Bill Description: House Bill 328 creates the "Digital Assets Act" to regulate virtual currency, digital securities, and blockchain tokens.
Analyst Note: House Bill 328 is related to House Bill 327. Both serve to increase the scope of government regulation while effectively (even if unintentionally) stifling technological development.
Does it give government any new, additional, or expanded power to prohibit, restrict, or regulate activities in the free market? Conversely, does it eliminate or reduce government intervention in the market?
House Bill 328 creates Chapter 53, Title 28, Idaho Code, titled the "Digital Assets Act." The bill attempts to shoehorn digital assets into the uniform commercial code in order to impose a host of unnecessary and unwarranted regulation on what is currently the largely unregulated space known broadly as cryptocurrency.
The bill classifies "digital consumer assets," "digital securities" and "virtual currency" under various existing sections of the uniform commercial code and proceeds to add several pages of new code, micromanaging the relationship between individuals and their digital property.
Under Section 28-5305 of this new chapter, the bill creates a regulatory framework for a financial institution to provide "custodial services" for digital assets. An institution wanting to provide these services must provide "sixty (60) days' written notice to the director of the department of finance."
The bill also says, "If a financial institution elects to provide custodial services under this section, it shall comply with all provisions of this section."
Private, voluntary transactions and contractual relationships should not fall under the control, purview, or oversight of the state.
Among the requirements it must face, the financial institution is ordered to violate the privacy of individuals by "fully comply[ing] with applicable federal anti-money laundering, customer identification, and beneficial ownership requirements."
This is problematic both because Idaho institutions are being involuntarily deputized to enforce federal law and because one of the primary benefits of cryptocurrency is the anonymity it provides. Compromising that anonymity is one of the major goals of attempting to regulate cryptocurrencies.
Does it directly or indirectly create or increase any taxes, fees, or other assessments? Conversely, does it eliminate or reduce any taxes, fees, or other assessments?
The bill also says, "To offset the costs of supervision and administration of this section, a financial institution that provides custodial services under this section shall pay a supervision fee equal to two-tenths of one mill on the dollar ($.0002) relating to assets held in custody as provided by rule of the director."