California won’t become the second state after New York to have a “BitLicense” type of law any time soon.
The lawmaker who introduced AB 1326, California Assembly member Matt Dababneh, D-Encino, has shelved it, marking the second straight year such legislation has been sidelined. After several conversations and meetings with virtual currency experts, consumer organizations, and others, he said he decided to remove AB 1326 from consideration for a vote this year, saying more time is needed to study the measure.
The use of virtual currency has become more prevalent statewide, he said, but as with any financial product, it carries potential risks for consumers.
AB 1326 required virtual currency companies to be licensed. Since Dababneh introduced the bill last year, efforts have been made to support a forward-thinking solution containing strong consumer protections.
Current Bill Deemed Unworthy
Dababneh said in a prepared statement:
Unfortunately, the current bill in print does not meet the objectives to create a lasting regulatory framework that protects consumers and allows this industry to thrive in our state.
More time is needed and these conversations must continue in order for California to be at the forefront of this effort.
Dababneh said federal regulators have issued guidance to virtual currency businesses. He noted the IRS has addressed virtual currency’s tax status while the Federal Bureau of Investigation has auctioned bitcoin seized in the Silk Road case. He said these events demonstrate digital currency’s growth and staying power.
However, a virtual currency user currently has no protection against loss, and businesses that transmit, store and use it are functioning in an ecosystem of regulatory uncertainty, he said.
Potential harm to consumers is not a remote possibility, Dababneh said, as it has already occurred. He noted the recent $65 million bitcoin hack that’s been in the news lately.
What the Measure Needs
Virtual currency businesses have a place in financial services, Dababneh said, but California has to establish minimum standards and protections.
“I look forward to continuing this discussion with stakeholders in January,” he said.
Dababneh’s bill was awaiting a second reading by the state senate, CCN.com reported earlier this month.
Bill opponents claimed its language had the potential to reduce California’s capability of supporting digital currency startups.
Also read: Is California set to get its own BitLicense?
Bill Opponents Prevail
Colin Gallaher, Bitcoin Foundation Education Committee chair, called on people to sign a petition opposing the bill after stating that the new version of the bill is “even worse than before.” He said the bill’s language was so vague that it was uncertain which companies would be considered virtual currency businesses. Companies handling bitcoin could have been subjected to extensive paperwork and legislative hurdles.
The bill last year drew mixed reactions from industry advocates, in stark contrast to the New York BitLicense, which met united industry opposition. The measure passed the Assembly in June of last year.
The Electronic Frontier Foundation (EFF), based in San Francisco, launched a petition opposing the bill. Coin Center, a Washington, D.C.-based group, supported the bill, calling it a cautious and well-researched approach to virtual currency regulation. Both groups opposed the New York BitLicense.
EFF opposes all virtual currency regulations while Coin Center claimed legislation can provide “much needed regulatory certainty.” Coinbase, the bitcoin exchange that opposed the BitLicense, sided with Coin Center in California.
Featured image from Shutterstock.
Last modified: March 4, 2021 4:50 PM