THE ASSEMBLY BANKING AND FINANCE
COMMITTEE IS CALLED TO ORDER AND
SERGEANTS IF YOU WILL BE SO KIND
AS TO PLEASE CALL ABSENT
MEMBERS. WE DON'T HAVE A CORN,
BUT WE CAN'T START AS A
SUBCOMMITTEE, SO WELCOME TO THE
ASSEMBLY BANKING AND FINANCE
COMMITTEE. WHETHER YOU'RE HERE
IN PERSON OR WHETHER YOU'RE
WATCHING VIRTUALLY I AM GRATEFUL
THAT YOU HAVE JOINED US HERE IN
ROOM 444. TODAY WE WILL ALLOW
TESTIMONY IN PERSON. I ALSO WANT
TO NOTE THAT WE ARE ACCEPTING
WRITTEN TESTIMONY THROUGH THE
POSITION LETTER PORTAL ON THE
COMMITTEE'S WEBSITE. AND WITH
THAT WE WILL MOVE ON TO THE
HEARING AGAIN. WE DON'T HAVE A
QUORUM SO WE WILL MOVE FORWARD
AS A SUBCOMMITTEE. DARN NO ITEMS
ON THE CONSENT CALENDAR. WE DO
HAVE FILE ITEM NUMBER ONE SB 401
AND SENATOR LIMÓN IS PRESENT.
PLEASE LET ME SEE. OH, BEFORE
YOU SLEEP. YOU START AND SPEAK
THIS BILL. SB 401 FILE ITEM
NUMBER ONE RECOMMENDATION IS DO
PASS AS AMENDED TO THE
APPROPRIATIONS COMMITTEE, AND
THOSE AMENDMENTS ARE DETAILED IN
THE COMMITTEE ANALYSIS. SO WHEN
YOU'RE READY, YOU CAN BEGIN.
THANK YOU. CHAIR AND THANK YOU
MEMBERS. I WANT TO FIRST START
BY RECOGNIZING TO AGREE SIN AND
THE WORK THAT, UM, CHECK THE
CHAIR HAS DONE AROUND THE CRYPTO
SPACE AND SO SPE 41 HOPES TO
BUILD ON SOME OF THAT WORK. AND
FOCUSES ON A NARROW PART OF THE
GROUP CRYPTO SPACE KNOWN AS
CRYPTO KIOSK OR CRYPTO ATMS.
CRYPTO CHAOS OUR PHYSICAL
MACHINES THAT ALLOW CONSUMERS TO
PURCHASE CRYPTO ASSETS USING
CASH, DEBIT OR CREDIT CARD OR
BANK TRANSFER. THESE MACHINES
ARE OFTEN LOCATED IN GROCERY AND
CONVENIENCE STORES AND GENERALLY
TARGET CONSUMERS WHO ARE LESS
KNOWLEDGEABLE OF CRYPTO MARKETS
THAN CONSUMERS WHO USE ONLINE
TRADING PLATFORMS. IN ADDITION
TO THE INVESTMENT RISK INHERENT
WITH THE VOLATILE CRYPTO
MARKETS, CRYPTO CHAOS POSE
ADDITIONAL CONCERNS RELATED TO
CRIMINAL ACTIVITY AND HIGH COSTS
FOR CONSUMERS. WE KNOW THAT
SCAMMERS AND FRAUDSTERS ARE
TRICKING VICTIMS INTO SENDING
CRYPTO ASSETS USING KIOSK.
THERE'S A RECENT L. A TIMES
ARTICLE ABOUT SCAMMERS WHO
TRICKED A SENIOR INTO TAKING
$75,000 OUT IN CASH OF HER BANK
ACCOUNT AND DEPOSITING IT INTO
CRYPTO KIOSK THAT ALLOWED THE
OVERSEAS CRIMINALS TO TAKE
POSSESSION OF HER FUNDS. IN THAT
SAME ARTICLE, THE DIRECTOR OF
VICTIM SUPPORT AT AARP S FRAUD
WATCH NETWORK SAID THAT CRYPTO
CRIMES LIKE THIS ARE COMMON
AMONG THE 400 TO 500 CALLS THAT
THEY RECEIVE DAILY. WE ALSO KNOW
THAT THE FBI AND D E A HAVE FLAG
KIOSK FOR THEIR USE IN
FACILITATING DRUG AND HUMAN
TRAFFICKING AND ALLOWING
CRIMINAL ORGANIZATIONS TO MOVE
FUNDS ACROSS BORDERS FOR THESE
REASONS, S BEFORE ONE PLACES A
TRANSACTION LIMIT OF $1000 PER
CUSTOMER PER DAY TO LIMIT THE
HARMS OF LARGER FRAUDS AND
ORGANIZED CRIMINAL ACTIVITY.
OUTSIDE OF ILLEGAL USES OF
CRYPTO KIOSK. WE MUST CONFRONT
THE INCREDIBLY HIGH FEES THAT
SOME OF THESE OPERATORS CHARGE.
WE KNOW THAT SOME OPERATORS ARE
CHARGING MORE THAN 30% MARKUP ON
CRYPTO ASSETS THAT THEY SELL
CONSUMERS. COMPARE THESE FEES TO
ONLINE STARK STOCK BROKERAGE
ACCOUNTS THAT OFTEN CHARGE ZERO
FEES AND HAVE PRICE SPREADS OF
LESS THAN 1% OR EVEN ONLINE
CRYPTO TRADING PLATFORMS THAT
TYPICALLY KEEP THEIR TOTAL FEES
BELOW 2% OF THE TRANSACTION
AMOUNT TO ADDRESS THE HIGH FEES.
SP 41 PROPOSES A FEE CAP OF 10.
OR $5 PER TRANSACTION, WHICHEVER
IS GREATER. AS CITED IN RESEARCH
FROM THE BROOKINGS CENTERS THAT
IS SUMMARIZED IN THE COMMITTEE
ANALYSIS. WE KNOW THAT SOME
OPERATORS ARE READY CHARGED.
LESS THAN 10% THAT THEN THE 10%
PROPOSED CAP SO WELL
ECONOMICALLY FEASIBLE FOR AT
LEAST SOME OF THE MARKET TO
ADAPT BEFORE I CLOSE. I WANT TO
FLAG THAT THIS IS NOT A
LICENSING BILL. WHICH SEEMS TO
BE A SOURCE OF CONFUSION FOR
SOME OF THE OPPOSITION. I
SUGGESTED IN THE ANALYSIS, I
WILL BE WORKING WITH THE CHAIR
TO ENSURE THAT OUR TWO BILLS FIT
TOGETHER AND THAT THE
OBLIGATIONS FOR CRYPTO KIOSK
OPERATORS ARE CLEAR. ON THAT
NOTE. I HAVE HEARD CONCERNS FROM
INDEPENDENT ATM OPERATORS WHO
OFFER LIMITED CRYPTO PRODUCTS
ALONGSIDE TRADITIONAL ATM
SERVICES, AND I'M COMMITTED TO
ADDRESSING THEIR UNCERTAINTY
AROUND LICENSURE REQUIREMENTS.
I'M ALSO HAPPY TO ACCEPT THE
AMENDMENT SPECIFIED IN COMMENT.
NUMBER 11 IN THE COMMITTEE
ANALYSIS. THESE ARE HELPFUL
SUGGESTIONS THAT MAKE THIS BILL
EVEN STRONGER NOW LIKE TO TURN
TO OUR SUPPORTING WITNESS,
ROBERT HAROLD FROM THE CONSUMER
FEDERATION OF CALIFORNIA. PLEASE
THANK YOU, MR CHAIRMAN AND
MEMBERS. ROBERT URAL, EXECUTIVE
DIRECTOR OF THE CONSUMER
FEDERATION OF CALIFORNIA. I ALSO
WOULD LIKE TO THANK THE CHAIR
AND THIS COMMITTEE. A THOROUGH
ANALYSIS IS ALWAYS ALSO SENATOR
LIMÓN AND OTHERS WHO HAVE BEEN
WORKING ON THIS ISSUE FOR A
WHILE. YOU'VE HEARD ME SPEAK
BEFORE THIS COMMITTEE BEFORE
ABOUT CRYPTO AND THE LARGER
CONTEXT. I'LL TRY NOT TO BE
REDUNDANT ON THAT. BUT SOME OF
THE FRAUDS AND SCAMS IN SOME
CASES DO INVOLVE THESE CHAOS.
AND SO THE BILL WE THINK PUTS
FORWARD A VERY REASONABLE
FRAMEWORK. FOR REGULATION AND
FEE LIMITATION HERE. UM THE
AUTHOR MENTIONED SOME OF THE
OTHER PRODUCTS THAT ARGUABLY
SOMETIMES COMPETE WITH THESE, IN
SOME CASES BE A CHECK CASHING OR
PAYDAY LENDING HAVE, IN MANY
CASES, A STATUTORY REQUIRED MUCH
LOWER FEE CAP, SO WE THINK IT
10% FEE IS A EMINENTLY
REASONABLE. AND APPROPRIATE. UM
SADLY, IF YOU LOOK AT A PHYSICAL
MAPPING OVERLAY OF WHERE THESE
CRYPTO CHAOS ARE LOCATED, IT
LOOKS AN AWFUL LOT LIKE WE'RE
PAYDAY LENDERS ARE LOCATED. THAT
IS TO SAY THE SORT OF MOST
COMMON LOCATION OF ONE OF THESE
IS IN A LIQUOR STORE AND A LOWER
SOCIOECONOMIC STATUS
NEIGHBORHOOD, USUALLY A
BYPRODUCT NEIGHBORHOOD. AND SO,
UM, UM, WE THINK THERE HAS BEEN
HISTORICALLY, SOME TARGETING THE
SENATOR MENTIONED RESEARCH DONE
BY THE BROOKINGS INSTITUTE. THEY
CONTINUE TO DO MORE RESEARCH ON
THIS, WHICH HAS BEEN VERY
HELPFUL AND INFORMATIVE WITH
THAT. I'M HAPPY TO ANSWER
QUESTIONS. BUT I WOULD URGE THE
COMMITTEE TO SUPPORT THE BILL
TODAY ASKED FOR AN I VOTE. THANK
YOU. THANK YOU SO MUCH FOR YOUR
TESTIMONY, AND DO WE HAVE ANY
OTHER WITNESSES IN SUPPORT IN
THE HEARING ROOM, PLEASE STEP
FORWARD TO THE MIC STATE. YOUR
NAME ORGANIZATION POSITION, SEE
NONE. WE WILL NOW TURN TO
WITNESSES IN OPPOSITION AND IF
YOU ARE LEAD WITNESSES AND
OPPOSITION, PLEASE FEEL FREE TO
COME. AND YOU MAY BEGIN WHEN
YOU'RE READY. AFTERNOON THANK
YOU, JAMIE MINOR, REPRESENTING
BLOCKCHAIN ADVOCACY COALITION.
AND WHILE WE HAVE GREAT RESPECT
FOR THE AUTHOR, AND ALL THE WORK
YOU'VE DONE ON THIS BILL, WE ARE
WE HAVE OPPOSED UNLESS AMENDED
POSITION. SO BE A C REPRESENTS
COMPANIES AND NON PROFITS THAT
SPAN THE VIRTUAL ASSET AND
BLOCKCHAIN SECTOR. UNFORTUNATELY
AS WRITTEN SP 41 AND FAIRLY
TARGETS A SPECIFIC TECHNOLOGY
THAT ALLOWS EVERYDAY CONSUMERS
TO PARTICIPATE IN THE DIGITAL
ASSET ECONOMY. IT SETS AN
ARBITRARY CAP, AS YOU'VE HEARD
ABOUT THAT DOES NOT EXIST FOR
SIMILAR PRODUCTS AND DOES NOT
TAKE INTO ACCOUNT THAT THE
INDUSTRY IS STILL SCALING AND
DEVELOPING. SO FIRST, SOME
BACKGROUND WALL CRYPTO KEYS ARE
COMMONLY REFERRED TO AS BITCOIN
80. THEY ARE MUCH DIFFERENT THAN
AN ATM, AND THEY OPERATE MORE
CLOSELY TO A CURRENCY EXCHANGE
KIOSK AT THE AIRPORT. THEREFORE
THE CAPITAL COST TO MAINTAIN A
KIOSK ARE MUCH DIFFERENT. CRYPTO
KIOSK DO NOT PROVIDE ACCESS TO A
PERSON'S OWN OWN OWN FUNDS, NOR
DO THEY CUSTODY FUNDS LIKE AN
ONLINE EXCHANGE OR HOSTED
WALLET. THEY SERVE ONLY AS A
POINT OF SALE FOR PURCHASING OR
SELLING CRYPTO IN A CONVENIENT,
FAST AND SAFE WAY. OUR COALITION
HAS TWO MAJOR PROBLEMS WITH THE
BILL AS WRITTEN FIRST.
UNFORTUNATELY THE FEE CAP AND
THE BILL IS UNWORKABLE AND
OPERATIONALLY AND FEASIBLE.
THERE ARE UNIQUE COSTS
ASSOCIATED WITH THE OPERATION OF
THESE MACHINES, INCLUDING HEAVY
COMPLIANCE COSTS AND CASH
MANAGEMENT COSTS TO GIVE
PERSPECTIVE PROCESSING COSTS TO
UTILIZE THE BLOCKCHAIN NETWORK
ALONE CAN INCREASE ON A WHIM AND
RANGE FROM 2 TO $60 PER
TRANSACTION. KIOSK OPERATORS
ASSUMED THE RISK TO OFFER THE
PURCHASE OF CRYPTO AND A QUICK
AND SEAMLESS WAY TO THEIR
CUSTOMERS. SECONDLY THE
TRANSACTION CAP SET IN THE BILL
DOES NOTHING TO PREVENT FRAUD.
IN FACT, THE PROPOSED LANGUAGE
COULD MAKE FRAUD EASIER AS LESS
INFORMATION IS COLLECTED AND
REPORTED TO REGULATORS ABOUT THE
CUSTOMER OF THE TRANSACTION
AMOUNT IS UNDER $1000 B. A C
SUPPORTS A LICENSING FRAMEWORK
FOR CRYPTO KIOSK OPERATORS THAT
WILL DETER BAD ACTORS. WE HAVE
OFFERED ROBUST AMENDMENTS THAT
INCLUDE MANDATING NUMEROUS
DISCLOSURES, FRAUD AND SCAM
PREVENTION PLANS AND OTHER
CONSUMER PROTECTIONS. WE'VE ALSO
OFFERED A FEE AND TRANSACTION
CAP THAT WE FEEL IS WORKABLE FOR
THE INDUSTRY AND WILL ALLOW THE
MARKET TO STAY IN CALIFORNIA
COMPETE FOR BUSINESS AND DRIVE
COSTS DOWN, AS IS THE BILL WOULD
RESULT IN A DE FACTO BAN ON MANY
CRYPTO CHAOS, AND THEY WOULD
CEASE TO OPERATE IN CALIFORNIA.
THIS COULD RESULT IN A LOSS OF
15 TO $25 MILLION ANNUALLY TO
SMALL BUSINESS SHOP OAN.
LAWYERS THAT HOUSE THESE
MACHINES AND ALL OF THE OTHER
TAX REVENUE THAT COMES FROM THE
INDUSTRY. UM SO FOR THESE
REASONS, WE MUST RESPECTFULLY
OPPOSED UNLESS AMENDED. THANK
YOU. THANK YOU SO MUCH. TWO
MINUTES. GOOD AFTERNOON. GOOD
AFTERNOON. THANK YOU. MR
CHAIRMAN, COMMITTEE MEMBERS. MY
NAME IS JOSEPH PICCOLO. I'M THE
FOUNDER AND PRESIDENT OF BIT AML
, BASED HERE IN ROSEVILLE,
CALIFORNIA. WE ARE REGULATORY
COMPLIANCE CONSULTANCY SERVING
THE CRYPTO FINANCIAL SERVICES
INDUSTRY SINCE 2015 OVER THE
PAST EIGHT YEARS, WE'VE WORKED
WITH HUNDREDS OF CRYPTO
FINANCIAL SERVICES PROVIDERS,
INCLUDING KIOSK OPERATORS.
CRYPTO CHAOS IN CALIFORNIA,
SUBJECT TO ROBUST REGULATION AT
THE FEDERAL LEVEL TO ENSURE THAT
THESE BUSINESSES OPERATE IN A
SAFE AND SECURE MANNER. THESE
REGULATIONS HELP TO PREVENT,
DETECT AND DETER ILLICIT
TRANSACTIONS, WHILE ALSO
PROVIDING PROTECTION FOR
CONSUMERS. THIS IS WHY HAS
POINTED OUT THE ANALYSIS? THE
MOST RECENT CRIME REPORT
CONDUCTED BY CHE ANALYSIS, A
BLOCKCHAIN FORENSICS SOFTWARE
VENDOR, UTILIZED BY FEDERAL AND
NATIONAL SECURITY AGENCIES,
HIGHLIGHTS ONLY 1% OF FRAUD AND
SCAM CASES IN THE CRYPTO
ECOSYSTEM ARE CONDUCTED BY A
CRYPTO KIOSK. AMONG OTHERS.
CRYPTO CHAOS COMPANIES MUST
COMPLY WITH THE BANK SECRECY
ACT, OR B S A UNDER BSA. THESE
COMPANIES MUST VERIFY THE
IDENTITY OF THEIR CUSTOMERS
RETAIN CUSTOMER TRANSACTION
RECORDS, TRAIN ALL EMPLOYEES ON
ANTI MONEY LAUNDERING AND
UNDERGO REGULAR INDEPENDENT
AUDITS AND FEDERAL EXAMINATIONS
CONDUCTED BY THE I. R S THESE
ARE MANY MORE REGULATORY
REQUIREMENTS AND COMPLIANCE
EXPECTATIONS ARE ENFORCED BY THE
FINANCIAL CRIMES ENFORCEMENT
NETWORK, OR VINCENT, A BUREAU OF
THE U. S. TREASURY. KIOSK
OPERATORS MUST DETECT,
INVESTIGATE AND REPORT POTENTIAL
SUSPICIOUS AND OR UNUSUAL
ACTIVITY BY FILING SUSPICIOUS
ACTIVITY REPORTS OR SARS, WITH
VINCENT TO QUOTE THE SECRET
SERVICE WHOSE FIELD TEAMS
OPERATE A FINANCIAL CRIMES TASK
FORCE QUOTE BLOCKCHAIN IS AN
AMAZING OPPORTUNITY TO TRACK THE
FLOW OF MONEY, END QUOTE.
CUSTOMER AND TRANSACTION RECORDS
MAINTAINED BY KIOSK OPERATORS,
INCLUDING SURVEILLANCE PICTURES
OF THE CUSTOMER CAN BE SHARED
WITH LAW ENFORCEMENT. IN A
MATTER OF SECONDS, THE OPERATORS
WE WORK WITH AND REPRESENT WANT
TO MAKE SURE CONSUMERS FEEL SAFE
USING THEIR MACHINES, AND WE
SUPPORT A LICENSING REGIME
SPECIFIC TO CALIFORNIA. HOWEVER
WE THINK THAT THERE ARE OTHER
PROTECTIONS THAT COULD BE
CONSIDERED AND THEY HAVE BEEN
OFFERED, WHICH WILL ACTUALLY
PROTECT CONSUMERS AS OPPOSED TO
BORROWING THESE MACHINES FROM
OPERATING IN OUR STATE. THANK
YOU. THANK YOU SO MUCH FOR YOUR
TESTIMONY. ARE THERE ANY OTHER?
UH FOLKS PRESENT IN OPPOSITION.
SIMPLY STEP UP TO THE MIC STATE,
YOUR NAME ORGANIZATION IN
POSITION. THE CALIFORNIA FUELS
AND CONVENIENCE ALLIANCE.
NUMBER OF COMMERCE IN, UH,
RESPECTFUL OPPOSITION. THANK
YOU. THANK YOU VERY MUCH, SEEING
NO OTHER OPPOSITION PRESENT. WE
DO HAVE A QUORUM, SO OR WE DO
HAVE ENOUGH MEMBERS FOR
ACCORDING SECRETARY PLEASE CALL
THE ROLL. GRAYSON GRAYSON HERE
CHAN CHAN HERE. BAUER CAN
CERVANTES DIXON DIXON HERE, MIKE
FONG FONG HERE, GABRIEL
PETRIE-NORRIS PETRIE-NORRIS
HERE, SORIA. WALDRON WALDRON
HERE. WICKS WILSON WILSON HERE.
WE HAVE A VERY GOOD WE'VE
ESTABLISHED A QUORUM. WE'VE
HEARD FROM OPPOSITION AND NOW
WE'LL BRING IT BACK TO COMMITTEE
QUESTIONS. VICE CHAIR CHEN THANK
YOU, MR WANT TO THANK THE
SENATOR FOR BRENDA'S BILL? I
THINK THE STATE OF CALIFORNIA
STILL GRAPPLING WITH
CRYPTOCURRENCY IN TERMS OF WHAT
OUR ROLE IS IN THIS ARENA. UM I
DO HAVE SOME QUESTIONS. HOWEVER,
IN THE ANALYSIS THERE IS, UM
DATA THAT TALKED ABOUT SMALL
BUSINESS LOANS AS WELL AS UH,
LOANS GOING FROM 15% TO 36% AND
I KNOW THAT IS, I BELIEVE NOT
COMPARABLE TO THIS CATEGORY. AS
I BELIEVE IN THESE ATMS WERE
CRYPTOCURRENCY. IT'S VOLUNTARY,
SO I WANT TO UNDERSTAND OR
BETTER UNDERSTAND. HOW DO WE
COME UP WITH THIS 10% AS SOME OF
THE OTHER LOANS I'VE SEEN FROM
PAYDAY TO AGAINST SMALL DOLLAR
LENDING. RANGED FROM 15 TO 36
AGAIN. I DON'T THINK IT'S AN
APPLES TO APPLES COMPARISON. BUT
HOW DO WE COME UP WITH THIS? 10%
WHICH IS, I THINK DRASTICALLY
LOWER THAN THESE OTHER ANALOGIES
THAT WERE GIVEN IN THE ANALYSIS
. THANK YOU. I'LL JUST START BY
SAYING THAT I WASN'T NECESSARILY
COMPARING THIS TO PAYDAY, BUT
I'M HAPPY TO IF THAT'S THE
DIRECTION THAT THE COMMITTEE
WOULD LIKE TO GO IN, AND I THINK
THAT THOSE ARE DIFFERENT THINGS
. UM AND SO, AS WE HAVE STATED,
UM, YOU KNOW, YOU CAN DO THE
SAME PIECE ONLINE FOR AT 2. UM
AND SO WHEN WE THINK OF 10% WE
ACTUALLY THINK THAT THAT'S
REASONABLE COMPARED TO DOING THE
SAME THING ONLINE, WHICH YOU
WOULD HAVE AS MUCH SMALLER FEE.
UM SO I THINK THAT THAT'S
PROBABLY A REALLY MEANINGFUL
DATA POINT THAT DESCRIBES WHY WE
ARE AT 10% YOU KNOW, CERTAINLY
THE RECOMMENDATION THAT'S BEEN
GIVEN US TO GO TO 25% WE THINK
THAT THAT'S A PRETTY HIGH AND
NOT, YOU KNOW, THAT'S WHAT THE
OPPOSITION BROUGHT TO US AND
PROBABLY NOT THE DIRECTION AND
THAT WE'RE GOING IN, AND THIS IS
A PRETTY HEFTY FEE AT 25% RIGHT
FOR THE TRANSACTION. SO WE THINK
THAT WHEN YOU LOOK AT HOW ELSE
YOU CAN DO THIS TRANSACTION AND
OTHER PLATFORMS, YOU KNOW, GOING
FROM 2% TO 10% LEAVE SOME WIGGLE
ROOM THERE. THANK YOU, SENATOR.
IF I MAY MR SHARE AND ANOTHER
QUESTION FOR THE OPPOSITION UM,
YOU KNOW, I UNDERSTAND THAT SOME
OF THE INDIVIDUALS THAT YOU
REPRESENT AND ULTIMATELY IT'S A
BUSINESS AND THEY HAVE TO MAKE
AN R O. I AND THEY HAD TO
FUNCTION. BUT WHAT? WHAT ARE
WHERE DO THESE THINGS GO WHEN
THERE ARE FEES ARE GIVEN FOR A
CLIENT CONSUMER. AH WHAT ARE
THESE FEES FOR? YEAH. GREAT
QUESTION. I MEAN, I THINK YOU
KNOW AND APPRECIATE THAT ANALOGY
AND THAT IT'S NOT QUITE APPLES
TO APPLES. THIS IS AGAIN AN
EXCHANGING A CURRENCY. AND
BECAUSE IT'S DONE VIA CASH. IN
THE MOMENT, THOSE COSTS ARE MUCH
DIFFERENT THAN ONLINE BEING
EXCHANGE THAT AGAIN HAS IT HAS
JUST A DIFFERENT BUSINESS MODEL
, SO MOST OF THE COSTS GO TO
HONESTLY, COMPLIANCE, MAKING
SURE THAT THEY'RE COMPLYING WITH
THE BANK SECRECY ACT WITH
FEDERAL LINK REGULATIONS THAT
ARE APPLIED BY FINN SENT, UM,
BUT IT'S EXPENSIVE TO MANAGE
CASH. YOU KNOW, COSTS GO UP WITH
GAS WITH TRANSPORTATION COSTS,
SO THAT'S ALSO A BULK OF THE
FEES AND THEN UM, JUST THE
VOLATILITY. YOU KNOW, BITCOIN
CAN GO UP 30% IN ONE DAY, SO
THESE OPERATORS HAVE TO HAVE
THAT ON HAND IN THE MOMENT THEY
HAVE TO ASSUME SOME OF THAT RISK
. UM, YOU KNOW, IF YOU LOOK AT
WHERE BITCOIN IS, I THINK IT'S
LIKE 85% YEAR TO DATE TODAY, BUT
LAST WEEK IT WAS AT 50% SO THEY
HAVE TO ASSUME THAT RISK AND
THERE'S ALSO RISK IN THE
TRANSACTION FEE BECAUSE IT ALL
DEPENDS. SORRY. THE ACCESSING
THE BLOCKCHAIN NETWORK BECAUSE
THAT CAN RANGE FROM 2 TO $60 IN
A MOMENT BASED ON HOW MANY
PEOPLE ARE ACCESSING THAT
BLOCKCHAIN AT THE SAME TIME, SO
ALL OF THESE ARE RISKS THAT ARE
ASSUMED BY THESE OPERATORS. AND
THEREFORE, YOU KNOW, WE'RE
LOOKING FOR A LITTLE BIT OF
FLEXIBILITY IN THE FEE AS THEY
CONTINUE TO RAMP UP AS THERE
CONTINUES TO BE ECONOMIES OF
SCALE, AND THAT KEEPS THEM IN
THIS STATE IN A SAFE AND
CONSUMER PROTECTING WAY. THANK
YOU, SIR. ONE FINAL QUESTION AND
GIVEN SOME OF THE RESPONSIBLE
HAD JUST FOR THE AUTHOR HAS
THERE BEEN AN OPPORTUNITY TO
SPEAK WITH THE OPPOSITION AND
PERHAPS, UM, UM, MOVING FORWARD
OR OPPORTUNITY IN TERMS OF
DISCUSSION OF THAT 10% CAP? UM
SO WE'VE HAD QUITE SIGNIFICANT.
I THINK CONVERSATIONS THROUGH
THE BEGINNING. I MEAN, YOU KNOW
THE ONE PIECE YOU KNOW THE
TRANSACTION PIECE YOU SAW, AND
YOU, YOU KNOW, VOTED FOR LAST
YEAR IN A BILL. UM SO YOU'VE
SEEN THAT PART BEFORE AND WILL
CONTINUE TO HAVE A DISCUSSION
WILL BE. WILL WE BE ABLE TO
REACH A POINT WHERE THE
OPPOSITION REMOVES THEIR
OPPOSITION? I'M NOT ACTUALLY
SURE. BUT WE WILL CONTINUE TO
HAVE DISCUSSIONS ON ANY AND ALL
ISSUES. MHM. ANY OTHER QUESTIONS
? YES, WE DO. THANK YOU. CHAIR.
JUST A QUICK QUESTION. I'M
TRYING TO SORT OUT THIS
TRANSACTION FEE. SO WHO RECEIVES
THE FEED A REGULATORY AGENCY OR
THE CRYPTO COMPANY, SO IT'S THE
CONSUMER THAT'S ACTUALLY
PURCHASING THE CRYPTO. THEY'RE
CHARGED A FEE. IT'S KIND OF LIKE
A CONVENIENCE FEE. UM BECAUSE
IT'S YOU KNOW, DONE VIA CASH AT
YOU KNOW, WHEREVER GROCERY STORE
WHEREVER THEY ARE IN THEIR
COMMUNITY SERVICE FEE SERVICE
FEE FOR THE THINK ABOUT IT IF
YOU'RE CONVERTING YOUR DOLLARS
TO PESOS AT AN AIRPORT THAT'S
PROBABLY THE CLOSEST ANALOGY SO
THE 10% IS A BURDEN ON THE USER
. AND SO THIS IS A NEW
TECHNOLOGY. UM IS THAT
CONSIDERED TOO HIGH? OR THE
AUTHOR WAS SAYING 25% I MEAN,
HOW HOW HAVE YOU DETERMINED 10%
25% WHAT DID WE DO? AND THE
COMPANY HAS TO RECOUP THEIR
STARTUP COSTS JUST AS SOMEBODY
THAT WAS SAYING, SO, HOW DO WE
ARRIVE AT A FIGURE THAT ALLOWS
THEM TO DO THE RECOUP AND THEN
ALLOWS THE CONSUMER TO NOT BE
BURDENED BY OVERLY UM, BURDEN
SOME TRANSACTION FEES. IF I
UNDERSTAND ALL THIS CORRECTLY,
IT'S ALL NEW. YES IT IT IS NEW,
AND I THINK THAT'S YOU KNOW,
PART OF THE ISSUE HERE. THESE
OPERATORS ARE STILL SCALING. YOU
KNOW, 18 YOU THINK ABOUT A
TRADITIONAL ATM? IT'S BEEN
AROUND FOR DECADES. UM SO IT'S
REALLY THE MARKET THAT'S DRIVE
DOWN THOSE FEES. LIKE RIGHT.
WHAT I PAY $2. YOU KNOW, WHY
WOULD I PAY $8 THAT ONE
OPERATION WHEN IT'S $2 AT
ANOTHER, YOU YOU SHOP AROUND.
THERE REALLY HASN'T BEEN A LOT
OF TIME FOR THAT TO HAPPEN. YOU
KNOW, THESE FEES CAN RANGE FROM
10 TO 30% AND I THINK A LOT OF
IT DOES DEPEND ON THAT
VOLATILITY THAT I MENTIONED
EARLIER. UM BUT AT THE END OF
THE DAY, YOU KNOW, COMPETITION
WILL DRIVE DOWN THESE COSTS IN
OUR EYES. UM, AGAIN, YOU CAN GO
ACROSS THE STREET TO ANOTHER ATM
, BUT THAT HAS A LOWER FEE, SO
IT'S WITHIN YOU KNOW, THE
CUSTOMER CAN MAKE THAT DECISION
. WE HAVE OFFERED 20% WE THINK
THAT'S RIGHT IN THE MIDDLE
BETWEEN 10 AND 30, WHERE YOU SEE
THE RANGE BUT, YOU KNOW, HOPE TO
CONTINUE CONVERSATIONS WITH THE
AUTHOR AND WITH THE COMMITTEE
AND IS A MARKET THAT WILL
DETERMINE THE MARKETPLACE WILL
DETERMINE WHERE THAT RATE FALLS
. IS THAT WHERE THEY? ABSOLUTELY
IT'S NOT A MANDATORY FEED BY ANY
ANY MEANS AGAIN. THEY VARY JUST
DEPENDING ON THE COSTS OF THE
BUSINESS OPERATION. AT THAT
MOMENT, SO SPECIFY THAT IN THIS
LAW PROPOSED LAW, THIS BILL AH,
THERE'S AN YOU HAVE TO COME TO
AN AGREEMENT OF WHERE YOU'RE
GOING TO START GOING TO START
AND AS YOU ARE STARTING A
STARTUP MODE. IS THAT WHAT THIS
COMPANY IT'S OUR PREFERENCE NOT
TO HAVE, YOU KNOW, FEED CAP,
OBVIOUSLY IN STATUTE, BUT
UNDERSTAND THAT'S THAT'S THE
WILL OF THE COMMITTEE AND, YOU
KNOW, WE WANT TO WORK WITH THE
AUTHOR TO FIND SOMETHING THAT'S
WORKABLE FOR OPERATORS IN THE
STATE, AND THAT WILL STILL DRIVE
COMPETITION, ALLOW THEM TO EXIST
AND DRIVE THOSE CUTS DOWN FOR
EVERYBODY AS THIS BUSINESS MODEL
EVOLVES, BUT IF WE ESTABLISHED
LAW FOR 10% DO WE NEED A NEW LAW
TO WHEN THE MARKET PLAYS. WHAT
WHAT? HOW DO WE PUT THAT INTO
THE MARKETPLACE BEFORE MANDATING
A 10% TRANSACTION FEE IN THE
LAW. MAYBE THAT'S THE PROBLEM.
YEAH I THINK THAT'S OUR CONCERN
IS PUTTING SOMETHING IN STATUE.
OKAY ALRIGHT. THANK YOU VERY
MUCH THROUGH THE CHAIR. JUST
THAT THIS BILL STARTED AT 2% WE
INCREASED IT TO 10% THIS IS NOT
ALONE PRODUCT, RIGHT? SO THIS
FEE WHEN YOU BORROW WHEN YOU
THINK OF THE FEES THAT ARE PUT
FOR ANYTHING THAT'S ALONE. YOU
MAY NOT GET THAT MONEY BACK, SO
YOU TEND TO SEE HIGHER RATES. SO
THIS IS SIMPLY A SERVICE FEE AS
YOU CALLED IT, UM AND SO IF IT'S
A SERVICE FEE, AND YOU HAVE
COMPARABLE SERVICE FEES AT 2% TO
DO THE EXACT SAME THING WE THINK
YOU KNOW 10% IS REASONABLE. WE
REALLY DO THINK 25 AND 35% IS
TOO HIGH WHEN YOU HAVE, UH, THE
SAME KIND OF SPACE THAT'S DOING
DOING THE SAME THING TO RECEIVE
TO ACHIEVE THIS SAME OUTCOME.
FOR 2% SO I THINK THAT THAT IS
REALLY IMPORTANT TO NOTE THAT
THE REASON IS THAT YOU KNOW,
WE'RE LOOKING AT 10% IS FOR THE
GOOD OF THE CONSUMER RATHER THAN
THE COMPANY THEMSELVES. THANK
YOU. THANK YOU. ANY OTHER
QUESTIONS? YES SIMILAR MEMBER OF
PETRIE-NORRIS. THANK YOU,
SENATOR. ABSOLUTELY PICKING UP
ON TWO POINTS IN THE DISCUSSION
FIRST AROUND THE KNEECAP AND
THEN ACTUALLY HAVE ANOTHER
QUESTION AROUND THE, UH, DOLLAR
CAP. BUT IN TERMS OF THE FEE
CAP, WHAT? WHAT ARE SOME
COMPARABLE CAPS THAT EXIST FOR?
SERVICE FEES IN OTHER FINANCIAL
SERVICES, ATMS ARE TYPICALLY 2
TO $3 RIGHT, AND THAT'S AN ATM
FOR A TRADITIONAL BANK. AND
YOU'RE TAKING OUT YOUR OWN
MONEY. YOU HAVE THIS EXACT SAME
THING WHERE YOU'RE EXCHANGING
ONLINE, WHICH IS 2. AND IS THERE
ANY DISTINCTION BETWEEN WHAT'S
HAPPENING ONLINE FOR 2% AND
WHAT'S HAPPENING AT THE KIOSKS?
RIGHT NOW DISTINCTION AS IN
WHAT'S ACTUALLY HAPPENING LIKE
WHAT SOMEONE'S DOING? YEAH, I
MEAN, THEY THINK CASH RIGHT,
GETTING IT FROM THE FACT THAT
YOU DON'T HAVE TO HAVE A BANK
ACCOUNT. YOU CAN DO IT IN CASH.
AND SO IT'S A IT'S A
CONVENIENCE. KIND OF LIKE YOU
BUY AIRPODS AT THE AIRPORT,
RIGHT? BECAUSE YOU FORGOT YOURS
. YOUR CHARGE CONVENIENCE FEE
FOR THAT TO HAPPEN IN THE MOMENT
. UM A LOT OF FOLKS THAT ARE
LOOKING TO MAKE THESE PURCHASES.
WANT THEM DONE IN A QUICK,
EXPEDIENT WAY, AND SO THIS
ALLOWS THEM TO DO THAT. AND
ALLOWS THEM TO DO THAT WITH
CASH. SO THAT'S NOT SOMETHING
THAT IS DONE ON AN ONLINE
EXCHANGE, FOR EXAMPLE, OKAY? AND
THEN AND THEN. WHY DID YOU? WHY
DO WE? WHY ARE YOU INTRODUCING
THE DAILY CAP? FOR FRAUD REASONS
. I MEAN, SO AS AS I STATED IN
MY COMMENTS, RIGHT, WE HAVE
FOUND THERE WAS RECENTLY A TIMES
ARTICLE. UM THAT TALKED ABOUT
SOMEONE THAT JUST TOOK OUT
$75,000 IN CASH. AND THEN THAT
WENT TO THE FRAUDSTERS ABROAD.
SO IF YOU HAVE A CAP, THEN YOU
WON'T HAVE COMMUNITIES AND RIGHT
NOW, A LOT OF OUR ELDER
COMMUNITIES HAVE BEEN FALLEN
VICTIM OF ABUSE OF SAYING TAKE
THIS CASH. PUT IT IN THIS THING
AT YOU KNOW THIS GAS STATION AND
THEN THEY LOSE THEIR MONEY. SO
IT'S REALLY THE $1000 DAILY.
IT'S A DAILY $1000 TO EXCHANGE
RIGHT FROM CASH TO THE CURRENCY
IS REALLY THERE FOR FRAUD
PURPOSES, AND WE KNOW THAT THE
FBI AND D E. A UM, ALSO HAVE
BEEN LOOKING INTO CASES BECAUSE
WHEN YOU'RE DOING ALL CASH
TRANSACTIONS, THEY'RE JUST TENDS
TO BE MORE FRAUD. AND SO IT'S
JUST YEAH, FOR THE CONSUMER.
IT'S ALL IT'S VERY TIMELY. I
JUST DID IT. WE DID A VIRTUAL
TOWN HALL ON CRYPTO FRAUD. I
SHOULD HAVE PAID CLOSER
ATTENTION. UM BUT AND THEN I
KNOW AND THEN THE OPPOSITION'S
RESPONSE HAS SAID THAT IT
ACTUALLY IS NOT GOING TO
ACCOMPLISHED THE GOAL OF
MITIGATING FRAUD. IN FACT, YOU
THINK IT COULD EXACERBATE FRAUD.
CAN YOU HELP US UNDERSTAND WHY
YOU THINK THAT HAPPY TO
ELABORATE ON THAT? SO, UM WITH
REGARD TO SUSPICIOUS ACTIVITY
REPORTS OR SARS MANDATORY FILING
OF THE ACTIVITY SUSPICIOUS AND
OR UNUSUAL AND WHERE THE
UNDERLYING AMOUNT IS $2000 OR
MORE SO FOR CAPPING IT AT 1000,
AND WE HAVE SMALLER
TRANSACTIONS. THERE MAY BE A
SITUATION WHERE THAT OPERATOR IS
NOT COMPELLED TO FILE A SAR FOR
THAT SUSPICIOUS ACTIVITY.
THERE'S ALSO OTHER THRESHOLDS
SAID AT THE FEDERAL LEVEL, AND
THIS IS WHERE IT GETS KIND OF
TRICKY IF WE'RE GONNA DO AT THE
STATE LEVEL, WHERE IT'S ALREADY
BEEN ESTABLISHED AT THE FEDERAL
LEVEL, THROUGH EXAM CYCLES AND
HARD AND FAST RULES FROM
GOVERNMENT, SO FOR EXAMPLE, AT
$3000, OR MORE THE OPERATOR IS
OBLIGATED TO COLLECT THE SOCIAL
SECURITY NUMBER OF THAT
PARTICULAR CUSTOMER FOR RECORD
KEEPING AND PROTECTS PURPOSES
AND REPORTING SO CALIFORNIA
WOULD NOT HAVE THE BENEFIT THAT
INFORMATION TO THE TAX
AUTHORITIES TO FOLLOW UP ON.
THERE WAS A REPORT DONE BY CHAIN
ANALYSIS, WHICH IS THE MAJOR
NEWS OR THE THEY DO ALL THE DATA
AND RESEARCH FOR THE INDUSTRY
AND GOVERNMENT USES THEM AS
WELL. UM FOUND THAT ONLY 1% OF
FRAUD, AS YOU MENTIONED IS USING
A KIOSK BECAUSE THINK ABOUT IT
IF YOU ARE, YOU KNOW YOU'RE
GOING TO LAUNDER MONEY. YOU'RE
NOT GOING INTO A WELL LIT, YOU
KNOW, CONVENIENCE STORE WHERE
YOU'RE ON CAMERA. YOU KNOW, THE
OPERATOR REQUIRES YOU TO ENTER.
YOUR PHONE NUMBER REQUIRES YOU
TO ENTER A NUMBER OF PIECES OF
PERSONAL INFORMATION. UM SO
THERE IS, YOU KNOW, THERE ARE A
LOT OF LAYERS THAT PROTECT
AGAINST FRAUD AND MAKE IT SO
THAT WE CAN WORK WITH LAW
ENFORCEMENT TO CATCH THOSE BAD
ACTORS. SO AGAIN, OUR THAT'S OUR
CONCERN THAT IF YOU LOWER OF
THAT AMOUNT. LESS INFORMATION
WILL BE COLLECTED TO CATCH THE
FRAUDSTER IF THAT DOESN'T IN
FACT HAPPEN. UNDERSTOOD SO RIGHT
? I THINK I HEAR YOU SAYING THAT
THERE MAY BE SOME KIND OF
INTERACTIONS WITH OTHER EXISTING
REGULATIONS THAT. PERHAPS THE
YOU KNOW OTHER CAN WORK WITH YOU
TO JUST TO BE CLEAR THEY'RE
COLLECTING INFORMATION ABOUT THE
VICTIMS, NOT THE PERPETRATOR, SO
I JUST WANT TO BE CLEAR AND ALSO
AT THE 1000. THERE IS NOTHING
STOPPING THEM FROM CONTINUING TO
COLLECT THE INFORMATION ON A
VOLUNTARY BASIS. AND THE 3000 IN
THE 2000 MENTIONED ALSO COULD BE
AGGREGATE. SO THIS IS 1000 PER
DAY. SO IF YOU'RE GOING IN THERE
AT THE 3000 MARK, YOU COULD
TRIGGER THAT. SENATOR WOULD YOUR
WITNESS ALSO LIKE RESPONDING? I
WOULD LIKE TO JUMP BACK
ASSEMBLYMEMBER'S PETRIE-NORRIS
TO THE PERCENTAGE TRANSACTION.
IT IS OUR VIEW AND THE CONSUMER
COMMUNITY THAT IF SOMEONE WANTS
$1000 IN BITCOIN, THEY SHOULD
NOT HAVE TO PAY $300 OR $250 PER
TRANSACTION. AS A CONVENIENCE
FEE. THOSE SEEM TO BE TO US
OUTRAGEOUS SUMS. I PERSONALLY
DON'T LOVE 10% WHICH TRANSLATES
TO $100. BUT REMEMBER, AS THE
SENATOR SAID IT STARTED OUT AT
2% AND SO I THINK YOU HAVE TO
USE KIND OF A REASONABLE TEST
HERE AGAIN. REMEMBER THESE ARE
KIOSKS THAT OVERWHELMINGLY TEND
TO BE IN COMMUNITIES WHERE
THERE'S A LOWER LEVEL OF
INFORMATION ABOUT CRYPTO.
ACCORDING TO LAW ENFORCEMENT.
THOSE ARE THE COMMUNITIES THAT
TEND TO HAVE BEEN TARGETED MORE.
I'M NOT SAYING ALL OF THOSE ARE
HAPPENING AT CRYPTO CHAOS, BUT
THAT'S THE CONTEXT THAT I THINK
IS REALLY IMPORTANT FOR THOSE OF
US IN THE CONSUMER ADVOCACY
COMMUNITY FOR MEMBERS TO BEAR IN
MIND. THANK YOU.
ASSEMBLYMEMBER'S SIMILAR MEMBER
OF WILSON. THANK YOU. THANK YOU
. AND I APPRECIATE THE CONTEXT
THAT WE JUST HEARD AND IN REGARD
TO THAT, UM, WHERE ARE THE KEY
OSCAR LOCATED ARE LOCATED IN
AREAS. WHERE THE PEOPLE TEND TO
BE TARGETED, RIGHT? AND SO THIS
IS AN AVENUE TO USE IT BECAUSE
IT IS BY VIRTUE CHEAPER TO DO
THINGS ONLINE. JUST LIKE IF I GO
TO MY BANK AND I TRANSFER I USE
TRANSFER MONEY. YOU KNOW, ON MY
ONLINE APP. IT COSTS ME NOTHING
IF I DO THOSE KIND OF THINGS
THAT ARE 80 M, I'M MORE LIKELY
TO HAVE TO PAY A TRANSACTION FEE
TO BE ABLE TO DO. THOSE THINGS
AND SO, UM BUT AT THE SAME TIME
ON WHEN WE'RE TALKING ABOUT A T
M'S AND CHAOS MOST OF THE TIME
THERE, UM THERE'S NOT IN STATUTE
REGULATION OF A PERCENT OR WHAT
THE TRANSACTION FEE CAN BE. YOU
KNOW, SOMETIMES IF I'M AT, YOU
KNOW A REGULAR BANK IN MY
NEIGHBORHOOD. I MIGHT PAY $3. IF
I USE AN OUT OF NETWORK.
HOWEVER, I GO TO A HOTEL OR HAVE
I GO? YOU KNOW TO SOME, YOU
KNOW, RANDOM PLACE. I PAY A LOT
MORE RIGHT AND THERE'S NOTHING
IN STATUTE DID SAY THAT. I
WONDER WHY WE WOULD PUT IN
STATUTE. UM. THE COSTS RELATED
TO THIS KIOSK, AND I READ THE
ANALYSIS AND SAW THAT, BUT I'M
STILL STRUGGLING EVEN WITH THE
BACK AND FORTH. AND WHY THERE'S
A NEED, UM, TO BE ABLE TO DO THE
TRANSACTION. BE PART I DO GET
THE DOLLAR AMOUNT. UM WHICH
HELPS, YOU KNOW, MITIGATE
POTENTIAL FRAUD OR OR ABUSE? UM
BUT I DON'T SEE THE FACT THAT
THE COST OF BUSINESS AND THE
VOLATILITY THAT WE ALREADY SEE
WITH CRYPTO CURRENCY UM AND NOT
REALIZING YOU KNOW THE IMPACT
THAT IT COULD HAVE WITH
PROVIDING CASH OR NOT, THAT THAT
WOULD THAT COST BURDEN WOULD BE
ON TO THE CONSUMER WHO'S DOING A
VOLUNTARY TRANSACTION. IT'S NOT
LIKE YOU HAVE TO DO YOU HAVE TO
BUY THIS INVESTMENT. IT'S NOT
LIKE YOU LIKE A TÌM. EVEN WHERE
YOU HAVE. IT'S YOUR MONEY. IT'S
CASH IN THE BANK, AND YOU NEED
ACCESS TO YOUR MONEY. AND THAT
SEEMS LIKE WE WOULD REGULATE
THAT EVEN MORE THAN THIS BECAUSE
I HAVE TO ACCESS MY MONEY,
RIGHT? UM TO BE ABLE TO LIVE
VERSUS DO A VOLUNTARY
TRANSACTIONS. I'D LIKE TO
UNDERSTAND THAT MORE BECAUSE
THAT'S THE PIECE THAT I STRUGGLE
WITH. UM ON THIS PARTICULAR BILL
IS RELATED TO THE PERCENT. YES
SO WE ACTUALLY DO HAVE SOME
THINGS IN LAW, SO WE HAVE LAWS
ON FEE CAPS. EXAMPLE FOR EXAMPLE
, ON CHECKING AH, CASHIER'S
CHECKS. UM SO WE CAP THAT AT
3.5% SO YOU KNOW YOU HAVE YOU'RE
ABLE TO DO IT WITH NO PHOTO I D
AND ONLY 3% OF, YOU KNOW
CUSTOMERS. UM UH, WITH WITH USER
PHOTO I D. DID I SAY THAT RIGHT?
NO HOLD ON THE CAP IS 3.5% SO
THAT IS JUST ONE EXAMPLE OF
SOMETHING WHERE WE DO HAVE IT IN
LAW AND WE'VE PUT IT AND MOST OF
THE TIME WHEN WE DO DECIDE TO
PUT SOMETHING I THINK INTO LAW
IS WITH SOME EVIDENCE THAT
THERE'S A REASON TO. AND SO I
THINK FOR ME, YOU KNOW, THE
REASON THAT KIND OF HAS LED ME
TO THIS IS THAT THE FRAUD I
THINK WE PROBABLY COULD DEBATE
WHAT? WHETHER 1% OF FRAUD IS,
YOU KNOW IF YOU KNOW WHETHER IT
REALLY IS 1% OF FRAUD OR NOT,
BUT SOME OF THE TYPES OF FRAUD
THAT ARE BEING COMMITTED, I
THINK ALSO, UM, SPEAK TO REALLY
THERE ARE GLOBAL, YOU KNOW,
THERE ARE GLOBAL CONCERNS
NATIONAL CONCERNS STATE CONCERNS
ABOUT HOW AND WHERE SOME HOW
THESE MACHINES ARE BEING USED TO
TRAFFIC. AND SO I THINK, UM IT
MERITS LOOKING AT OTHER SPACES
THAT WE HAVE, UM, WHERE WE HAVE
PUT PIECES IN LAW. TO CAP THAT.
SO I JUST TO CLARIFY, SO THERE'S
A THERE'S IN STATUTE. WE HAVE AN
EXAMPLE OF IN STATUTE FOR
CASHIER'S CHECK, BUT NOT RELATED
TO THE CLOSEST TYPE OF THING.
KIOSK OF ATMS. CASHIER'S CHECK
WELL IN IN IN STATUE, I WILL SAY
THAT I YOU KNOW, I'VE HAD BILLS
ON A T M V S, UM SO YOU KNOW,
IT'S CERTAINLY I THINK A
LEGISLATIVE CONVERSATION. UM YOU
KNOW, WE HAVEN'T HAD WE DON'T
HAVE ANYTHING LAW VERSUS WE'VE
HAD INTRODUCTIONS OF BILLS
RELATED TO 18. BUT WE DON'T HAVE
ANYTHING WRONG, YOU KNOW? LIFE.
WE WE'VE CERTAINLY HEARD. YOU
KNOW, OUR PRESIDENT TALKED ABOUT
ATM V S, AND YOU KNOW BROADER
FEES, UM AS A WHOLE, AND THEN
THINKING ABOUT FRAUD, AS YOU
TALKED ABOUT IN RESPONSE THE, UM
CAN YOU TALK TO ME ABOUT HOW
FRAUD RELATES TO THE PERCENT OF
THE FREE RELATED TO THE KIOSK
BECAUSE I GET IT TO THE AMOUNT
IN DOLLARS, BUT I'M NOT SEEING
THE CONNECTION WHEN TALKING
ABOUT THIS IS USED TO PREVENT
FRAUD AS A RELATE TO THE PERCENT
THAT IT COST. TO THAT YOU'RE
PAYING IN THIS CONVENIENCE FEE.
SO ARE YOU SAYING THAT THE KIOSK
COMPANIES ARE COMMITTING FRAUD?
NO OKAY. THINK THAT YOU KNOW FOR
ME. THE FRAUD IS THE TECHNOLOGY
IS BEING USED FOR FRAUD BY SOME
, NOT UNLIKE ONLINE OR ANYTHING
ELSE. AND SO I THINK WHEN YOU
LOOK AT PIECES THAT ARE
IMPORTANT FOR CONSUMERS TO BE
PROTECTED FROM FRAUD. I THINK
YOU YOU'RE LOOKING, UM AT THE
TRANSACTION FEE, BUT ALSO AS A
CONSUMER PROTECTION. GENERALLY
SPEAKING THE FEE FOR THE
TRANSACTION, THE SERVICE FEE. I
THINK IT'S ALSO REALLY IMPORTANT
. SO LOSING 300, YOU KNOW
DOLLARS TO $1000 YOU KNOW,
TRANSACTION IS, I THINK PRETTY
HEFTY, SO I THINK THAT THIS IS
MORE OF A BROADER CONVERSATION
ABOUT WHERE WE LAND ON BETTER
CONSUMER. I THINK USE, UH, AND
SO FOR ME, I THINK THAT WHEN YOU
LOOK AT 10% I THINK THAT THAT
SEEMS REASONABLE FOR A SERVICE
FEE. TO EXCHANGE DOLLARS. AND I
THINK THAT YOU KNOW IF YOU LOOK
AT OTHER PLACES WHERE WE DO HAVE
FEES. WE TALKED QUITE A BIT
ABOUT LOANS. FOR EXAMPLE, THAT
IS YOU TALKED ABOUT YOUR OWN
MONEY. YOU'RE BORROWING AND YOU
MAY NOT GET THAT MONEY BACK.
THAT IS NOT A RISK INHERENT IN
THIS PARTICULAR TECHNOLOGY. AND
SO WITHOUT THAT RISK, I'M NOT
SURE WHY WE WOULD WANT A HIGHER
TRANSACTION SERVICE FEE. I GUESS
WHAT I LOOK AT THE SERVICE WE UM
, AND THE BIG STICKING POINT FOR
ME IS THE COST OF DOING BUSINESS
. AND SO TYPICALLY, THAT COST OF
DOING BUSINESS IS ROLLED OVER TO
THE CONSUMER. UM AND SO YOU DO
HAVE, UM SO THAT THAT THAT PART
OF IT IS A CONCERN IS THAT THE
CONVENIENCE FEAR OR WHATEVER
SHOULD SHOULD BE RELATED TO THE
COST OF DOING BUSINESS AND THE
RISK INHERENT AND, UM, VOLATILE
, UM, AND A RISK INHERENT IN
DOING BUSINESS, WHICH, IN THIS
PARTICULAR CASE, CRYPTO CURRENCY
IS STILL A PRETTY VOLATILE BEAR.
UH, UM, BUSINESS AND THE AMOUNT
OF THERE IS NO BACKING. IT'S A
BLOCKCHAIN, RIGHT? BUT THEN
THERE IS A REQUIREMENT TO HAVE
SO MUCH CASH IF YOU'RE RECEIVING
CASH AND GIVING CASH BECAUSE I
KNOW SOME OF THE KEY OSCAR ALL
ABOUT PURCHASING INVESTMENTS AND
NOT NECESSARILY GIVING CASH
BACK. BUT SOME VERY MUCH ARE AND
I DON'T KNOW THE PERCENTAGE
BREAKUP BETWEEN THE TWO BUT ARE
ABOUT GIVING CASH. SO I'M STILL
CONCERNED ABOUT THE TRANSIT. I
DID. THE OTHER MEASURES MAKES
SENSE TO ME IN TERMS OF CONSUMER
PROTECTION, BUT IN THIS WHEN WE
DON'T SEE IT IN OTHER PLACES,
AND I THINK THAT TWO CASHIER'S
CHECK IT SLIGHTLY DIFFERENT
BECAUSE I'M ONLY DOING IS TAKING
CASH AND I'M GIVING YOU AND
YOU'RE GETTING THE ABILITY TO
USE CASH BACK. THERE'S ONLY SO
MUCH, UM INHERENT IN THAT, SO I
DON'T CONSIDER THAT AN APPLES TO
APPLES COMPARISON IN THIS CASE,
BUT I APPRECIATE YOUR
WILLINGNESS TO LEGISLATE IN THIS
SPACE, AND I APPRECIATE THE FACT
THAT THIS IS OF AUTO MARKET AND
BEING ABLE TO WEIGH IN AND TRY
TO FIGURE OUT LIKE WHAT'S THE
WAY TO PROTECT CONSUMERS BECAUSE
IT IS SUCH A GOOD THING THAT
MOST PEOPLE DON'T UNDERSTAND.
AND I'LL BE HONEST. I DON'T
EVERY EVERY TIME I TRY TO WRAP
MY BRAIN AROUND CRYPTOCURRENCY.
IT'S A NEW THING COMES UP THEN,
LIKE I COMPLETELY DO NOT
UNDERSTAND. THIS MEDIUM, BUT, UM
, THANK YOU. I JUST WANTED TO
SHOW MY APPRECIATION FOR THAT.
BUT THAT IS A THAT THAT THAT
PERCENTAGE FEE THAT, UM THE
TRANSACTION FEE IS LIKE A
STICKING POINT FOR ME. IT
CONCERNS ME THAT YOU KNOW
THERE'S A COST OF DOING BUSINESS
, BUT I ALSO HAVEN'T SEEN FROM
THE OPPOSITION IN THIS REGARD.
UM WHAT IT COSTS TO DO IT, AND
IT'S HARD TO LOOK UP. WHAT WHAT
THE WHAT THE REAL COST IS AND
HOW THAT CHANGES SO IT JUST
SEEMS, YOU KNOW A BIT ODD TO
REGULATE THAT PARTICULAR PIECE
OF IT WELL, AND I JUST WILL SAY
THAT THERE ARE YOU KNOW THERE
ARE FOLKS WHO DO IT AT THE
PERCENTAGE THAT WE HAVE IT. SO I
THINK THAT THAT THIS IS NOT A
BILL ELIMINATING THEM. AND SO I
THINK TO THE TO THE QUESTION
ABOUT WHAT IT COSTS. I THINK
THAT THAT'S YOU KNOW, A FAIR
QUESTION. A FAIR THING TO BRING
UP BUT WE ALSO KNOW THAT THERE
ARE FOLKS WHO DO IT SO CLEARLY
THERE IS SOME LENIENCY IF THERE
ARE FOLKS THAT ARE ALREADY IN
THE INDUSTRY THAT CAN DO IT AT
THAT PERCENT. UM THEN IT BEGS.
PROBABLY A DIFFERENT QUESTION.
UM ABOUT WHY IT'S COSTING SOME
SO MUCH MORE THAN WHAT IT COSTS
THE FOLKS ASSEMBLYMEMBER'S
BARRACK CAMP. THANK YOU. AND I
APOLOGIZE THAT I WASN'T HERE FOR
YOUR PRESENTATION, SENATOR, UM,
STARTING LATE, BUT GLAD TO BE
HERE FOR THE CONVERSATION. UM SO
I'M GONNA PICK IT BACK ON A
QUESTION FROM OUR COLLEAGUE FROM
IRVINE. UM I GUESS I'M A LITTLE
CONFUSED. I SEE ONLY TWO
PURPOSES FOR THESE KIOSKS. TO
ME. MONEY LAUNDERING IS VERY
CLEAR ONE AND I JUST WANT TO BE
BLACK AND WHITE ABOUT THAT, THAT
IF I HAVE A BUNCH OF CASH THAT'S
ILLEGAL. THE EASIEST WAY TO
HANDLE IT WOULD BE IT APPEAR TO
SHOW UP AT A KIOSK WHERE I CAN
GIVE CASH RATHER THAN DO IT ON
THE INTERNET, WHERE THERE'S A
TON OF WHERE THERE'S A TRAIL, SO
I WOULD ASSUME, AS NOTED IN THE
ANALYSIS THAT MONEY LAUNDERING
IS A HUGE PIECE OF THIS AND THE
FACT THAT THESE COMPANIES ARE,
UM AND YOU SAY NO, BUT WE DON'T
I DON'T KNOW THAT. YOU KNOW THAT
TO BE FRANK WITH YOU. I MEAN,
YOU SAY YOU IT'S 1% OF FRAUD,
BUT I DON'T KNOW THAT YOU
ACTUALLY KNOW WHERE THE SOURCES
OF EVERY DOLLAR THAT'S COMING
INTO YOUR KIOSKS ARE BUT MAYBE
I'M WRONG. MOST OPERATORS. THEY
AT EVERY TRANSACTION, THEY WILL
GET THE PERSON'S PHONE NUMBER.
THEY HAVE FOOTAGE OF THEM. UM SO
WITH JUST THEIR PHONE NUMBER,
THEY'RE ABLE TO GET THEIR NAME
AND THEIR ADDRESS. UM SO AGAIN.
THAT'S WHY YOU HAVE FOUND THAT
WHERE THE DATA IS ON MONEY
LAUNDERING. IT IS NOT IN THESE.
THERE'S A LOT OF RISK FOR MONEY
LAUNDER TO SHOW UP IN PERSON TO
HAVE TO SHOW THEIR I D. UM AND
TO LAUNDER MONEY, BECAUSE YOU
KNOW, LAW ENFORCEMENT IS MORE
YOU KNOW, THEY CAN MORE EASILY
TRACKED THEM DOWN BY THE MINE.
SO THAT'S REALLY WHY YOU HAVEN'T
THERE ARE INSTANCES OF COURSE,
AND I THINK WHEN THEY FIRST
STARTED, UM YOU KNOW, MAYBE 56
YEARS AGO, THIS WAS MORE OF A
CONCERN, BUT BECAUSE OF THE
AMOUNT OF DUE DILIGENCE THAT HAS
GONE INTO Kò C PROTOCOLS WHEN IT
COMES TO THESE OPERATIONS THAT
WERE WILLING TO CODIFY THAT
THOSE WERE AMENDMENTS. UM YOU
YOU ACTUALLY DON'T SEE A LOT OF
IT. I MEAN, I KNOW IT'S YOU
KNOW, YOU THINK CASH. SO YOU
JUST THINK THAT ACTOR BUT UM
BECAUSE OF THE AMOUNT OF
INFORMATION THAT'S COLLECTED,
IT'S NOT. IT'S NOT AN ISSUE. I
MEAN, I WOULD I WOULD QUERY
GIVEN THAT HANDING CASH OVER TO
GET BITCOIN. HOW MUCH WE KNOW
ABOUT THE SOURCE OF THIS CASH
AND I DON'T KNOW THEY'RE HAVING
SOMEONE'S PHONE NUMBER TELLS US
WHETHER OR NOT THEY WERE
ENGAGING IN HUMAN TRAFFICKING TO
GET THAT MONEY OR SOME OTHER
THING, WE WANT TO STOP AND I
DON'T KNOW THAT WE HAVE THE
INFORMATION TO BE FRANK WITH YOU
TO KNOW FOR SURE. BUT ANYWAYS,
THE I MEAN, THE OTHER THING THAT
THE ANALYSIS SITES, I THINK IS
THIS DEMOCRATIZATION OF FINANCE
THAT REALLY HAS SOMETHING THAT'S
BEEN HELD UP BY CRYPTOCURRENCY
OVER THE YEARS, AND I GUESS
THAT'S WHERE I UNDERSTAND WHERE
THE AUTHOR IS COMING FROM IS IF
WHAT WE'RE TRYING TO DO HERE IS
DEMOCRATIZED, THEN WE ARE LIKELY
TARGETING THESE KIOSKS TO
INDIVIDUALS WHO IN MY COURSE AT
THE TIME, BOTH BUT THE SENATOR
AS CHAIR AND THIS CURRENT CHAIR,
WE'VE WORKED HARD TO ENSURE THAT
THOSE LOW INCOME UNBANKED
COMMUNITIES ARE NOT BEING THE
SUBJECTS PREDATION, AND THAT, I
THINK IS THE CRUX OF WHAT SHE'S
TRYING TO DO WITH THESE, UM THE
CAPS ON PERCENTAGE AND OTHERWISE
, 10% SEEMS INCREDIBLY DOABLE TO
ME AGAIN, LOOKING AT WHAT ATMS
THAT HAVE TO HAVE A PHYSICAL
PRESENCE AS WELL CHARGED $20.
THAT'S $2 LIKE THAT SEEMS PLENTY
. I JUST THINK AND AGAIN GOES UP
FROM THERE, SO I GUESS I'M
CONFUSED IF WHAT IS HAPPENING
HERE IS TO MONEY LAUNDERING
ILLEGAL ACTIVITY THAT I DON'T
WANT IT TO HAPPEN IF WHAT IS
HAPPENING IS THE DEMOCRATIZATION
AND ACCESS BY LOW INCOME
CALIFORNIANS AND I WANT THEM TO
HAVE THE PROTECTIONS OF NOT
BEING TAKEN ADVANTAGE OF WITH
HIGH USURY PERCENTAGES ON WHAT
SHOULD BE TO THE SENATORS POINT
JUST LENIENCE VÆ. SO I SUPPORT
THIS, BUT JUST WANTED TO OPEN
THAT UP, BECAUSE I GUESS FROM
EVERYTHING I'M HEARING THAT
SEEMS TO BE WHAT'S GOING ON
HERE. THANK YOU ASSEMBLYMEMBER'S
ANY OTHER QUESTIONS OR CONCERNS?
SEEING NONE. SENATOR. THE MOON.
WOULD YOU LIKE TO GIVE A CLOSING
STATEMENT? YOU KNOW, I
APPRECIATE THE CONVERSATION AND
DIALOGUE AND CERTAINLY WE'VE
BEEN AT IT. UM YOU KNOW, I THINK
TRYING TO TALK ABOUT JUST CRYPTO
CONSUMER PROTECTIONS FOR QUITE
SOME TIME. UM AND I THINK IT'S
YOU KNOW, FOR ME. THIS IS
IMPORTANT. UM CERTAINLY BECAUSE
YOU KNOW, WE NOW UNDERSTAND. AND
AS EACH YEAR GOES BY, WE ALL
HAVE CONSTITUENTS IN OUR
DISTRICT WHO, UH, FIND
THEMSELVES, YOU KNOW, THROUGH
FRAUD AND SO LIKE ANYTHING ELSE,
WE LOOK AT WAYS THAT WE CAN
ENSURE WE MINIMIZE THAT HARM AND
THAT IMPACT. UM AND SO THAT ALSO
MEANS THAT WE PUT SOME LIMIT
BOOSTERS AND BROWN GREASE. YOU
KNOW, SOME BELTS AND SUSPENDERS
AROUND SOME OF THE THINGS YOU
KNOW THE ITEMS THAT ARE OUT
THERE, WHETHER IT'S TECHNOLOGY
OR WHETHER IT'S TRANSACTIONS,
AND SO WITH THAT, YOU KNOW, I DO
ASK FOR RESPECTFULLY ASKED FOR
AN I VOTE TO SUPPORT SB 401.
THANK YOU VERY MUCH, SENATOR AND
I DO WANT TO STATE THAT, UH,
THANK YOU FOR BRINGING THIS
MEASURE FORWARD. AND YOU, YOU
AND I HAVE WORKED EXTENSIVELY ON
THIS SUBJECT ON IN MULTIPLE
AREAS, AND YOU'VE BEEN AN
EXCELLENT PARTNER. SO WITH THAT
I'M LOOKING FOR IN SO WE HAVE A
MOTION FROM SIMILAR MEMBER OF
BARRICADES SECOND FROM SOME OF
THE MEMBERS CERVANTES, WE DO
HAVE EMOTIONS. SECOND SECRETARY
PLEASE CALL THE ROLL SP 401. THE
MOTION IS DUE PASS AS A MINUTE
AND REFERRED TO COMMITTEE ON
APPROPRIATIONS. GRAYSON AND I,
CHEN. CHEN NO. FARRAKHAN MARICON
I, CERVANTES CERVANTES, I
DICKSON DICKSON. NO MIKE FONG,
MY PHONE I GABRIEL PETRIE-NORRIS
PETRIE-NORRIS SORIA. SORRY, I
WALDRON WALDRON, NO WIGS.
WILSON. WILSON. I SEVEN VOTES.
BILL HAS SEVEN VOTES. WE WILL
KEEP IT OPEN FOR ABSENT MEMBERS.
IT DOES GET OUT OF THE
COMMITTEE.
DEBATED. EXACTLY BECAUSE I THINK
SOMETHING. QUÊ DO YOU THINK YOU
THE WORLD. I JUST SAY NO. YEAH.
THANK YOU. SECRETARY WILL YOU
REOPEN ROLE? SP 401. THE MOTIONS
DO PASSES A MINUTE REFERRED TO
COMMITTEE ON APPROPRIATIONS.
GABRIEL WIX WIX I AS A BOATS.
BILL HAS EIGHT VOTES. IT GETS
OUT AND OUT OF THIS COMMITTEE
AND WE HAVE COMPLETED OUR AGENDA
FOR TODAY'S HEARING. WE WILL BE
MOVING ON AND ADJOURNING THIS
MEETING.
I FEEL LIKE. THIS IS LIKE YEAH.
YEAH. BEAUTIFUL.