California Takes ‘Wait and Watch’ Approach to Crypto

The governor of California has vetoed a bill that sought to establish a crypto licensing and regulatory framework in the state. In a letter dated Sept. 23, Gov. Gavin Newsom wrote that he is returning bill AB2269 without signing it. The proposed bill would have created a framework to regulate digital asset activity under the Department of Financial Protection and Innovation.

With various federal bodies preparing legislation to regulate digital financial assets, Newsom said that until federal regulations are in place, it is premature to look at a licensing structure at the state level. The bill was a result of research and consultation conducted by the state government after Newsom passed an Executive Order in May 2022 calling for transparent regulation that makes California a competitive place for crypto businesses.

“I am committed to working collaboratively with the Legislature to achieve the appropriate regulatory clarity once federal regulations come into sharper focus for digital financial assets,” Newsom said.

Newsom believes the bill would have cost the state “tens of millions of dollars” over the next few years and a more flexible bill is needed to keep pace with the quickly evolving crypto sector. Several crypto advocates like the Blockchain Association welcomed the decision, saying it was the right call as the bill would have hampered innovation in California’s crypto industry.