California Gov. Gavin Newsom is set to sign a recently passed bill that would require digital asset exchanges and other crypto companies to obtain a license to operate in the state.
The Digital Financial Assets Law, dubbed California's “BitLicense,” takes after New York’s BitLicense regulation, which went into effect in 2015. The California law, if signed by Gov. Gavin Newsom, will go into effect in January 2025, according to Coindesk.
“While the newness of cryptocurrency is part of what makes investing exciting, it also makes it riskier for consumers because cryptocurrency businesses are not adequately regulated and do not have to follow many of the same rules that apply to everyone else,” Assembly Member Timothy Grayson (D-Concord), the bill's sponsor, said in a prior statement.
Among the requirements is a prohibition, which would be phased out in 2028, on California-licensed entities dealing with stablecoins, unless that stablecoin is issued by a bank or is licensed by the California Department of Financial Protection and Innovation. This is similar to a proposed but never passed bill in the US Congress that would require stablecoin issuers to have a bank charter.
Another clause in the bill's stablecoin section requires stablecoin issuers who hold securities as a reserve to have “not less than the aggregate amount of all of its outstanding stablecoins issued or sold in the United States.” In addition, the bill stipulates that the aggregate market value must be computed using the generally accepted accounting principles (GAAP) of the United States.
This is California's second attempt at creating a “BitLicense” regime. The first, in 2015, failed and was suspended after opposition from a state senator. In general, industry experts believe that the bill creates useless restrictions that will prevent California from developing in this industry, while simultaneously pushing many specialists out of the state.
Within California's assembly, the bill received 71 yes votes and zero no votes. Nine members of the assembly abstained from voting. On the Senate floor, the bill received 31 yes votes and six no votes. Newsom has until September 30 to sign or veto the bill.
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About the Author
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.