California Governor Vetoes Cryptocurrency Bill

On Friday, California Governor Gavin Newsom (D) rejected a crypto licensing and regulatory measure that was viewed as a possible West Coast equivalent of New York’s “BitLicense.”

Assembly Bill 2269, introduced by Assemblymember Tim Grayson (D), would have established a licensing scheme for anybody wishing to assist crypto transactions, similar to how the Money Transmission Act now regulates money transmissions.

It was one of eight laws vetoed by Newsom on Friday. He also signed 21 other bills addressing topics ranging from traffic signals to cybersecurity to infrastructure concerns.

Newsom wrote in a message explaining his veto:

“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 – all within the context of a rapidly evolving federal regulatory picture.

Over the last several months, my Administration has conducted extensive research and outreach to gather input on approaches that balance the benefits and risk to consumers, harmonize with federal rules, and incorporate California values such as equity, inclusivity, and environmental protection.”

It would be premature to construct a licensing regime without taking into account the response to this executive order, according to Newsom. He also hinted at potential future government laws or restrictions.

Last month, the California Assembly passed the bill. If signed into law, it would have required California-licensed entities to only interact with stablecoins issued by banks or other entities licensed by the state Department of Financial Protection and Innovation (the ban would have been phased out by 2028); required stablecoin issuers to remain fully backed by reserves, and established a licensing and examination regime for crypto companies.

Grayson stated in a tweet that he would continue to strive to defend California’s customers, adding that the Assembly had overwhelmingly approved the bill, with 71 yes votes, zero no votes, and 9 abstentions.

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