Illinois Introduces New Legislation to Regulate Fintech and Strengthen Consumer Financial Protection

Illinois announces new consumer protections for digital assets; proposes new money transmitter licensing provisions.

Illinois Department of Financial and Professional Regulation (IDFPR) announced new legislative initiatives on February 21, 2023, to regulate and protect cryptocurrencies and other digital assets. The Fintech-Digital Asset Bill, also known as HB 3479, aims to create the Uniform Money Transmission Modernization Act and regulate digital asset businesses while modernizing money transmission regulations in the state. This new legislation requires digital asset exchanges and other digital asset businesses to obtain a license from IDFPR to operate in Illinois.

The bill also sets various requirements for businesses, including investment disclosures, customer asset safeguards, and customer service standards. In addition, companies are required to implement cybersecurity measures and have procedures for addressing business continuity, fraud, and money laundering. The Fintech-Digital Asset Bill replaces and supersedes the Transmitters of Money Act, which harmonizes the licensing, regulation, and supervision of money transmitters operating across state lines.

The new legislation also allows for the creation of trust companies to act as a fiduciary to safeguard customers’ digital assets. The Corporate Fiduciary Act has been amended to enable this provision. This will give more confidence to customers who are worried about the safety of their digital assets.

The Consumer Financial Protection Bill, also known as HB 3483, empowers IDFPR to enforce the Fintech-Digital Asset Bill and strengthen the department’s authority and resources for enforcing existing consumer financial protections. This bill is modeled after the Dodd-Frank Act, and it gives IDFPR the ability to target unfair, deceptive, and abusive acts and practices by unlicensed financial services providers.

The Consumer Financial Protection Bill creates the Consumer Financial Protection Law and the Financial Protection Fund. It establishes provisions related to supervision, registration requirements, consumer protection, cybersecurity, anti-fraud and anti-money laundering, enforcement, procedures, and rulemaking. The bill also includes provisions concerning court orders, penalty of perjury, character and fitness of licensees, and consent orders and settlement agreements. Amendments to various application, license, and examination fees are made to the Collection Agency Act, Currency Exchange Act, Sales Finance Agency Act, Debt Management Service Act, Consumer Installment Loan Act, and Debt Settlement Consumer Protection Act.

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