California Passes Bill To Regulate And License Crypto Firms
California’s state legislature has passed a bill that requires crypto firms to have a license of operation in the state. The bill was passed in the upper and lower houses of the legislature and is now awaiting passage or a veto from Governor Gavin Newsom.
The Digital Financial Assets Law, a bill potentially requiring crypto service providers to register before operating in California has been passed by the California State Senate this week. The bill was approved the following day in the California State Assembly. The bill is now in the hands of Governor Gavin Newsom, who will either veto it or set the bill in motion.
Details Of The Bill
If passed, the bill would amend the state’s financial code, bringing virtual assets under its purview from January 2025. The bill states that anyone engaging in “digital financial asset business activity” would have to obtain a license from California’s Department of Financial Protection and Innovation before being able to operate legally. If not followed, firms could face a civil penalty of up to $100,00 per day, for each day in violation of the law.
The bill was introduced in February this year by Democratic Assembly member Timothy Grayson. The bill defines a “digital financial asset” as a “digital representation of value that is used as a medium of exchange, unit of account, or store of value, and that is not legal tender, whether or not denominated in legal tender.” Grayson said in a statement upon the bill’s passage within his chamber that:
The Legislature’s understanding is that a healthy cryptocurrency market can only exist if simple guardrails are established.
He added that he understands the excitement around cryptocurrencies and virtual assets, adding:
I’m impressed by the market’s ability to help consumers feel empowered to make financial investments and participate in a system that has, in many cases, felt closed off to them.
Grayson also stressed the risks brought on by the newness of the sector and the lack of adequate regulation:
This bill will provide consumers basic but necessary protections and will promote a healthy cryptocurrency market by making it safer for everyone.
Blockchain Association In Opposition
Advocates of the cryptocurrency industry have however spoken out in opposition to the bill. Before the bill was passed by both houses, the Blockchain Association, a cryptocurrency lobbying group, urged assembly members to reject the bill. The group instead suggested that legislators engage with the process set out in a recent executive order from Governor Newsom. According to the Blockchain Association, the bill “creates shortsighted and unhelpful restrictions that would impede crypto innovators’ ability to operate and push many out of the state.” The Association added that the bill would introduce “the same type of onerous licensing and reporting regime that has stunted the growth of the crypto industry and limited access to safe and reliable crypto products and services in New York.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.