HOUSE BILL 356
56th legislature - STATE OF NEW MEXICO - first session, 2023
Meredith A. Dixon and Linda Serrato and Gerald Ortiz y Pino
and Antonio Maestas
RELATING TO LICENSURE; ENACTING THE TECHNOLOGY SANDBOX ACT; PROVIDING TEMPORARY AND LIMITED REGULATORY WAIVERS TO CERTAIN APPLICANTS THAT PROVIDE AN INNOVATIVE USE OF BLOCKCHAIN TECHNOLOGY; ESTABLISHING APPLICATIONS AND PROCEDURES; PROVIDING PROTECTIONS FOR CONSUMERS; LIMITING AN APPLICANT'S RIGHT TO PROTEST THE DENIAL OF A REGULATORY WAIVER; LIMITING A SANDBOX PARTICIPANT'S RIGHT TO PROTEST THE SUSPENSION OF A REGULATORY WAIVER; MAKING AN APPROPRIATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. [NEW MATERIAL] SHORT TITLE.--This act may be cited as the "Technology Sandbox Act".
SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Technology Sandbox Act:
A. "applicable agency" means a department, agency of the state or board that regulates an activity or a person engaged in such activity for which an applicant may seek a regulatory waiver pursuant to the Technology Sandbox Act;
B. "applicant" means an individual or entity that applies for a regulatory waiver;
C. "blockchain technology" means the use of a digital database containing records of transactions, which can be simultaneously used and shared within a decentralized, publicly accessible network and can record transactions between two or more parties in a verifiable and permanent way;
D. "consumer" means a state resident that enters into a transaction or agreement to receive a sandbox product or service;
E. "innovative use" means the use or incorporation of blockchain technology to address a problem, provide a benefit or otherwise offer a product, service, business model or delivery mechanism that is determined by the attorney general to not have a comparable widespread offering within the state;
F. "regulatory waiver" means a waiver provided by the attorney general pursuant to the Technology Sandbox Act that allows a sandbox participant to provide a sandbox product or service to a consumer without the need of a license or other type of authorization otherwise required by law;
G. "sandbox participant" means an individual or entity who has been granted a regulatory waiver; and
H. "sandbox product or service" means a product or service that is provided by a sandbox participant pursuant to a regulatory waiver.
SECTION 3. [NEW MATERIAL] REGULATORY WAIVERS--APPLICABILITY.--Notwithstanding any other provision of law, the attorney general may issue a regulatory waiver, pursuant to the Technology Sandbox Act, for any licensing requirement provided by law. A regulatory waiver shall confer the same rights, privileges and responsibilities as a regular license issued pursuant to law, except as otherwise provided by the Technology Sandbox Act.
SECTION 4. [NEW MATERIAL] REGULATORY WAIVERS--APPLICATIONS--TERMS AND DISCLAIMERS.--
A. The attorney general shall receive and review applications for regulatory waivers. An applicant shall submit an application for each product for which the applicant seeks a waiver. The attorney general shall approve or deny applications within sixty days of receipt of an application and notify applicants of approval or denial. Regulatory waivers shall be for a period not exceeding three years. The attorney general shall coordinate with any applicable agencies that would otherwise regulate or oversee the sandbox products or services described in an application. The attorney general may issue a regulatory waiver if:
(1) the attorney general determines, in concurrence with any applicable agencies, that an applicant is able to provide a sandbox product or service that demonstrates an innovative use of blockchain technology;
(2) the applicant pays a licensing fee for a regulatory waiver to the attorney general in an amount determined by the attorney general; and
(3) the proposed provision of sandbox products or services does not conflict with any existing federal law.
B. An application shall include:
(1) the nature of the sandbox product or service proposed to be made available to consumers pursuant to the regulatory waiver;
(2) any known or reasonably expected risks to consumers and methods that shall be used to protect consumers and resolve complaints;
(3) a business plan, including a projected financial statement for no less than a period of three years; provided that proprietary information shall be confidential and shall be disclosed for no purpose other than the application;
(4) the personnel and the financial and technical expertise needed to provide the sandbox product or service;
(5) whether any person involved in the development, operation or management of the sandbox product or service has been convicted of, or is currently under investigation for, any state or federal criminal violations;
(6) a copy of the required disclosures that will be provided to consumers; and
(7) any other factor or information that the attorney general determines to be relevant.
C. If a regulatory waiver is granted, the attorney general shall specify the statutory requirements for which the waiver is granted and the length of the regulatory waiver as determined by the attorney general. The attorney general shall also make the application, a summary of the sandbox product or service and the contact information of the sandbox participant publicly available.
D. An applicant shall have no recourse or means to appeal the denial of a regulatory waiver.
E. A sandbox participant may make a sandbox product or service available for consumer use pursuant to the provisions of that sandbox participant's regulatory waiver. The attorney general may specify the maximum number of consumers permitted to receive a sandbox product or service pursuant to a regulatory waiver. A sandbox participant shall ensure, prior to engaging in a transaction to provide a sandbox product or service, that every prospective consumer is provided with the following:
(1) a disclaimer that the sandbox product or service is subject to a regulatory waiver and may entail risk;
(2) the name and contact information of the sandbox participant;
(3) a disclaimer that the state does not endorse the sandbox product or service and is not subject to liability for losses or damages caused by the sandbox product or service;
(4) a disclaimer that the sandbox participant is not immune from civil liability for any losses or damages caused by the sandbox product or service;
(5) the expected end date of the regulatory waiver;
(6) contact information for the attorney general; and
(7) any other statements or disclosures as provided by attorney general rule that are necessary to further the purposes of the Technology Sandbox Act.
F. A sandbox participant shall maintain comprehensive records, which shall include base level code source and change logs to underlying code accessing state-level data, as required by the attorney general, relating to the sandbox product or service. The sandbox participant shall keep these records for not less than five years after the expiration of the regulatory waiver.
G. The attorney general may examine the records maintained by a sandbox participant at any time, with or without notice. All direct and indirect costs of an examination conducted under this subsection shall be paid by the sandbox participant. Records made available to the attorney general pursuant to this subsection shall not be subject to disclosure under the Inspection of Public Records Act but may be released to appropriate state and federal agencies for the purposes of financial or criminal investigations.
H. Not less than sixty days before the expiration of the regulatory waiver, a sandbox participant shall provide written notification to consumers regarding the expiration of the regulatory waiver and shall not enter into any transactions regarding the sandbox product or service with any new consumers. The program participant shall ensure that transactions with existing consumers cease by the expiration of the regulatory waiver, except that, after the expiration of the regulatory waiver, the sandbox participant may:
(1) collect and receive money owed to the sandbox participant and service loans or other instruments of debt based on agreements with consumers made before the expiration of the regulatory waiver;
(2) pursue legal action related to the sandbox product or service; and
(3) take other actions authorized by attorney general rule that are not inconsistent with the Technology Sandbox Act.
SECTION 5. [NEW MATERIAL] REGULATORY WAIVERS--CONSUMER PROTECTION BOND.--A sandbox participant shall post a sandbox consumer protection bond with the attorney general as security for potential losses and damages suffered by consumers. The bond amount shall be determined by the attorney general, based on risk profile of the product and the number of consumers it will be available to, and shall be commensurate with the risk profile of the sandbox product or service offered by that sandbox participant. The attorney general may require that a bond be increased or decreased at any time based on updated information regarding the risk profile of the sandbox product or service. Unless losses or damages are alleged, the attorney general shall cancel the bond two years after the date of the expiration of the regulatory waiver. If losses or damages are proven in a court of competent jurisdiction, the bond posted pursuant to this section may be used to compensate a consumer pursuant to a court order.
SECTION 6. [NEW MATERIAL] SUSPENSION OF A REGULATORY WAIVER.--
A. The attorney general may revoke or suspend a regulatory waiver at any time if:
(1) the sandbox participant has violated any provision of the Technology Sandbox Act or any rule promulgated pursuant to that act;
(2) a fact or condition exists or becomes known that, if it had existed or become known at the time of the application for a regulatory waiver, would have caused the application to be denied;
(3) a material error, false statement, misrepresentation or material omission was made in the application for a regulatory waiver; or
(4) evidence exists that:
(a) continued use of the regulatory waiver would be likely to harm consumers; or
(b) there no longer exists an innovative use for the sandbox product or service.
B. The attorney general shall provide to the sandbox participant notice of the suspension or revocation of a regulatory waiver. A sandbox participant or past sandbox participant shall have no recourse or means to appeal the suspension or revocation of a regulatory waiver.
SECTION 7. [NEW MATERIAL] RULEMAKING.--By October 1, 2023, the attorney general shall propose rules necessary to carry out the provisions of the Technology Sandbox Act, including rules establishing criteria for acceptable cryptocurrencies, prohibiting initial coin offerings and accounting of those currencies. No later than December 31, 2023, the attorney general shall adopt the rules.
SECTION 8. APPROPRIATION.--Four hundred thousand dollars ($400,000) is appropriated from the general fund to the office of the attorney general for expenditure in fiscal year 2024 to fund additional full-time-equivalent positions to administer the provisions of the Technology Sandbox Act. Any unexpended or unencumbered balance remaining at the end of fiscal year 2024 shall revert to the general fund.
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