California Gov. Newsom explains veto of NY-styled BitLicense crypto business bill

California Governor Gavin Newsom on Sept. 23 overruled Assembly Bill-2269 Digital financial asset businesses: regulation – a crypto regulatory framework.

AB-2269 set out specific requirements for crypto businesses, including the application for a license to operate in the state, the obligation to run a 24-hour customer service telephone line, and protections specific to the flow of stablecoins, among other things.

However, in a letter from the Office of the Governor, Newsom said he wanted California to remain “a competitive place for companies to invest and innovate.”

What is AB-2269 about?

The bill passed the state assembly on Aug. 30 in a 71-0 count in favor of the “ayes.” Similar to New York’s BitLicense, AB-2269 would have required crypto businesses, including exchanges, operating in the state to be registered with the Department of Financial Protection and Innovation.

Under the legislation, it would be necessary for crypto businesses to keep customer records detailing user activity, thus enforcing an administrative burden on those businesses.

“[The bill] would require a licensee to maintain, for all digital financial asset business activity with, or on behalf of, a resident for 5 years after the date of the activity, certain records, including a general ledger posted at least monthly that lists all assets, liabilities, capital, income, and expenses of the licensee.”

As well as general provisions, the bill also covered rules on licensure, examination of records, enforcement, disclosures and protections, prohibited crypto assets, the documentation of policies and procedures, and miscellaneous items such as definitions.

Newsom explains why crypto businesses don’t need Californian state oversight

Newsom wrote that he supports the idea of protecting Californians from potential financial harm through a clear legislature governing crypto businesses in the state.

However, the Governor thought the bill overkill considering the passing of Executive Order N-9-22 in May, which, in his view, achieves the same goals as the vetoed bill.

“On May 4, 2022, I issued Executive Order N-9-22 to position California as the first state to establish a transparent regulatory environment that both fosters responsible innovation, and protects consumers who use digital asset financial services and products.”

He continued by saying a licensing structure “is premature” without considering the outcomes of upcoming federal actions regarding crypto assets.

With that, overruling AB-2269 would allow for a more flexible and cost-efficient approach to the matter.