California lawmakers pass state’s ‘BitLicense’ clamping down on stablecoins

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California is poised become one of the most restrictive jurisdictions in the U.S. for digital asset firms in a month’s time after the state’s lawmakers passed the Digital Financial Assets Law this week. The bill now heads to the governor for his signature.

The bill, dubbed California’s BitLicense—taking after New York’s BitLicense law, which imposes stringent restrictions on digital asset firms—was approved by California’s Assembly last August 31, just a day after it passed the state Senate.

It now heads to the desk of Governor Gavin Newsom, who has until September 30 to either sign it into law or veto it. The governor will likely sign the bill into law, given his push for digital asset regulations earlier this year. Newsom signed an executive order in May directing the state’s financial regulators to work with his economic development office to formulate regulations for the industry.

Lawmakers who voted in favor of the bill are already touting it to be a victory for the state and are confident that it will be signed into law by the governor. Assembly Member Timothy Grayson (D-Concord) took to Twitter to hail the bill as a path toward responsible innovation.

With today’s vote, California is now set to forge a path for responsible innovation. AB 2269 is headed to the Governor's desk#Crypto pic.twitter.com/Uuv9eXVK7m

— Tim Grayson (@AsmGrayson) August 31, 2022

Grayson has previously claimed that California was in dire need of the bill as “cryptocurrency businesses are not adequately regulated and do not have to follow many of the same rules that apply to everyone else,” making the industry very risky for investors.

One of the most controversial stipulations of the bill is a restriction on the use and issuance of stablecoins. It prohibits Californian entities from dealing in stablecoins unless they have been issued by a bank or have been licensed by the California Department of Financial Protection and Innovation.

This isn’t the first time U.S. lawmakers have attempted to bring stablecoins under the banking umbrella. As CoinGeek reported in December 2020, Michigan Democrat Rep. Rashida Tlaib introduced the STABLE Act that stipulated that all stablecoin issuers must obtain a banking charter.

This stablecoin onslaught has seen the California bill opposed by some in the blockchain industry. They include the industry lobby group Blockchain Association which claimed the bill would “impede crypto innovators’ ability to operate and push many out of the state.”

1/ California has long stood as a bastion of technological innovation, and with his recent Executive Order on #crypto, Governor @GavinNewsom committed to fostering this next wave of innovators.

However, legislation in the state Assembly threatens to undermine his pledge.

🧵

— Blockchain Association (@BlockchainAssn) August 29, 2022

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