HB2540 101ST GENERAL ASSEMBLY

LRB101 06907 RJF 51939 b

101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB2540

Introduced , by Rep. Sonya M. Harper

SYNOPSIS AS INTRODUCED:

New Act

Creates the Blockchain Business Development Act. Provides for the creation and regulation of personal information protection companies. Provides for the creation and regulation of blockchain-based limited liability companies as businesses that utilize blockchain technology for a material portion of their business activities. Provides for a public record blockchain study and report. Provides for a blockchain insurance and banking study and report. Requires the Department of Commerce and Economic Opportunity to incorporate into one or more of its economic development marketing and business support programs, events, and activities topics concerning blockchain technology and financial technology. Defines terms.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning business.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Blockchain Business Development Act.

Section 5. Definitions. As used in this Act:

"Blockchain" means cryptographically secured, chronological, and decentralized consensus ledger or consensus database maintained via Internet, peer-to-peer network, or other interaction.

"Blockchain technology" means computer software or hardware or collections of computer software or hardware, or both, that utilize or enable a blockchain.

"Department" means the Department of Financial and Professional Regulation.

"Participant" means: (1) each person that has a partial or complete copy of the decentralized consensus ledger or database utilized by the blockchain technology, or otherwise participates in the validation processes of such ledger or database; (2) each person in control of any digital asset native to the blockchain technology; and (3) each person that makes a material contribution to the protocols.

"Personal information" means data capable of being associated with a particular natural person, including gender identification, birth information, marital status, citizenship and nationality, biometric records, government identification designations, and personal, educational, and financial histories.

"Personal information protection company" means a business that is organized for the primary purpose of providing personal information protection services to individual consumers.

"Personal information protection services" means receiving, holding, and managing the disclosure or use of personal information concerning an individual consumer: (1) pursuant to a written agreement in which the person receiving the individual consumer's information agrees to serve as a personal information protection company, and which specifies the types of personal information to be held and the scope of services to be provided on behalf of the consumer; and (2) in the best interests and for the protection and benefit of the consumer.

"Protocols" means the designated regulatory model of the software that governs the rules, operations, and communication between nodes on the network utilized by the participants.

"Virtual currency" means a digital representation of value that: (1) is used as a medium of exchange, unit of account, or store of value; and (2) is not legal tender, whether or not denominated in legal tender.

Section 10. Qualified personal information protection company.

(a) A personal information protection company shall qualify to conduct its business under the terms of this Act and applicable rules adopted by the Department of Financial and Professional Regulation.

(b) A person shall not engage in business as a personal information protection company in this State without first obtaining authorization from the Department.

(c) A personal information protection company shall:

(1) be organized or authorized to do business under the laws of this State;

(2) maintain a place of business in this State;

(3) appoint a registered agent to accept service of process and to otherwise act on its behalf in this State; provided that, whenever the registered agent cannot with reasonable diligence be found at the Illinois registered office of the company, the Secretary of State shall be an agent of the company upon whom any process, notice, or demand may be served;

(4) annually hold at least one meeting of its governing body in this State, at which meeting one or more members of the body are physically present; and

(5) develop, implement, and maintain a comprehensive information security program that contains administrative, technical, and physical safeguards sufficient to protect personal information, and which may include the use of blockchain technology in some or all of its business activities.

(d) A personal information protection company that accepts personal information based upon to a written agreement to provide personal information protection services has a fiduciary responsibility to the consumer when providing personal protection services.

Section 15. Personal information protection company name; conduct of business.

(a) A personal information protection company shall file with the Department the name it proposes to use in connection with its business, which the Department shall not approve if it determines that the name may be misleading, likely to confuse the public, or deceptively similar to any other business name in use in this State.

(b) A personal information protection company may:

(1) operate through remote interaction with the individuals entrusting personal information to the company, and there shall be no requirement of Illinois residency or other contact for any such individual to establish such a relationship with the company; and

(2) subject to applicable fiduciary duties, the terms of any agreement with the individual involved, and any applicable statutory or regulatory provision:

(A) provide elements of personal information to third parties with which the individual seeks to have a transaction, a service relationship, or other particular purpose interaction;

(B) provide certification or validation concerning personal information; and

(C) receive compensation for acting in these capacities.

(c) An authorization to provide personal information may be either particular or general, provided it meets the terms of any agreement with the individual involved and any rules adopted by the Department.

Section 20. Assessment of fees; authority of the Department regarding personal information protection companies; implementation report.

(a) The Department of Financial and Professional Regulation shall assess the following fees for a personal information protection company:

(1) an initial registration fee of $1,000, consisting a licensing fee of $500 and an investigation fee of $500;

(2) an annual renewal fee of $500; and

(3) a change in address fee of $100.

(b) The Department shall have the authority to bill a personal information protection company for examination time at its standard rate.

(c) In addition to other powers conferred under this Act, the Department shall have the authority to review records, conduct examinations, and require annual audits of a personal information protection company.

(d) The Department may prescribe by rule the timing and manner of reports by a personal information protection company to the Department.

(e) The Department may adopt rules to govern other aspects of the business of a personal information protection company, including its protection and safeguarding of personal information and its interaction with third parties with respect to personal information it holds.

(f) Within 2 years after the effective date of this Act, the Department shall submit to the Governor and General Assembly a progress report that addresses:

(1) the implementation of the provisions concerning the regulation of personal information protection companies under this Act; and

(2) the status of any rulemaking pursuant to its authority under this Section.

Section 25. Blockchain-based limited liability company.

(a) For the purposes of this Section, "company" means a blockchain-based limited liability company.

(b) A limited liability company organized under the Limited Liability Company Act for the purpose of operating a business that utilizes blockchain technology for a material portion of its business activities may elect to be a blockchain-based limited liability company (BBLLC) by:

(1) specifying in its articles of organization that it elects to be such a company (BBLLC); and

(2) meeting the requirements of subsections (c) and (d).

(c) Notwithstanding any provision of law to the contrary, a blockchain-based limited liability company established under this Section may provide for its governance, in whole or in part, through blockchain technology. The operating agreement for the company shall:

(1) provide a summary description of the mission or purpose of the company;

(2) specify whether the decentralized consensus ledger or database utilized or enabled by the company will be fully decentralized or partially decentralized and whether such ledger or database will be fully or partially public or private, including the extent of participants' access to information and read and write permissions with respect to protocols;

(3) adopt voting procedures, which may include smart contracts carried out on the blockchain technology, to address:

(A) proposals from managers, members, or other groups of participants in the company for upgrades or modifications to software systems or protocols, or both;

(B) other proposed changes to the company operating agreement; or

(C) any other matter of governance or activities within the purpose of the company;

(4) adopt protocols to respond to system security breaches or other unauthorized actions that affect the integrity of the blockchain technology utilized by the company;

(5) provide how a person becomes a member of the company with an interest, which may be denominated in the form of units, shares of capital stock, or other forms of ownership or profit interests; and

(6) specify the rights and obligations of each group of participants within the company, including which participants shall be entitled to the rights and obligations of members and managers.

(d) A member or manager of a blockchain-based limited liability company may interact with the company in multiple roles, including as a member, manager, developer, node, miner, or other participant in the company, or as a trader and holder of the currency in its own account and for the account of others, provided such member or manager complies with any applicable fiduciary duties. The activities of a member or manager who interacts with the company through multiple roles are not deemed to take place in this State solely because the company is organized in this State.

(e) A blockchain-based limited liability company may adopt any reasonable algorithmic means for accomplishing the consensus process for validating records, as well as requirements, processes, and procedures for conducting operations, or making organizational decisions on the blockchain technology used by the company.

(f) A blockchain-based limited liability company may, in accordance with any procedure specified under subsection (c), modify the consensus process, requirements, processes, and procedures, or substitute a new consensus process, requirements, processes, or procedures that comply with the requirements of law and the governance provisions of the company.

(g) Except as expressly provided otherwise, this Section does not exempt a blockchain-based limited liability company from any other judicial, statutory, or regulatory provision of Illinois law or federal law, including State and federal securities laws. Except to the extent inconsistent with the provisions of this Section, the provisions of the Limited Liability Company Act govern.

Section 30. Public record blockchain study; report.

(a) On or before January 1, 2021, the Secretary of State shall:

(1) evaluate blockchain technology for the systematic and efficient management of public records;

(2) recommend legislation, including uniform laws, necessary to support the possible use of blockchain technology for the recording of land records and for other public records; and

(3) submit its findings and recommendations to Governor and the General Assembly.

(b) This Section is repealed January 1, 2022.

Section 35. Blockchain insurance and banking study.

(a) The Department of Financial and Professional Regulation shall review the potential application of blockchain technology to the provision of insurance and banking, and consider areas for potential adoption and any necessary regulatory changes in Illinois.

(b) On or before January 1, 2021, the Department shall submit a report of its findings and recommendations to the Governor and General Assembly.

(c) This Section is repealed January 1, 2022.

Section 40. Blockchain and financial technology promotion. The Department of Commerce and Economic Opportunity shall incorporate into one or more of its economic development marketing and business support programs, events, and activities the following topics:

(1) opportunities to promote blockchain technology and financial technology-related economic development in the private sector, including in the areas of banking, insurance, retail and service businesses, and cryptocurrency;

(2) legal and regulatory mechanisms that enable and promote the adoption of blockchain technology and financial technology in this State; and

(3) educational and workforce training opportunities in blockchain technology, financial technology, and related areas.