California governor vetoes bill requiring crypto-related businesses to obtain a special license

Gavin Newsom, the governor of California, declined to sign a bill that would have established a licensing and regulatory framework for cryptocurrency businesses in the state, citing the need for a more adaptable strategy to “keep up with quickly expanding technology and use cases” for digital assets.

In a letter to the state Assembly, Newsom said that “digital assets are growing more and more popular in our financial ecosystem, with more customers purchasing and selling cryptocurrencies each year.” Without taking future government measures into account, it is premature to create a license structure.

As tougher encryption regulations are being contemplated nationally, the governor vetoed the Assembly bill. The House might vote on legislation banning stablecoins as soon as this week.

Gary Gensler, the chairman of the Securities and Exchange Commission (SEC), made a suggestion earlier this month that proof-of-stake (PoS) cryptocurrencies might be subject to securities regulation.

A California Assembly member sponsored AB 2269, also known as “Digital financial asset businesses: regulation,” earlier this year. It was approved by the Assembly and the California State Senate at the end of August.

AB 2269 would prohibit anybody from operating a business dealing in digital financial assets without a license from the California Department of Financial Protection and Innovation as of January 1, 2025. (DFAI). Additionally, the DFAI would mandate that companies keep records of all California client activity for a minimum of five years.

The bill had been fiercely opposed by numerous industry representatives. The licensing and reporting requirements of the measure, according to a statement from the Blockchain Association, will stifle regional business growth and drive the sector out of California.

The governor also said that his administration had conducted “substantial research and outreach” on the subject of cryptocurrencies before issuing the veto.

To ensure that regulatory oversight can keep up with quickly changing technologies and use cases and is personalized with the right tools to address trends and reduce consumer harm, a more flexible approach is required.