, and accordingly, losses due to
fraudulent or accidental transactions may not be recoverable;
e. Some virtual currency transactions may be immediately effective when recorded on a
public ledger, which is not necessarily the date or time that the user initiates the
transaction;
f. The value of virtual currency may be derived from the continued willingness of market
participants to exchange legal tender for virtual currency, which may result in the
potential for permanent and total loss of value of a particular virtual currency if the
market for the virtual currency declines or collapses for an extended period of time;
g. Any bond required by Section 9 of this Act for the benefit of virtual currency kiosk
users may not be sufficient to cover all losses incurred by the users;
h. Virtual currency kiosk users should perform research before purchasing or investing in
virtual currency; and
i. The circumstances under which the virtual currency kiosk operator will, in the ordinary
course of business, disclose the user's financial and account information to third
parties;
3. Include any other terms, conditions, or information the commissioner determines is necessary
and appropriate to disclose to virtual currency kiosk users;
4. Be made separately from any other information provided by a virtual currency kiosk operator;
and
5. Be clear, conspicuous, and in legible writing.
(5) (a) Upon completion of a virtual currency kiosk transaction, a virtual currency kiosk operator shall
provide a receipt in paper or electronic retainable form, as designated under paragraph (b) of this
subsection, to the virtual currency kiosk user that contains all of the following information:
1. The name and toll-free customer service telephone number of the operator;
2. The contact information required under subsection (2)(e)3. of this section to report fraud or
suspected fraud;
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3. The type, value, date, and precise time of the transaction;
4. Each applicable virtual currency wallet address and transaction hash, where available;
5. A description of all virtual currency kiosk charges, which shall be disclosed in United States
dollars;
6. The exchange rate of the virtual currency to the United States dollar;
7. The operator's liability for nondelivery or delayed delivery;
8. The operator's refund policy; and
9. Any additional information required by the commissioner.
(b) Each virtual currency kiosk user shall be provided the option to receive a paper or electronic receipt
for each virtual currency kiosk transaction.
(6) A virtual currency kiosk operator may provide additional notices or disclosures, or information on a receipt
provided, to a virtual currency kiosk user.
(7) A fraud victim's eligibility for a refund shall not be waived, affected, or prevented by, or due to, a disclosure
made in accordance with this section.
(8) The notices, disclosures, and receipts required under this section shall be in the English language.
(9) The commissioner may promulgate an administrative regulation in accordance with KRS Chapter 13A to:
(a) Establish the format of the notices required under subsection (2)(e) of this section;
(b) Establish any additional disclosures or information the commissioner requires under subsection (4)
or (5) of this section; and
(c) Require virtual currency kiosk operators to comply with one (1) or more specified industry standards
or practices if the commissioner determines that compliance with the standard or practice is
necessary to:
1. Ensure the lawful conduct of business under this subtitle; or
2. Protect the interest of the public.
SECTION 18. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) As used in this section:
(a) "Blockchain analytics" means the analysis of data from blockchains or publicly distributed ledgers,
including associated transaction information;
(b) "Blockchain analytics and tracing software" means a software service that uses blockchain analytics
data to provide:
1. Risk-specific information;
2. Tracing of virtual currency wallet addresses; and
3. Other information and services; and
(c) "Virtual currency wallet" and "virtual currency wallet address" have the same meanings as in
Section 17 of this Act.
(2) (a) Each virtual currency kiosk operator shall take reasonable steps to detect and prevent fraud and
money laundering associated with its virtual currency kiosk business in this state.
(b) The reasonable steps required under paragraph (a) of this subsection shall include establishing,
implementing, maintaining, and enforcing:
1. An anti-fraud and anti-money laundering policy that, at a minimum:
a. Identifies and assesses fraud-related and money laundering-related risk areas;
b. Establishes procedures and controls to protect against identified risks;
c. Allocates responsibility for monitoring risks;
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d. Establishes procedures for the periodic evaluation and revision of the policy's
procedures, controls, and monitoring mechanisms; and
e. Requires compliance with the federal Bank Secrecy Act, codified at 31 U.S.C. sec. 5311
et seq.;
2. An enhanced due diligence policy that, at a minimum, establishes protocols to identify
individuals who are at risk of fraud based on age or mental capacity; and
3. Policies that address:
a. Cybersecurity, the privacy of personal information, and information security; and
b. Any other subjects required by the commissioner in an administrative regulation
promulgated in accordance with KRS Chapter 13A.
(c) The policies required under paragraph (b) of this subsection shall:
1. Be in writing;
2. Apply to all employees and agents of the virtual currency kiosk operator; and
3. Be reviewed and approved by the virtual currency kiosk operator's board of directors or
equivalent governing body.
(3) (a) Each virtual currency kiosk operator and its agents shall use blockchain analytics and tracing
software to:
1. Assist in the prevention of sending virtual currency to a virtual currency wallet known or
likely to be affiliated with fraudulent activity at the time of a virtual currency kiosk
transaction; and
2. Detect virtual currency kiosk transaction patterns that are indicative of fraud or other illicit
activities.
(b) A virtual currency kiosk operator and its agents shall block a virtual currency kiosk transaction to a
virtual currency wallet that is associated with overseas exchanges that are not accessible for virtual
currency kiosk users in the United States.
(c) The department may request evidence from any virtual currency kiosk operator or agent of current
use of blockchain analytics.
(4) (a) Prior to accepting payment from any virtual currency kiosk user in this state, a virtual currency kiosk
operator and its agents shall verify the identity of the user.
(b) To comply with paragraph (a) of this subsection, the virtual currency kiosk operator or agent, or an
authorized delegate of the operator or agent, shall:
1. Obtain a copy of a government-issued identification card that identifies the virtual currency
kiosk user; and
2. Collect additional information about the virtual currency kiosk user, including the user's:
a. Name;
b. Date of birth;
c. Telephone number;
d. Physical address; and
e. Email address.
(c) A virtual currency kiosk operator and its agents shall not allow a virtual currency kiosk user to
engage in a virtual currency kiosk transaction under or using any name, account, or identity that is
not the user's own true name, account, or identity.
(d) A virtual currency kiosk operator and its agents shall be strictly liable for any violation of this
subsection.
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(5) (a) Except as provided in paragraph (b) of this subsection, upon request of a virtual currency kiosk user,
a virtual currency kiosk operator and its agents shall issue a refund of all virtual currency kiosk
charges to the user for each virtual currency kiosk transaction that satisfies all of the following:
1. The user was fraudulently induced to engage in the transaction;
2. The user reported the fraud within ninety (90) days of the transaction to:
a. The operator or agent; and
b. One (1) of the following:
i. The department;
ii. The Attorney General; or
iii. Any relevant state or local law enforcement agency; and
3. The user submitted proof of the fraud to the operator or agent and the person referenced in
subparagraph 2.b. of this paragraph, which may include one (1) of the following:
a. A police report; or
b. A sworn statement made to the department, Attorney General, operator, or agent;
that details the fraudulent nature of the transaction.
(b) 1. In addition to any other remedies and penalties available under this subtitle or any other
statutory or common law, a virtual currency kiosk operator and its agents shall issue a refund
to a virtual currency kiosk user in the full amount of any virtual currency kiosk transaction,
including all virtual currency kiosk charges, if the user submits proof, which may be in the
form of a police report or sworn statement, that the operator or agent, or an employee or other
representative of the operator or agent, defrauded, deceived, or mislead the user in connection
with the transaction.
2. A virtual currency kiosk user shall submit the proof required under this paragraph in
accordance with the requirements of paragraph (a) of this subsection, except the user shall be
required to submit the proof within any applicable statute of limitations associated with the
violation or offense, which shall not be less than one (1) year after the transaction.
(c) The refund required under paragraph (a) or (b) of this subsection shall be:
1. Paid in the originating currency; and
2. Made to a virtual currency kiosk user by the virtual currency kiosk operator or agent within
seventy-two (72) hours after the requirements of paragraph (a) or (b) of this subsection, as
applicable, are satisfied.
(6) (a) A virtual currency kiosk operator and its agents shall provide a dedicated and frequently monitored
communications line for law enforcement, the department, and the Attorney General, via a United
States telephone number or email address posted on each virtual currency kiosk in accordance with
Section 17 of this Act, to be used by the agencies to facilitate communications with the operator or
agent in the event of a report from a virtual currency kiosk user of fraud or suspected fraud.
(b) Upon request from law enforcement, the department, or the Attorney General, a virtual currency
kiosk operator and its agents shall:
1. Provide the agency with its trace findings; and
2. Grant the agency assistance with blockchain analytics to assist in any fraud investigation.
(c) A virtual currency kiosk operator and its agents shall cooperate with law enforcement, the
department, and the Attorney General in the investigation of fraud and other unlawful activity,
which shall include without limitation:
1. Promptly complying with lawful subpoenas, court orders, and other official requests for
records or information relating to virtual currency kiosk transactions or virtual currency kiosk
users;
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2. Responding in good faith to lawful requests relating to fraud involving a virtual currency
kiosk; and
3. Designating a point of contact for communication with law enforcement, the department, and
the Attorney General regarding fraud-related matters.
(7) (a) Each virtual currency kiosk operator shall designate a qualified natural person to serve as the
operator's chief compliance officer for virtual currency kiosk business conducted in this state.
(b) The chief compliance officer shall be responsible for coordinating, monitoring, and ensuring the
operator's and its agents' compliance with:
1. This section; and
2. All other applicable state and federal laws, including all administrative regulations, rules, and
orders promulgated or issued thereunder.
SECTION 19. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
It shall be a violation of this subtitle for an applicant, a licensee, a virtual currency kiosk operator, an agent, or
any other person to do any of the following:
(1) With regard to virtual currency kiosk business in this state, whether or not the person is required to have a
license:
(a) Directly or indirectly employ any scheme, device, or artifice to defraud or mislead, when the
applicant, licensee, operator, agent, or person should have known that the scheme, device, or artifice
was defrauding or misleading; or
(b) Engage in any:
1. Unfair or deceptive practice; or
2. Other act or conduct that would warrant the denial, suspension, or revocation of a license
under Section 25 of this Act;
(2) Negligently make any false statement, or knowingly or willfully make any omission of material fact, in
connection with:
(a)_ Any information or reports relating to virtual currency kiosk business in this state filed with:
1. A state or federal government agency;
2. The registry, as defined in Section 5 of this Act; or
3. Any agency or authority, as part of a nationwide licensing system, that is designated by the
commissioner to accept filings under Section 5 of this Act; or
(b) Any investigation or examination conducted by the commissioner or any other state or federal
government agency relating to virtual currency kiosk business in this state; or
(3) Fail to truthfully account for any assets in connection with any virtual currency kiosk transaction.
SECTION 20. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
In addition to the requirements of this subtitle, every virtual currency kiosk operator and its agents shall comply
with all applicable federal and state laws.
SECTION 21. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) Any person may file a written complaint with the commissioner relating to:
(a) Virtual currency kiosk business in this state; or
(b) The conduct of any person engaged or participating in virtual currency kiosk business in this state.
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(2) The commissioner may conduct an investigation, upon complaint or otherwise, of any virtual currency
kiosk operator or other person within or outside this state that he or she deems necessary to:
(a) Discover violations of this subtitle, including violations of any administrative regulation
promulgated, or order issued, under this subtitle; or
(b) Secure information necessary for the proper enforcement of this subtitle.
(3) (a) The commissioner may conduct routine examinations of the virtual currency kiosk affairs, business,
offices, books, accounts, and records of licensees and agents of licensees.
(b) A licensee shall pay a reasonable fee sufficient to cover the cost of each routine examination based
upon fair compensation for time and actual expenses.
(c) Upon written notice of the amount assessed under paragraph (b) of this subsection, the licensee shall
become liable for and pay the assessment to the department.
(4) To the extent necessary to conduct any investigation or examination authorized under this section, the
commissioner may:
(a) Compel the attendance of any person or obtain any books, accounts, or records by subpoenas;
(b) Administer oaths and affirmations;
(c) Examine under oath or affirmation all persons whose testimony he or she may require; and
(d) To the extent permitted under federal law, access and review records and related information relating
to compliance with federal anti-money laundering laws, including suspicious activity reports filed
pursuant to the Bank Secrecy Act, 31 U.S.C. sec. 5311 et seq., as amended.
(5) As a condition of licensure under this subtitle, a licensee and its agents shall, by operation of law, be
deemed to consent to any examination or investigation conducted under this section, whether or not prior
notice is given to the licensee or agent.
(6) When conducting an investigation or examination, the commissioner may do any of the following:
(a) Conduct an on-site or off-site investigation or examination;
(b) Participate in a joint or concurrent investigation or examination with one (1) or more states or
federal agencies, including a multistate investigation or examination; and
(c) Accept and rely upon an investigation or examination report of one (1) or more states or federal
agencies, including a multistate investigation or examination report.
(7) (a) Except as provided in paragraph (b) of this subsection and Section 22 of this Act, a routine
examination report, related correspondence, and examination-related information shall:
1. Be considered confidential by law and privileged; and
2. Not be subject to disclosure under KRS 61.870 to 61.884.
(b) A licensee:
1. May disclose a Kentucky routine examination report to a financial institution upon written
request from the financial institution for the purpose of assisting the financial institution in its
compliance with the Bank Secrecy Act, 31 U.S.C. secs. 5311 to 5332 and 31 C.F.R. pt. 103;
and
2. Shall provide written notice to the commissioner of a disclosure made under this paragraph at
the same time that the disclosure is made.
SECTION 22. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) Except as otherwise provided in subsection (3) of this section, any document, material, report, or other
information in the possession or control of the commissioner that is provided to the commissioner
according to this subtitle shall:
(a) Be confidential by law and privileged;
(b) Not be subject to disclosure under KRS 61.870 to 61.884; and
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(c) Not be subject to subpoena or discovery, or admissible as evidence in any civil action, unless the
commissioner determines or, after notice to the commissioner and a hearing, a court of competent
jurisdiction determines that the commissioner would not be prejudiced by disclosure of the document,
material, report, or information.
(2) (a) The commissioner shall not be required to testify in any civil action concerning any document,
material, report, or information that is confidential under subsection (1) of this section.
(b) Any person who received documents, materials, reports, or other information that is confidential
under subsection (1) of this section while acting under the authority of the commissioner shall not be
required to testify in any civil action concerning the documents, materials, reports, or other
information.
(3) In order to assist in the performance of the commissioner's duties, the commissioner may do all of the
following:
(a) Share or disclose documents, materials, reports, and other information in the commissioner's
possession or control, including otherwise confidential and privileged documents, materials, reports,
and other information:
1. In accordance with Section 5 of this Act;
2. In accordance with a joint, concurrent, or multistate investigation or examination conducted
under Section 21 of this Act; or
3. With the following, if the recipient agrees to maintain the confidentiality and privileged status
of shared documents, materials, reports, and information:
a. Other state, federal, and international regulatory agencies;
b. Organizations made up of other state regulators of virtual currency businesses; and
c. Local, state, federal, and international law enforcement authorities;
(b) Report apparent violations of law to:
1. Other state, federal, and international regulators of virtual currency businesses;
2. The registry, as defined in Section 5 of this Act; or
3. Local, state, federal, and international law enforcement authorities;
(c) Disclose to the public:
1. A list of licensees and agents;
2. A licensee's registered agent for service of process in this state;
3. The aggregate financial or other data of persons regulated under this subtitle; or
4. Violations of this subtitle, enforcement actions, and other relevant information that the
commissioner deems necessary to carry out the requirements and purposes of this subtitle;
(d) Disclose and use documents, materials, reports, and other information in the commissioner's
possession or control, including otherwise confidential and privileged documents, materials, reports,
and other information, in furtherance of any regulatory or legal action brought as part of the
commissioner's official duties;
(e) Receive any documents, materials, reports, or other information, including otherwise confidential
and privileged documents, materials, reports, or other information, from any source;
(f) Agree to maintain the confidentiality and privileged status of any documents, materials, reports, or
information received;
(g) Enter into agreements or relationships with other government officials, federal and state regulatory
agencies, and regulatory associations;
(h) Use, hire, contract, or employ analytical systems, methods, or software;
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(i) Consider, accept, and rely upon audit reports prepared by an independent certified public accountant
or other qualified third-party auditor for any person subject to this subtitle; or
(j) Incorporate all or part of any audit report referenced in paragraph (i) of this subsection into an
examination or investigation report.
(4) A waiver of any applicable privilege or claim of confidentiality in documents, materials, reports, or other
information shall not occur as a result of a disclosure:
(a) To the commissioner under this section; or
(b) That is made under subsection (3)(a) of this section.
SECTION 23. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
The commissioner shall prepare and publish for public distribution on the department's website an annual report
that details and summarizes, in composite form:
(1) The data received from virtual currency kiosk operators relating to virtual currency kiosk business
conducted in this state; and
(2) Information about the licensing of virtual currency kiosk business in this state, including the following
information, by calendar year:
(a) The number of applications made for a license;
(b) The number of applicants who have a license to engage in money transmission;
(c) The number of licenses granted;
(d) The number of applicants who have been denied a license; and
(e) A list of fees that applicants are required to pay.
SECTION 24. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) As used in this section:
(a) "Applicant" includes:
1. With respect to conditions placed on, or denial of an application for, an approval to engage in
virtual currency kiosk business through an agent in this state, a proposed agent; and
2. With respect to a denial of an application for approval of a change of control, a person that
filed the application seeking the change of control; and
(b) "Person" means any applicant, licensee, virtual currency kiosk operator, agent, or other person.
(2) The commissioner shall serve written notice on an applicant prior to:
(a) Placing conditions on:
1. A license; or
2. An approval to engage in virtual currency kiosk business at a location, or through an agent, in
this state; or
(b) Denying any license or application made under this subtitle.
(3) An applicant that is served a notice of intent to deny any license or application made under this subtitle
shall be entitled to an administrative hearing on the notice conducted in accordance with KRS Chapter 13B
if the applicant files a written request for a hearing with the commissioner within twenty (20) days of the
date of service.
(4) (a) The commissioner shall serve an administrative complaint on a person:
1. Prior to doing any of the following:
a. Taking an adverse action against the person under subsection (1)(a)4. of Section 25 of
this Act;
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b. Issuing a cease and desist order against the person under Section 27 of this Act; or
c. Issuing an order that directs the person to:
i. Pay any fee or civil penalty;
ii. Provide any remedy; or
iii. Be subject to a penalty; and
2. Simultaneous with the service of an emergency order on the person under Section 26 of this
Act.
(b) Except as provided in paragraph (c) of this subsection, a person that is served an administrative
complaint under paragraph (a) of this subsection shall be entitled to an administrative hearing on the
complaint conducted in accordance with KRS Chapter 13B if the person files both of the following
with the commissioner within twenty (20) days of the date of service:
1. A written answer to the complaint; and
2. A request for hearing.
(c) A person that complies with paragraph (b) of this subsection in response to an administrative
complaint and emergency order issued under Section 25 of this Act shall be entitled to an emergency
administrative hearing conducted in accordance with KRS 13B.125.
(5) (a) Except as provided in paragraph (b) of this subsection, the commissioner shall serve any notice,
complaint, or emergency order referenced in this section by certified mail or personal delivery to the
person's last known address or upon the person's agent for service of process.
(b) If the commissioner is unable to reasonably determine a person's last known address or agent for
service of process, the commissioner may serve a notice, a complaint, or an emergency order by
certified mail or personal delivery to any owner or operator of the premises or real property upon
which the person's virtual currency kiosk or kiosks are located.
(6) Service by certified mail shall be complete as provided in KRS 13B.050(2).
(7) If any person fails to timely file a request for hearing under subsection (3) of this section, or a written
answer and request for hearing under subsection (4) of this section, the commissioner may, as applicable
and subject to KRS Chapter 13B, issue a final order:
(a) Taking the action that was:
1. Set forth in the notice; or
2. Sought in the complaint; or
(b) Affirming the emergency action that was taken.
(8) All other requirements of and rights arising under KRS Chapter 13B shall apply to administrative hearings
conducted and orders issued under this subtitle.
(9) The commissioner may, at any time, enter into a consent order with any person to resolve a matter arising
under this subtitle.
SECTION 25. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) As used in this section:
(a) "Adverse action" means to take any of the following actions:
1. Deny or condition a license;
2. Deny, in whole or in part, an application to engage in virtual currency kiosk business at one
(1) or more locations, or through one (1) or more agents, in this state;
3. Condition an approval:
a. To engage in virtual currency kiosk business at a location in this state; or
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b. Of an agent to engage in virtual currency kiosk business in this state on behalf of an
applicant or licensee; or
4. Suspend, revoke, or refuse to renew:
a. A license;
b. An approval to engage in virtual currency kiosk business at a location in this state; or
c. An approval of an agent to engage in virtual currency kiosk business in this state on
behalf of a licensee;
(b) "Regulated person" means any applicant, licensee, or agent; and
(c) 1. "Unsafe or unsound act or practice" means an act or practice that:
a. Creates a likelihood of material loss, insolvency, or dissipation of a regulated person's
assets; or
b. Materially prejudices the:
i. Financial condition of a regulated person; or
ii. Interests of a regulated person's customers.
2. In determining whether a regulated person has engaged, or is engaging, in an unsafe or
unsound act or practice, the commissioner may consider:
a. The size and condition of the person's business;
b. The magnitude of the loss;
c. The gravity of the violation of this subtitle;
d. Any action taken by another state or federal government against the person; and
e. The previous conduct of the person.
(2) Subject to Section 24 of this Act and KRS 335B.020, the commissioner may take an adverse action against a
regulated person if the commissioner finds one (1) or more of the following:
(a) The regulated person has:
1. Violated any:
a. Provision of this subtitle;
b. Other state or federal law related to money transmission or virtual currency kiosk
business; or
c. Consent order or compliance agreement entered into with the commissioner;
2. Engaged in:
a. An unsafe or unsound act or practice;
b. An unfair, deceptive, or dishonest act or practice;
c. Fraud, an intentional misrepresentation, or gross negligence; or
d. A misappropriation of legal tender, virtual currency, or other assets;
3. Misrepresented material facts or made a false promise likely to influence, persuade, or induce
a virtual currency kiosk user to engage in a virtual currency kiosk transaction;
4. Misrepresented or concealed a material fact, term, or condition of a virtual currency kiosk
transaction;
5. Knowingly engaged in a transaction, practice, or course of business that perpetrates a fraud
upon any person in connection with a virtual currency kiosk transaction;
6. Failed to exchange, transfer, or store, without just cause, any funds in accordance with any
agreement connected with a virtual currency kiosk business;
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7. Failed to timely remit, account for, or deliver to any person any legal tender, virtual currency,
precious metals, electronic certificates, or other assets legally due to the person;
8. Failed to implement reasonable risk-mitigation measures to prevent fraudulent activity by
third parties in connection with a virtual currency kiosk transaction;
9. Been found to have violated any of the recordkeeping and reporting requirements of the
United States government, including 31 U.S.C. secs. 5311 to 5332 and 31 C.F.R. pt. 103;
10. Been convicted of, pled guilty to, or pled nolo contendere, or knowingly employed or
contracted with a responsible individual that has been convicted of, pled guilty to, or pled nolo
contendere, to a:
a. Felony; or
b. A misdemeanor:
i. Related to money transmission or virtual currency kiosk business; or
ii. Involving theft, fraud, or breach of trust; or
11. Has had any license, registration, claim of exemption, or other authorization to do business
relating to the financial services industry denied, revoked, suspended, conditioned, restricted,
probated, or terminated by any state, federal, or foreign jurisdiction;
(b) The regulated person:
1. Is insolvent;
2. Has suspended payment of its obligations or made a general assignment for the benefit of its
creditors;
3. Has:
a. Become the debtor, alleged debtor, respondent, or person in a similar capacity in a case
or other proceeding under any bankruptcy, reorganization, arrangement, readjustment,
insolvency, receivership, dissolution, liquidation, or similar law; and
b. Not obtained from a court, within a reasonable time, confirmation of a plan or
dismissal of the case or proceeding; or
4. Has applied for, or has permitted the appointment of, a receiver, trustee, or other agent of a
court for itself or for a substantial part of its assets;
(c) The regulated person has knowingly made or provided, or caused to be made or provided, to the
commissioner one (1) or more of the following:
1. A material misrepresentation; or
2. A false or fraudulent:
a. Material fact; or
b. Financial statement;
(d) The applicant or licensee suppressed or withheld from the commissioner any information which, if
submitted by the applicant or licensee, warrants or would have warranted the commissioner denying
a license;
(e) The applicant or licensee failed to terminate or suspend the authority of its responsible individual or
agent to act on its behalf when the applicant or licensee knew, or was given reasonable notice, that
its responsible individual or agent:
1. Violated, or was about to violate, a material provision of this subtitle, including any
administrative regulation or order promulgated or issued by the commissioner; or
2. Engaged in, or was about to engage in, an act or practice that would warrant an adverse
action under this section;
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(f) Any of the following are listed on the specially designated nationals and blocked persons list
prepared by the United States Department of the Treasury or the United States Department of State
under Presidential Executive Order No. 13224 as a potential threat to commit terrorist acts or to
finance terrorist acts:
1. The regulated person;
2. An executive officer of the regulated person;
3. A director of the regulated person;
4. A key shareholder of the regulated person;
5. A person in control of the regulated person; or
6. A responsible individual of the applicant or licensee;
(g) The competence, experience, character, or general fitness of an agent, or a person in control of the
agent, indicates that it is not in the public interest to permit the agent to be engaged in virtual
currency kiosk business in this state;
(h) The applicant or licensee no longer meets the requirements of this subtitle to:
1. Hold a license; or
2. Engage in virtual currency kiosk business at one (1) or more locations in this state; or
(i) Any fact or condition exists that, if it existed at the time the applicant or licensee applied for a
license, or approval to engage in virtual currency kiosk business at one (1) or more locations, or
through one (1) or more agents, in this state, would have been grounds for denying the application.
(3) Subsection (2)(a)1. of this section includes all of the following:
(a) Violating any administrative regulation promulgated, or order of general application issued, under
this subtitle;
(b) Failing to pay any fee, civil penalty, or remedy that is owed under this subtitle;
(c) Violating the written conditions under which a license or approval was issued, renewed, or
maintained under this subtitle;
(d) Refusing to permit, or failing to cooperate substantially with, an investigation or examination under
this subtitle;
(e) Failing, within a reasonable time, to furnish any information or file any notice or report required or
otherwise requested by the commissioner under this subtitle; and
(f) Failing to comply with a lawful order or subpoena issued by the commissioner.
(4) Subject to Section 24 of this Act:
(a) The commissioner may, at any time, issue a notice of intent to impose conditions on a license, or
approval to engage in virtual currency kiosk business at one (1) or more locations, or through one
(1) or more agents, in this state if the commissioner finds that the conditions, including any
additional bond amount specified by the commissioner under Section 9 of this Act, are necessary for
a licensee to continue to satisfy the requirements of this subtitle for licensure;
(b) A notice of intent issued under paragraph (a) of this subsection shall specify the additional
conditions that are required for the licensee and any agent;
(c) The commissioner may impose conditions on a license, or approval to engage in virtual currency
kiosk business at one (1) or more locations, or through one (1) or more agents, in this state if the
licensee, agent, or both, as applicable, files a written acceptance of the conditions specified in the
notice issued under paragraph (a) of this subsection to the licensee, agent, or both within thirty (30)
days after service of the notice; and
(d) If the department does not receive a written acceptance of the conditions specified in a notice issued
under paragraph (a) of this subsection to a licensee, agent, or both within thirty (30) days after
service of the notice, the commissioner shall serve an administrative complaint on the licensee, agent,
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or both, as applicable, seeking to take an appropriate adverse action under subsection (1)(a)4. of this
section relating to the license or approval.
(5) Any person or person in control whose license, or agent or person in control of an agent whose approval as
an agent, has been:
(a) Denied shall not be eligible to apply for a license, to serve as an agent, or to serve as a person in
control of a licensee or agent for one (1) year after the date of denial; or
(b) Revoked shall not be eligible to apply for a license, to serve as an agent, or to serve as a person in
control of a licensee or agent:
1. For the first revocation, until three (3) years after the date of revocation; and
2. For any subsequent revocation, permanently.
(6) The surrender or expiration of a license, or an agent designation, shall not affect a proceeding to suspend
or revoke the license or approval of the agent.
SECTION 26. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) As used in this section:
(a) "Emergency order" means an order that does one (1) or more the following without prior notice and
hearing:
1. Suspends or conditions:
a. Any license; or
b. An approval to engage in virtual currency kiosk business at a location, or through an
agent, in this state; or
2. Directs any peace officer to:
a. Seize or impound a virtual currency kiosk, including any contents thereof; or
b. Render a virtual currency kiosk inoperable; and
(b) "Person" means any licensee, virtual currency kiosk operator, agent, or other person.
(2) Subject to Section 24 of this Act, the commissioner may issue an emergency order against any person,
pending further investigation, the entry of a final order, or other final legal action, if the commissioner has
reason to believe or determines one (1) or more of the following:
(a) The person is acting in violation of Section 4 of this Act;
(b) The licensee is not in compliance with Section 9 of this Act;
(c) The person has committed a material violation of this subtitle that poses an immediate and
irreparable harm to the public health, safety, or welfare;
(d) Subject to KRS 335B.020, the licensee or agent has been convicted of, pled guilty to, or pled nolo
contendere, or the licensee is knowingly employing or contracting with a responsible individual that
has been convicted of, pled guilty to, or pled nolo contendere, to a:
1. Felony involving theft, fraud, or breach of trust; or
2. A crime under the USA PATRIOT Act of 2001, Pub. L. No. 107-56;
(e) The licensee has had any license, registration, claim of exemption, or other authorization to do
business relating to money transmission or virtual currency kiosk business denied, revoked,
suspended, or terminated by any state, federal, or foreign jurisdiction;
(f) The licensee, agent, the licensee's responsible individual, or any key shareholder, executive officer,
director, or other person in control of the licensee or agent is listed or becomes listed on the specially
designated nationals and blocked persons list prepared by the United States Department of the
Treasury or United States Department of State under Presidential Executive Order No. 13224 as a
potential threat to commit terrorist acts or to finance terrorist acts; or
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(g) The licensee or agent is insolvent or otherwise satisfies one (1) of the grounds listed in subsection
(2)(b) of Section 25 of this Act.
(3) An emergency order issued under this section shall:
(a) Pursuant to KRS 13B.125, become effective when served by the commissioner; and
(b) Remain in effect until it is:
1. Stayed, withdrawn, suspended, or superseded by order of the commissioner; or
2. Terminated by court order.
SECTION 27. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) Subject to Section 24 of this Act, the commissioner may issue a cease and desist order requiring an
applicant, a licensee, a virtual currency kiosk operator, an agent, or any other person to cease and desist
from violating one (1) or more identified provisions of the following, if the commissioner has reason to
believe or determines that the violations have occurred or will occur:
(a) This subtitle;
(b) An administrative regulation promulgated under this subtitle;
(c) An order issued under this subtitle; or
(d) An agreement entered with the commissioner relating to compliance with this subtitle.
(2) A cease and desist order issued under this section shall remain in effect until it is:
(a) Stayed, withdrawn, suspended, or superseded by order of the commissioner; or
(b) Terminated by court order.
SECTION 28. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) As used in this section, "person" means any applicant, licensee, virtual currency kiosk operator, agent, or
other person.
(2) Subject to Section 24 of this Act, the commissioner may do one (1) or more of the following:
(a) Issue an order against any person to:
1. Refund any amount charged or collected in violation of this subtitle; or
2. Pay any fee or civil penalty, or provide any other remedy, authorized under this subtitle;
(b) Levy a civil penalty against any person that violates, or participates in the violation of, any:
1. Provision of this subtitle;
2. Administrative regulation promulgated under this subtitle;
3. Order issued under this subtitle; or
4. Agreement with the commissioner relating to compliance with this subtitle; and
(c) For any virtual currency kiosk operator or its agent that is subject to a civil penalty under paragraph
(b) of this subsection, issue an order directing any peace officer to:
1. Seize or impound the operator's or agent's virtual currency kiosk, including any contents
thereof; or
2. Render the operator's or agent's virtual currency kiosk inoperable.
(3) The civil penalty levied under subsection (2)(b) of this section:
(a) Shall be not less than one thousand dollars ($1,000) nor more than five thousand dollars ($5,000)
per violation; and
(b) May:
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1. Be assessed for each day the violation is outstanding; and
2. Include an order for the person to pay the state's costs and expenses for the examination,
investigation, and prosecution of the matter, including reasonable attorney's fees and court
costs.
SECTION 29. A NEW SECTION OF SUBTITLE 13 OF KRS CHAPTER 286 IS CREATED TO READ
AS FOLLOWS:
(1) A person that intentionally or knowingly makes a false statement, misrepresentation, false certification, or
false entry, or omits a material entry, in a record filed or required to be maintained under this subtitle is
guilty of a Class D felony.
(2) A person that intentionally or knowingly engages in virtual currency kiosk business in this state for which a
license is required under this subtitle without being licensed under this subtitle is guilty of a Class C felony.
Section 30. KRS 286.2-015 is amended to read as follows:
(1) Except as provided in KRS 41.470 to 41.476 and 41.480, and subsections[subsection] (3) and (4) of this
section, all political subdivisions of the Commonwealth shall be prohibited from enacting and enforcing
ordinances, resolutions, and regulations pertaining to the financial or lending activities of persons or entities
that:
(a) Are subject to:
1. The jurisdiction of the department; or
2. The provisions of this chapter;
(b) Are subject to the jurisdiction or regulatory supervision of the Board of Governors of the Federal
Reserve System, the Office of the Comptroller of the Currency, the National Credit Union
Administration, the Farm Credit Administration, the Federal Deposit Insurance Corporation, or the
United States Department of Housing and Urban Development; or
(c) Originate, purchase, sell, assign, securitize, assist, facilitate, or service property interests or obligations
created by financial transactions or loans made, executed, or originated by persons or entities referred to
in paragraph (a) or (b) of this subsection.
(2) The requirements of this section shall apply to all ordinances, resolutions, or regulations pertaining to financial
or lending activities, including any ordinances, resolutions, or regulations that:
(a) Limit or disqualify persons or entities from doing business with a political subdivision based upon
financial or lending activities; or
(b) Impose additional reporting requirements or other obligations on persons or entities referred to in
subsection (1) of this section seeking to do business with a political subdivision.
(3) Nothing in this section shall be interpreted as preventing the enforcement of ordinances, regulations, or
resolutions of political subdivisions of the Commonwealth pertaining to civil rights.
(4) (a) Political subdivisions of this Commonwealth may enact and enforce ordinances, regulations, and
resolutions pertaining to virtual currency kiosk business that are not in direct conflict with state law.
(b) Ordinances, regulations, and resolutions of political subdivisions of the Commonwealth that impose
greater requirements or restrictions on virtual currency kiosk business than the requirements or
restrictions set forth in Subtitle 13 of KRS Chapter 286 shall not be considered in direct conflict with
state law.
Section 31. KRS 431.073 is amended to read as follows:
(1) Any person who has been:
(a) Convicted of a Class D felony violation of Section 29 of this Act or KRS 17.175, 186.990, 194A.505,
194B.505, 217.181, 217.207, 217.208, 218A.140, 218A.1415, 218A.1416, 218A.1417, 218A.1418,
218A.1423, 218A.1439, 218A.282, 218A.284, 218A.286, 218A.320, 218A.322, 218A.324, 218A.500,
244.165, 286.11-057, 304.47-025, 324.990, 365.241, 434.155, 434.675, 434.850, 434.872, 511.040,
512.020, 514.030, 514.040, 514.050, 514.060, 514.065, 514.070, 514.080, 514.090, 514.100, 514.110,
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514.120, 514.140, 514.150, 514.160, 516.030, 516.060, 516.090, 516.108, 517.120, 518.040, 522.040,
524.100, 525.113, 526.020, 526.030, 528.020, 528.040, 528.050, 530.010, or 530.050;
(b) Convicted of a series of Class D felony violations of one (1) or more statutes enumerated in paragraph
(a) of this subsection arising from a single incident;
(c) Granted a full pardon; or
(d) Convicted of a Class D felony, or an offense prior to January 1, 1975 which was punishable by not
more than five (5) years' incarceration, which was not a violation of KRS 189A.010, 508.032, or
519.055, abuse of public office, a sex offense, or an offense committed against a child, and did not
result in serious bodily injury or death; or of multiple felony offenses eligible under this paragraph;
may file with the court in which he or she was convicted an application to have the judgment vacated. The
application shall be filed as a motion in the original criminal case. The person shall be informed of the right at
the time of adjudication.
(2) (a) A verified application to have the judgment vacated under this section shall be filed no sooner than five
(5) years after the completion of the person's sentence, or five (5) years after the successful completion
of the person's probation or parole, whichever occurs later.
(b) Upon the payment of the filing fee and the filing of the application, the Circuit Court clerk shall serve a
notice of filing upon the office of the Commonwealth's attorney or county attorney that prosecuted the
case and the county attorney of the county where the judgment was entered. The office of the
Commonwealth's attorney or county attorney that prosecuted the case shall file a response within sixty
(60) days after being served with the notice of filing. That time period may be extended for good cause,
but the hearing on the application to vacate the judgment shall occur no later than one hundred twenty
(120) days following the filing of the application. The inability to determine the location of the crime
victim shall constitute good cause for an extension of time. No hearing upon the merits of the
application shall be scheduled until the Commonwealth's response has been filed, or if no response is
received, no later than one hundred twenty (120) days after the filing of the application.
(c) In any case in which the Commonwealth objects that the application is grossly incomplete, the court
shall order the person or agency originating the application to supplement the application.
(3) Upon the filing of the Commonwealth's response to an application, or if no response is received, no later than
one hundred twenty (120) days after the filing of the application, the court shall set a date for a hearing and the
Circuit Court clerk shall notify the office of the Commonwealth's attorney or county attorney that prosecuted
the case. The office of the Commonwealth's attorney or county attorney that prosecuted the case shall notify
the victim of the crime, if there was an identified victim. The Commonwealth's attorney or county attorney
shall be authorized to obtain without payment of any fee information from the Transportation Cabinet
regarding the crime victim's address on file regarding any vehicle operator's license issued to that person.
(4) (a) In an application pursuant to subsection (1)(d) of this section, upon the filing of the Commonwealth's
response objecting to the vacating of a judgment and expungement of a record, the court shall schedule
a hearing within one hundred twenty (120) days of the Commonwealth's response. The prosecutor shall
specify in the objection the reasons for believing a denial of the application is justified. At the hearing at
which the applicant or his or her attorney must be present, the applicant must prove by clear and
convincing evidence that:
1. Vacating the judgment and expunging the record is consistent with the welfare and safety of the
public;
2. The action is supported by his or her behavior since the conviction or convictions, as evidenced
that he or she has been active in rehabilitative activities in prison and is living a law-abiding life
since release;
3. The vacation and expungement is warranted by the interests of justice; and
4. Any other matter deemed appropriate or necessary by the court to make a determination
regarding the petition for expungement is met.
(b) At the hearing, the applicant may testify as to the specific adverse consequences he or she may be
subject to if the application is denied. The court may hear testimony of witnesses and any other matter
the court deems proper and relevant to its determination regarding the application. The Commonwealth
may present proof of any extraordinary circumstances that exist to deny the application. A victim of any
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offense listed in the application shall have an opportunity to be heard at any hearing held under this
section.
(c) If the court determines that circumstances warrant vacation and expungement and that the harm
otherwise resulting to the applicant clearly outweighs the public interest in the criminal history record
information being publicly available, then the original conviction or convictions shall be vacated and
the records shall be expunged. The order of expungement shall not preclude a prosecutor's office from
retaining a nonpublic record for law enforcement purposes only.
(5) The court may order the judgment vacated, and if the judgment is vacated the court shall dismiss with
prejudice any charges which are eligible for expungement under subsection (1) of this section or KRS 431.076
or 431.078, and, upon full payment of the fee in subsection (11) of this section, order expunged all records in
the custody of the court and any records in the custody of any other agency or official, including law
enforcement records, if the court finds that:
(a) The person had not in the five (5) years prior to the filing of the application to have the judgment
vacated been convicted of a felony or a misdemeanor;
(b) No proceeding concerning a felony or misdemeanor is pending or being instituted against the person;
and
(c) For an application pursuant to subsection (1)(d) of this section, the person has been rehabilitated and
poses no significant threat of recidivism.
(6) If the court has received a response from the office of the Commonwealth's attorney or county attorney that
prosecuted the case stating no objection to the application to have the judgment vacated, or if one hundred
twenty (120) days have elapsed since the filing of the application and no response has been received from the
victim or the office of the Commonwealth's attorney or county attorney that prosecuted the case, the court
may, without a hearing, vacate the judgment in the manner established in subsection (5) of this section.
(7) Upon entry of an order vacating and expunging a conviction, the original conviction shall be vacated and,
upon full payment of the fee in subsection (11) of this section, the record shall be expunged. The court and
other agencies shall cause records to be deleted or removed from their computer systems so that the matter
shall not appear on official state-performed background checks. The court and other agencies shall reply to any
inquiry that no record exists on the matter. The person whose record is expunged shall not have to disclose the
fact of the record or any matter relating thereto on an application for employment, credit, or other type of
application. If the person is not prohibited from voting for any other reason, the person's ability to vote shall be
restored and the person may register to vote.
(8) An order vacating a conviction under this section shall not extend or revive an expired statute of limitations,
shall not constitute a finding of legal error regarding the proceedings leading to or resulting in the conviction,
shall not nullify any findings of fact or conclusions of law made by the trial court or any appellate court
regarding the conviction, and shall not constitute a finding of innocence regarding the conviction.
(9) The Administrative Office of the Courts shall establish a form application to be used in filing an application to
have judgment vacated and records expunged.
(10) The filing fee for an application to have judgment vacated and records expunged shall be fifty dollars ($50),
which shall be deposited into a trust and agency account for deputy clerks and shall not be refundable.
(11) (a) Upon the issuance of an order vacating and expunging a conviction pursuant to this section, the
applicant shall be charged an expungement fee of two hundred fifty dollars ($250), which may be
payable by an installment plan in accordance with KRS 534.020.
(b) When the order is issued, the court shall set a date, no sooner than eighteen (18) months after the date of
the order, by which the defendant must comply with the installment payment plan. The applicant shall
be given notice of the total amount due, the payment frequency, and the date by which all payments
must be made. The notice shall state that the expungement cannot be completed until full payment is
received, and that if the applicant has not completed the installment payment plan by the scheduled
date, he or she shall appear on that date to show good cause as to why he or she is unable to satisfy the
obligations. Notwithstanding provisions of KRS 534.020 to the contrary, no applicant shall be ordered
to jail for failure to complete an installment plan ordered pursuant to this section.
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(c) The revenues and interest from the expungement fee shall be deposited in the expungement fund
created in KRS 431.0795.
(12) This section shall be retroactive.
SECTION 32. A NEW SECTION OF KRS CHAPTER 367 IS CREATED TO READ AS FOLLOWS:
(1) Any of the following shall be deemed an unfair, false, misleading, or deceptive act or practice in the
conduct of trade or commerce in violation of KRS 367.170:
(a) On and after April 30, 2027, a violation of any provision of Subtitle 13 of KRS Chapter 286 by a
person subject to regulation as a virtual currency kiosk operator or agent under that subtitle; and
(b) A violation of Section 33 of this Act.
(2) All of the remedies, powers, and duties provided to the Attorney General or any other person under KRS
367.110 to 367.300, and the penalties provided in KRS 367.990, pertaining to acts and practices declared
unlawful by KRS 367.170, shall apply with equal force and effect to any of the following:
(a) On and after April 30, 2027, a violation of any provision of Subtitle 13 of KRS Chapter 286 by a
person subject to regulation as a virtual currency kiosk operator or agent under that subtitle; and
(b) A violation of Section 33 of this Act.
(3) (a) The remedies and penalties prescribed in this section shall be cumulative.
(b) This section shall not be construed to limit or restrict the powers, duties, remedies, or penalties
available to the Attorney General, the Commonwealth, or any other person under any other statutory
or common law.
SECTION 33. A NEW SECTION OF KRS 369.130 TO 369.139 IS CREATED TO READ AS
FOLLOWS:
(1) As used in this section, "hardware wallet provider" or "provider" means a person that offers or provides a
hardware wallet.
(2) (a) A hardware wallet provider shall provide the following disclosures to customers for all hardware
wallets sold in Kentucky:
1. All information that a customer should retain, maintain, and store in order to:
a. Access the contents of a wallet; and
b. Backup and restore a wallet; and
2. If applicable:
a. The provider does not retain, maintain, or store the information that a customer needs
to:
i. Access the contents of a wallet; or
ii. Backup and restore a wallet; and
b. The customer's loss of the information referenced in subparagraph 1. of this paragraph
will likely result in a total loss of the contents of a wallet.
(b) The disclosures required under paragraph (a) of this subsection shall be:
1. Displayed during wallet setup;
2. Contained in product packaging;
3. On the provider's website;
4. Furnished together in a clear and coherent manner;
5. In the same color, font, and size as the other language primarily used for the wallet setup, in
the product packaging, or on the provider's website, as applicable; and
6. Available in a format that can be easily downloaded, printed, or otherwise retained by the
customer.
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(3) A violation of this section shall be deemed unlawful as provided in Section 32 of this Act.
(4) (a) The remedies and penalties prescribed in this section shall be cumulative.
(b) This section shall not be construed to limit or restrict the powers, duties, remedies, or penalties
available to the Attorney General, the Commonwealth, or any other person under any other statutory
or common law.
(5) The Attorney General may promulgate administrative regulations in accordance with KRS Chapter 13A
necessary to effectuate, or as an aid to the effectuation of, the proper enforcement of this section.
Section 34. Sections 1 to 31 of this Act take effect April 30, 2027.
Section 35. On or before January 1, 2027, the commissioner of the Kentucky Department of Financial
Institutions shall promulgate any emergency and ordinary administrative regulations required under Sections 1 to 30
of this Act.
Signed by Governor April 13, 2026.
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