(Kitco News) - California is headed down a similar path as New York when it comes to cryptocurrencies following the passage of the Digital Financial Assets Law (AB 2269) Tuesday.
The bill, which requires digital asset exchanges and crypto companies to acquire an operating license issued by the state of California's Department of Financial Protection and Innovation, was passed by the California State Assembly by a vote of 71-0. Now, its fate rests in the hands of Governor Gavin Newsom, who can sign it into law or veto it entirely.
Once signed into law, it would come into effect on and after Jan. 1, 2025, at which point any operations that have not had a license issued to them would be prohibited. Individuals or entities that do not adhere to the law could receive a civil penalty of up to $100,000 for each day of violation.
According to the text of the bill, it authorizes the department “to conduct examinations of a licensee, as prescribed, and would require a licensee to maintain, for all digital financial asset business activity with, or on behalf of, a resident for 5 years after the date of the activity, certain records, including a general ledger posted at least monthly that lists all assets, liabilities, capital, income, and expenses of the licensee.”
In typical legal speak, the bill makes a roundabout way of including various sectors of the cryptocurrency ecosystem including main cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), as well as stablecoins.
A “digital financial asset” is defined as a “digital representation of value that is used as a medium of exchange, unit of account, or store of value, and that is not legal tender, whether or not denominated in legal tender, except as specified,” the bill laid out.
The sponsor of the new law, Assemblyman Timothy Grayson (D-Concord), sees the potential that cryptos have to “help consumers feel empowered to make financial investments and participate in a system that has, in many cases, felt closed off to them,” but wants to make sure that the proper protections are in place.
“This bill will provide consumers basic but necessary protections and will promote a healthy cryptocurrency market by making it safer for everyone,” Grayson said.
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Some in the crypto industry are worried that the new law could lead California down a similar path of New York and its “BitLicense,” which many feel is too strict and limits the growth and innovation of blockchain technology in the state.
The most populated state in the U.S. has been closely eyeing the crypto industry as of late, with Governor Newsom signing an executive order to align the federal and state regulatory framework for blockchain back in May.
Lawmakers in the state have also been vocal about warning residents about the dangers of interest-bearing crypto-asset accounts, telling them to take “extreme caution” with such platforms amid the collapse of Voyager and Celsius during the summer of 2022.
According to a study conducted by CoinGecko, California is the state that is most interested in Bitcoin and Ethereum based on web traffic data.
