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There have been a number of attempts by Californian officials to implement a regulatory framework for the cryptocurrency industry in the Golden State. Assembly bill 1326 was proposed in 2015 and was denied on two separate occasions in 2015 and 2016, with critics describing it as “bad for business, innovation and privacy”. Critics labelled the bill as the “Californian BitLicense”, comparing it to the heavily criticised and unpopular New York BitLicense.
In a fresh approach to crypto regulation in California, AB 1123 was proposed in early 2017 which would see the ‘Virtual Currency Act’ enacted. Although the Money Transmission Act currently covers the activities of the majority of virtual currency businesses, the Virtual Currency Act would place more specific obligations upon companies operating in the space. As with AB 1326, the bill was widely criticised and subsequently denied in early 2018. The Electronic Frontier Foundation argued that the bill would enforce premature regulation that would stifle innovation within the industry. Other criticisms of the bill include arguments that the Virtual Currency Act would demand irrelevant data from applicants, whilst the definition of virtual currency adopted within the proposed legislation is too vague. 1 2
Following multiple unsuccessful attempts to regulate the industry and the resignation of the Assemblyman Matt Dababneh who introduced AB 1123, the future of this legislation is unclear. In the past, companies have struggled to obtain money transmission licenses and regulators have not stated whether companies are obliged to become licensed. 3 As a result, companies operating in the industry have become alienated from the regulatory process. It could prove difficult for regulators to carry on in the same direction in light of such opposition, meanwhile the future of Californian cryptocurrency regulation remains vague.