California Assembly Passes ‘BitLicense’ Bill

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 <a href="https://www.coindesk.com/policy/2020/06/24/bitlicense-at-5-a-timeline-of-new-yorks-landmark-cryptocurrency-regulation/">New York’s BitLicense regulation</a>, which came into effect in 2015. California’s law, if signed by Newsom, a Democrat, would go into effect in January 2025.

“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 come into effect in 2028, on California-licensed entities dealing with stablecoins, unless that stablecoin is issued by a bank. This is similar to a <a href="https://www.coindesk.com/markets/2020/12/02/us-lawmakers-introduce-bill-that-would-require-stablecoin-issuers-to-obtain-bank-charters/">proposed</a> (and never passed) bill in the U.S. Congress that would require stablecoin issuers to have a bank charter.

The Blockchain Association, an industry trade group, <a href="https://twitter.com/BlockchainAssn/status/1564355951293087744">tweeted</a> that the bill would “create shortsighted and unhelpful restrictions that would impede crypto innovators’ ability to operate and push many out of the state.”

This is the second attempt California has made to create a "BitLicense" regime. The first, in 2015, <a href="https://www.coindesk.com/markets/2015/09/16/californias-bitcoin-bill-shelved-by-state-senator/">failed</a>, and was made dormant after opposition from a state senator.

Newsom has until Sept. 30 to sign or veto the bill.