Businesses would need a license to offer crypto financial services in California under a bill introduced Tuesday.
The bill, titled the Digital Financial Assets Law, would require companies “engaging in digital financial asset business activity,” including investing, lending or trading cryptocurrencies, to register with the state’s Department of Financial Protection and Innovation.
“While the newness of cryptocurrency is part of what makes investing exciting, it also makes it riskier for consumers because cryptocurrency businesses are not adequately regulated and do not have to follow many of the same rules that apply to everyone else,” said Assemblymember Timothy Grayson in a statement.
The proposal would offer consumers “basic but necessary protections” and “promote a healthy cryptocurrency market by making it safer for everyone,” added Grayson, who introduced the bill and is chair of the Assembly Banking and Finance Committee.
DFPI Commissioner Suzanne Martindale, who leads the state’s Consumer Financial Protection Division, said the proposal would “by and large, create a new licensing regime for crypto finance” and set up “minimum standards for various crypto related products and services.”
Martindale said California has been “trying to take a measured approach” to crypto which she said has led to an “explosion in offerings.”
“We know we need to act, but we want to do it right,” she told Protocol. “We are getting complaints where people are just straight up being defrauded. I mean, we know that there are people that are just outright just getting scammed, and so we don't want to move too slow either.”
The proposal underlines growing interest in regulating the fast-growing crypto industry. On Tuesday, Sens. Cynthia Lummis and Kirsten Gillibrand filed a bipartisan bill for regulating and defining cryptocurrencies and digital assets which would give the CFTC broad oversight powers.
California has taken a more hands-off approach to regulating cryptocurrencies than other states. It legalized bitcoin in 2014 and regulates the fiat-currency money-transmission activities of some cryptocurrency businesses but doesn't have an equivalent to New York's BitLicense, for example.