A bill regulating cryptocurrencies is approved by the California Assembly, and it stipulates that stablecoins must be issued by banks. This is very similar to New York’s BitLicense, which has been met with a great deal of opposition from the various industry stakeholders.
The recently passed legislation that requires digital asset exchanges and other cryptocurrency businesses to seek a license to operate within the state of California is going to be signed into law by the state’s new governor, Gavin Newsom.
The Digital Financial Assets Law in California, also known as “BitLicense,” was modeled after the BitLicense law that was passed in New York in 2015 and went into effect that same year. If Democratic Governor Gavin Newsom gives his blessing to the measure, the state of California will put it into action in January of 2025. A bill to regulate cryptocurrencies has been passed by the California Assembly, which could set off a surge of regulatory activity across the United States.
“Even while the novelty of cryptocurrency is a large part of what makes investing attractive, the fact that cryptocurrency businesses are not fully regulated and do not have to follow many of the same standards that apply to everyone else makes investing in bitcoin riskier for consumers,” The bill’s proponent, Democratic Assembly Member Timothy Grayson of Concord, claimed in a previous statement that the bill would
A prohibition on California-licensed firms
dealing with stablecoins is one of the requirements. This prohibition will be phased out in 2028 unless the stablecoin in question is issued by a bank or is regulated by the California Department of Financial Protection and Innovation. This is somewhat similar to a measure that was introduced in the United States Congress, although it was never really passed. That bill would have required stablecoin issuers to get a bank charter.
In accordance with yet another clause of the bill pertaining to stablecoins, issuers of stablecoins would be required to keep assets with a value “not less than the aggregate value of all of its outstanding stablecoins issued or sold in the United States.” In addition, the law stipulates that the total market value must be determined in a manner that is consistent with the accounting rules that are generally acknowledged in the United States (GAAP).
The Generally Accepted Accounting Principles (GAAP) are a standardized set of accounting rules, standards, and processes that are produced by the Financial Accounting Regulations Board (FASB).
The Blockchain Association, a trade group that represents the industry, has stated that the proposed legislation would “create shortsighted and unhelpful constraints that would hinder the capacity of crypto entrepreneurs to function and drive many out of the state.”
This is the second time that the state of California has attempted to create a “BitLicense” scheme. The first attempt, which took place in 2015, was unsuccessful and had to be put on hold because of objections raised by a state lawmaker.
In the assembly of California, there were 71 votes in favor of the measure and none against it. There were nine members of the assembly who chose not to vote. On the floor of the Senate, the measure received 31 affirmative votes and six negative votes, with all six negative votes coming from Republican senators.
The deadline for Governor Gavin Newsom to either sign or veto the bill is September 30. If he does not act by then, the bill will become law.