On March 11, South Dakota Governor Larry Rhoden signed Senate Bill 98, a new law that brings virtual currency kiosk operators within the state’s money transmission licensing framework and imposes a series of anti-fraud and consumer-protection requirements.
The law applies to businesses operating virtual currency kiosks and to certain in-person payment arrangements used to complete virtual currency transactions. It also treats a “virtual currency transaction” as a form of money transmission and adds these kiosk-specific obligations on top of South Dakota’s existing money transmission licensing framework.
Key provisions include:
- Licensure and reporting requirements. Operators must hold a money transmission license, and licensees must provide expanded renewal and condition reports that include kiosk transaction volume, revenue, complaints, refund activity, kiosk locations, and suspicious activity report data.
- Refund requirements. A licensee must issue a full refund, including charges, to a user who was the victim of a fraudulent virtual currency transaction if the user satisfies the statute’s reporting and documentation requirements, and the refund must be issued within 72 hours after those conditions are met.
- Transaction and fee limits. The law requires a daily transaction cap of no more than $1,000 per user and a 30-day cap of no more than $10,000 per user, and it prohibits affiliated kiosks, online portals, or over-the-counter channels from being used to evade those limits. It also caps charges at three percent of the transaction amount.
- Disclosures and customer service. Operators must provide fraud-related disclosures and warnings, display reporting information for law enforcement and government agencies, maintain live customer service lines between 8:00 a.m. and 10:00 p.m. local time, and provide a dedicated line or email address for law enforcement and regulatory communications.
- Compliance controls. Licensees must maintain a written anti-fraud policy, comply with the Bank Secrecy Act, use blockchain analytics software to identify and block certain high-risk wallet addresses, and verify customer identity with government-issued identification and additional personal information before accepting payment.
Putting It Into Practice: Virtual currency kiosk licensure has become an increasingly active area of focus for states in recent months (previously discussed here and here). Companies with multistate kiosk operations should review whether their licensing, fee practices, customer service protocols, fraud response procedures, transaction monitoring tools, and identity verification controls can be adapted to a more prescriptive state-by-state framework.
