The Digital Financial Assets Law, which is similar to New York’s BitLicense, has been criticized by industry stakeholders.
California Gov. Gavin Newsom is set to sign a recently passed bill that would require digital asset exchanges and other crypto companies to obtain a license to operate in the state.
The Digital Financial Assets Law, dubbed California’s “BitLicense,” takes after New York’s BitLicense regulation, which came into effect in 2015. California’s law, if signed by Newsom, a Democrat, would go into effect in January 2025.
“While the newness of cryptocurrency is part of what makes investing exciting, it also makes it riskier for consumers because cryptocurrency businesses are not adequately regulated and do not have to follow many of the same rules that apply to everyone else,” Assembly Member Timothy Grayson (D-Concord), the bill’s sponsor, said in a prior statement.
Among the requirements is a prohibition, which would be phased out in 2028, on California-licensed entities dealing with stablecoins, unless that stablecoin is issued by a bank or is licensed by the California Department of Financial Protection and Innovation. This is similar to a proposed (and never passed) bill in the U.S. Congress that would require stablecoin issuers to have a bank charter.
Another clause in the stablecoin section of the bill would require stablecoin issuers that hold securities as a reserve to have an amount “not less than the aggregate amount of all of its outstanding stablecoins issued or sold in the United States.” In addition, the bill stipulates that the aggregate market value must be computed using the generally accepted accounting principles (GAAP) of the United States. GAAP is a common set of accounting rules, standards and procedures issued by the Financial Accounting Standards Board (FASB).