Governor Gavin Newsom of California has vetoed a bill that would see crypto financial services institutions require a special license to provide their services in the state.
The Governor’s veto ends the run of the unopposed bill which was sponsored by Assembly Member Tim Grayson. The bill titled Assembly Bill 2269 seeks to create a licensing and regulatory framework adding to the many regulatory hurdles industry players already face.
This would mean all California-based entities can only deal with stablecoins issued by banks or institutions licensed by the designated regulator – the state Department of Financial Protection and Innovation.
Governor Gavin Newsom’s position
In his letter to the assembly rejecting the bill he described as “premature and costly”, Newsom has called for a more flexible approach tailored to protect consumers and keep up with the evolving technology.
According to the governor, this licensing regime will require a million-dollar loan which was not covered in the state’s annual budget process. In conclusion, Newsom says he awaits federal regulations on digital financial assets to come into a sharper focus before embarking on a licensing and regulatory regime on digital assets.
While the Bill had the overwhelming support of the Assembly with 71 votes, the Blockchain Association, one of the critics of the bill in a tweet thread described it as “shortsighted and unhelpful” back in August when it was passed.
Furthermore, the association said the bill is designed to install a generic licensing and reporting regime that will stall growth in the industry just like in the case of New York with “BitLicense”. Therefore Gov Newsom’s veto on the bill is another win for the nascent industry which will be celebrated by industry players.
California and the cryptosphere
Back in July 2022, the Golden State through the Fair Political Practices Commission of California overturned a four-year ban on cryptocurrency contributions for political campaigns.
The state now joins 12 other US States to expressly allow crypto donations on the condition that the donations be converted into fiat currency as soon as it’s received. The campaigns are expected to use a registered cryptocurrency processor to access donor information.
Also in February, the state Senate proposed Senate Bill 1275. The Bill which sought to include cryptocurrency as a payment option for government services was rejected in a procedural vote.