The Californian Assembly has endorsed a bill that seeks to regulate California’s crypto sector. According to reports, the bill would require crypto firms to obtain a license. Meanwhile, the bill was approved by a vote of 71-0. However, Governor Gavin Newsom has the power to approve or veto the bill.
What Does the Bill Entail?
The Digital Financial Assets Law, also called California’s “BitLicense,” is similar to the BitLicense bill of Newyork which was approved in 2015.
Meanwhile, the California crypto bill now rests on the shoulders of the Governor to approve or reject it. If Governor Newsom signs the bill, it will become effective on January 1st, 2025.
According to the legislation, all individuals or entities engaging in digital assets business activity must obtain a license from the state’s Department of Financial Protection and Innovation. Also, the Department will have the power to prosecute all unlicensed entities.
Hence, a penalty of over $100,000 daily will apply to crypto exchanges without a license. Also, if a licensed crypto entity violates any of the guidelines by the Department, a penalty of $20,0000 applies.
However, the bill received great criticism from several associations and stalwarts. Among them is the Blockchain Association, which likened the regulation to New York.
Regulation Of Stablecoin
The Blockchain Association noted that this legislation would install the same form of “draconian licensing and reporting framework” that has affected the crypto sector in New York.
Furthermore, there is another section of the bill that talks about stablecoins. A clause in this section applies to stablecoin issuers that have securities reserves. They are to have an amount equal to or more than the total amount of stablecoins sold or issued in the United States.
Also, it stated that the United States GAAP (generally accepted accounting principles) must be used to determine the aggregate market value of the stablecoins. The GAAP is a collection of accounting rules, procedures, and regulations developed by the FASB (Financial Accounting Standards Board).
According to the Blockchain Association, this bull would make it difficult for stablecoins issues to function in California. Consequently, this would affect the crypto industry’s ability to promote the state’s economic activity.
Governor Newsom Has Until September 30th to Sign or Vetoe the Bill
Meanwhile, this is the state’s second effort to enforce a “BitLicense” system. The first attempt was in 2015. However, it did not go as planned and was placed on hold due to resistance from a state lawmaker.
Within the Californian Assembly, the crypto bill got 71 yes and no opposition. Meanwhile, nine lawmakers were not part of the voting process. The bill gained 31 yes and six nos at the Senate level with six opposition from Republican lawmakers.
Governor Newsom has until September 30th to approve or veto the legislation. The crypto community can only hope that the outcome favors the sector.
Meanwhile, regulators worldwide are currently gearing up to shape the crypto regulatory framework guiding their states. Earlier this week, the Paraguayan President vetoed a crypto mining bill. Also, the Japanese government is looking at ways to lessen the regulation of crypto taxes.