Sep 1, 2022 - Economy & Business

California eyes crypto regulation in bid to protect consumers

Illustration of the California State Capitol with lines radiating from it.
Illustration: Brendan Lynch/Axios

Digital asset regulation is coming to California — that is, if Gov. Gavin Newsom signs into law a bill approved by state legislators this week in the next 30 days.

  • Among other things, the Digital Financial Assets Law would require major exchanges to get licensed by the state. It would also bar certain stablecoin operators from the state, forcing licensed exchanges to delist coins not approved by California.
  • It is intended to "boost transparency" and "enhance consumer protections," Tepring Piquado, senior director of state and local government relations for the western U.S at the Chamber of Progress, tells Axios.

Why it matters: Think of the industry and regulators as two baseballs thrown from opposites sides of the room, with one trying to maintain momentum in the name of innovation. The other is trying to slow it down as a precaution.

  • This is the moment right before impact: If they collide, one will change the other's trajectory. (See: New York and the BitLicense.)

The big picture: In its current form, the bill would force crypto exchanges and platforms to apply for a license, regularly report financial metrics as traditional firms do, and subject them to civil penalties in the event they violate rules.

The intrigue: It also bars certain stablecoin issuers from operating in the state until 2028.

What's happening: The bill was approved Monday by the state Senate and by the Assembly on Tuesday.

  • What's next: Newsom has until Sept. 30 to make a decision on the bill.

What they're saying: Assembly member Timothy Grayson, AB 2269's sponsor, called it "smart, balanced policy" in a statement after Tuesday's vote.

The pushback: The Blockchain Association opposes Grayson's bill, sayingit would "push many out of the state" and undermines Newsom's commitment to "fostering this next wave of innovators."

  • Flashback: Newsom put out an executive order in May to create a regulatory framework that would "grow jobs and protect consumers."

The other side: Similarly, New York instituted the BitLicense in 2015, one that continues to be broadly criticized by the industry. The Empire State is often fingered as one of the most onerous jurisdictions for crypto firms.

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