California Moves Ahead With Burdensome Virtual Currency License
California may have a wealth of tech-savvy entrepreneurs anxious to create new businesses. But the state’s lawmakers aren’t doing them any favors as they move forward on a virtual currency license that saddles businesses with fees, paperwork and uncertainties.
Businesses would have to pay a non-refundable fee of $5,000 just to apply for the license from the Commissioner of Business Oversight. Which makes one wonder about the bill’s real intent.
The Golden State’s lawmakers aren’t taking any time to study the ramifications of New York’s recently-released Bitlicense before requiring their own virtual currency businesses to be licensed. Instead, the California Assembly recently approved AB 1326 requiring businesses that store and exchange virtual currency to be licensed. The bill now heads to the state Senate. Once the Senate approves the bill, it goes to the governor for signing.
Sponsored by Assembly member Matt Dababneh, D–Encino, AB 1326 passed the Assembly with bipartisan support.
The New York Department of Financial Services released its Bitlicense in April.
A ‘balanced approach’?
“AB 1326 is a balanced approach that will give consumers confidence that they are dealing with a legitimate business and still allow for innovation in the virtual currency industry,” Dababneh said on his website.
The bill, which is available on the state’s website, requires applicants to pay a non-refundable fee of $5,000. A licensee will have to pay an annual renewal fee of $2,500.
Whenever the commissioner examines a licensee, the licensee will pay an hourly $75 fee for each examiner involved, plus travel expenses for any out of state travel.
Also read: AB 129 – California legally approves the use of bitcoin
Financial statements galore
Applicants will have to provide financial statements for the most recent fiscal year. The bill specifies numerous pieces of financial information.
A licensee must maintain at all times such capital as the commissioner determines “to ensure the safety and soundness of the licensee, its ongoing operations, and maintain consumer protection.” The bill doesn’t specify the amount of capital this entails, but it lists areas for the commissioner to use in determining this amount.
The bill would also require each licensee to maintain a bond or trust account in U.S. currency for the benefit of its customers in the form and amount as specified by the commissioner.
A reading of the California bill makes one wonder how Dababneh defines a “balanced approach that will give consumers confidence.”
