A simple stroke of a pen is the last step needed to make California one of the first states to require cryptocurrency-related businesses to obtain a special license to operate in the state.
California Assembly member Timothy Grayson introduced the bill, AB 2269, with support from the Consumer Federation of California, which will establish the Digital Financial Assets Law.
The California Senate approved AB 2269 on Monday, with the Assembly voting to approve the following day. The bill now goes before California Governor Gavin Newsom, whose signature would enact it into law.
The aim of the proposed law, Grayson says in a press release, is to protect Californians from "financial hardship and foster responsible innovation by licensing and regulating the activities of cryptocurrency exchanges," adding that the bill would require licensees to "act in the best interest of a customer when it recommends a cryptocurrency."
"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,” Grayson said in the release.
"By licensing digital financial assets companies under the Department of Financial Innovation and Protection (DFPI), the industry will receive necessary regulatory clarity, and consumers will have established protections," the Assemblymember’s office added.
According to Grayson, the bill will provide consumers basic but necessary protections, promoting a healthy market by making it safer for everyone.
"Fortune favors the balanced and wise, not just the so-called 'brave,'" said Robert Herrell, Executive Director of the Consumer Federation of California, in a prepared statement that takes a swipe at the cringe-inducing Crypto.com Super Bowl commercial starring Matt Damon. "Hundreds of millions in self-promotion from the crypto industry shouldn't overshadow the need for solid consumer protection."
Critics of the bill, including the Blockchain Association, said the bill would only stifle innovation by creating shortsighted, unhelpful restrictions inconsistent with the governor's stated vision for crypto policy in California.
"The bill's licensing provisions are designed to install 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," the Blockchain Association tweeted.
1/ California has long stood as a bastion of technological innovation, and with his recent Executive Order on #crypto, Governor @GavinNewsom committed to fostering this next wave of innovators.
However, legislation in the state Assembly threatens to undermine his pledge.