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Bill

HB 380

AN ACT relating to the regulation of digital asset business.

2026 Regular Session Introduced by Tom Smith and 1 co-sponsor

Kentucky would license and regulate virtual currency kiosks, requiring licenses, bonds, background checks, ongoing audits, user disclosures, and anti-fraud safeguards.

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Bill Summary · HB 380

Summary of HB 380 (2026 Regular Session, Kentucky)

Purpose and Intent

HB 380 proposes comprehensive regulation of digital asset activities in Kentucky by creating a new Subtitle 13 within Kentucky Revised Statutes Chapter 286 to license and oversee virtual currency kiosk (VCK) operations and their agents. The bill aims to establish licensing, ongoing supervision, consumer protections, risk controls, reporting requirements, and sanctions to safeguard the public as VCKs facilitate the exchange of fiat and virtual currency in the state.

Key Provisions and Changes

  • Definitions and Scope (Section 1):

    • Establishes terms such as affiliate, agent, control, director, executive officer, fiat currency, legal tender, licensee, material litigation, responsible individual, virtual currency, virtual currency kiosk, kiosk user, and kiosk transaction.
    • Defines a virtual currency kiosk as a physical terminal enabling fiat<->virtual currency exchanges or virtual currency-to-virtual currency exchanges.

  • Exclusions (Section 2):

    • Subsubtitle does not apply to federal government, state governments, certain banks and banking-related entities, or service providers acting on behalf of such entities under specified conditions.

  • Regulatory Authority and Enforcement (Section 3):

    • Commissioner of the Kentucky Department of Financial Institutions would enforce the subtitle and may promulgate related regulations.
    • Provides for enforcement actions, injunctive relief, and cumulative remedies.

  • Licensing and Location Approvals (Sections 4, 6–8):

    • To operate in Kentucky, a person must obtain a license and written approval for each agent and each physical location.
    • Licenses expire December 31 of the issuing year and generally are non-transferable.
    • The commissioner may issue unconditional licenses, or notices of intent to issue conditional licenses or deny licenses based on investigations.

  • Application and Background Checks (Sections 7–8):

    • Requires detailed information for applicants, including:
    • Personal and professional histories of applicants, executives, directors, key shareholders, agents, etc.
    • Financial statements, prior regulatory actions, criminal history, material litigation, bankruptcy/receivership history, and corporate structure.
    • Information about proposed locations, agents, contracts, and compliance officers.
    • Proof of insurance, and, for publicly traded entities, applicable disclosures.
    • Introduces a $100 investigation fee for change-of-control applications.

  • Bonding and Net Worth (Section 9):

    • Applicants must post a bond of at least $500,000, with potential increases up to $5,000,000 based on risk.
    • Licensees must maintain at least $500,000 in net worth.
    • Bond terms include long tail coverage (minimum 5-year claims period) and conditions for cancellation with notice.

  • Ongoing Reporting and Renewal (Section 11):

    • Annual renewal required by December 31; renewal involves audited financials, compliance certifications, transaction data, and disclosures of material changes or breaches.
    • Noncompliance leads to expiration, with possible reinstatement upon timely compliance and payment of a civil penalty.

  • Change of Control and Terminations (Sections 12–15):

    • Requires pre-notification and potential approvals for changes of control.
    • Interested parties must file notices of termination or resignation of responsible individuals or agents, and operators must maintain written procedures and notify the commissioner of changes.

  • Fees and Regulation (Sections 13–14):

    • Establishes consistent regulatory fees tied to the costs of reviewing, investigating, and enforcing the subtitle.
    • Requires express written agent contracts with defined duties and prohibitions on subagents.

  • Compliance, Consumer Protections, and Anti-Fraud Measures (Section 17–18):

    • mandates disclosures to users about transaction terms, risks, and refunds.
    • Requires receipts with detailed transaction data and customer service information.
    • Imposes mandatory identity verification for users and ongoing anti-fraud/anti-money-laundering protocols, including blockchain analytics to trace and block high-risk wallets (e.g., overseas exchanges not accessible to U.S. users).
    • Provides refunds for fraud-induced transactions under specified conditions and timelines.
    • Requires targeted notices at kiosks about scams, fraud reporting contacts, and accessibility of support.

  • Records and Safeguards (Section 15–16):

    • Requires robust recordkeeping, segregation of records, data retention timelines, and trust-like handling of funds, including protections against commingling.

Affected Parties

  • Primary: Individuals and entities that operate or plan to operate virtual currency kiosks in Kentucky, including their agents and locations.
  • Indirect: VCK users and the general public, who gain enhanced protections, disclosures, and dispute remedies.
  • Regulators: Kentucky Department of Financial Institutions, with powers to license, regulate, and enforce compliance; potential coordination with registry-type systems for filings.

Procedural and Timeline Aspects

  • Licenses and approvals are location- and agent-specific, with renewal annually by December 31.
  • Applications require comprehensive background checks and financial disclosures; change-of-control filings include a separate investigation fee.
  • Bonds and net worth must be maintained continuously; increases in bond may be required mid-cycle.
  • The bill provides timelines for notices (e.g., 15–30 days to respond to notices), and a 72-hour remittance/ refund window for certain transactions.
  • The act contemplates future regulatory regulations (KRS 13A) to flesh out formats, fees, and standards.

Note: This summary reflects the substantive provisions of HB 380 as introduced, focusing on regulatory framework, consumer protections, and supervisory mechanics for digital asset (virtual currency) kiosk businesses in Kentucky.

Compiled from official sources — confirm details with the bill’s official record.

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