When California Attacks: State Builds Anti-Bitcoin Regulations

April 24, 2015 09:03 UTC

There are many ways for an establishment in corporate industry to prevent new market competitors. The most common way in current Western culture is through “influencing” local or federal legislators to craft laws that would make creating innovations, new competitors, and small businesses less than feasible. Make the paperwork and regulation so time-consuming and onerous to process that new businesses will exhaust all their resources. Or you can make the costs involved in entering a market so large that only the established corporations can participate. Regulators in The State of California have suddenly turned their attention towards Bitcoin-related exchanges in a most negative fashion.

California: Land of sunshine, taxes, and regulations

Meet Matthew Dababneh, the chair of the California State Assembly’s Banking and Finance Committee. He doesn’t seem to give a whit about the new jobs California-based Bitcoin businesses are creating throughout the Bay Area and the state as a whole. He seems to see an opportunity to attack new or existing Bitcoin businesses in the state with AB-1326. This piece of legislation will hit digital currency businesses hard with fees that seem more like extortion. $5,000 for a state license application fee, $2,500 for an annual license renewal fee, and a special provision that allows the state’s commissioner to levy an annual assessment fee for administrative costs. The costs, exclusively for new or existing digital currency businesses, have drawn a new petition from Change.org, created by John Light.

“The law would force new or existing businesses who cannot afford the cost of compliance imposed by the proposed license to either prematurely sell off large shares of their business to raise the necessary funds, or else avoid the California market entirely until the business has enough capital to afford the license application and compliance,” says Light to Voices of Liberty.

Also read: California Department of Business Oversight Thinks it Can Regulate Bitcoin

That is only half of it. AB-1326 also attacks Bitcoin users in a special way. It would also force state residents to obtain a state license before they can do business with any virtual currency exchanges. The hypocrisy inherent within this bill is unprecedented since people do not need a state license to buy common stock shares or to invest in commodities like gold or silver. It seems designed specifically to drive Bitcoin users and businesses out of the state. California has similar anti-business legislation when it comes to state taxes. The state famously force Toyota, longtime tenant of Torrance, California, to schedule a move to Texas, just to escape the state tax burden.

“If voters learn about the negative consequences that AB-1326 would have on their local economy, and understand how those consequences would negatively affect their communities, they may be less likely to vote for Matthew Dababneh in the future,” Light posits. “Attempts to impose further restrictions on the purchase, sale, or use of bitcoin by private businesses and individuals would serve to limit access and prevent people from gaining the full range of benefits provided by this innovative technology.”

Competition, in currency, investments, or technology has a habit of helping consumers through lower prices, improved service and better technological advancements brought to market. Small Bitcoin businesses, Bitcoin owners, and potential future Bitcoin owners in California are set to lose big if AB-1326 passes muster in the state’s legislature. Major financial investment firms, banks, and related businesses stand to benefit from maintaining the financial industry’s status quo.

Are their lobbyists to blame for this sudden change in the committee’s narrative? Is this just California’s version of New York’s BitLicense? Will it hurt Bitcoin more than the state’s already shaky economy? Is this set to be rubber-stamped? Who is Matthew Dababneh serving here, since fostering innovation and competition within the market are obviously not the goals here. With major Bitcoin businesses like Coindesk and Coinbase operating out of California, the change in California’s acceptance of Bitcoin is changing quickly.

Why is that? We’ll keep you posted as this story progresses.

Last modified: April 24, 2015 09:03 UTC

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