California Bitcoin License Delayed at Least a Year

Register now

California state lawmakers have dropped plans for legislation this year to create a new license for bitcoin companies.

The effort to create the state's own BitLicense was halted last week after virtual currency advocates strongly opposed a new version of the plan, charging that it had grown to encompass too many types of businesses.

The bill, which was first introduced in 2015, will be reintroduced next year, said Mark Farouk, a spokesman for the California State Assembly's Committee on Banking and Finance.

"It is dead for this year," Farouk said. "We couldn't find consensus to come up with the right solution" by the end of this year's legislative session, he added.

A version of the bill introduced last week drew fire from virtual currency advocates who had previously grown to applaud how it differed from the New York BitLicense – notably in its lack of new anti-money-laundering requirements.

But the latest version, Coin Center Executive Director Jerry Brito said in a letter to California Senate Banking and Financial Institutions Committee Chairman Steven M. Glazer, "is a completely re-written bill."

Brito said the bill was not targeted enough, and was likely to force businesses that support virtual currency exchanges – such as multi-sig providers or even miners – to seek a license. "It not only provides no regulatory clarity, it will likely stifle innovation if enacted unchanged," Brito said in his letter.

The plan would require all virtual currency businesses to apply for California's "Digital Currency Business Enrollment Program." The license would cost $2,500 annually, and companies would have to pay $5,000 to apply or risk facing up to $25,000 in fines.

Virtual currency advocates also complained that the rule did not explicitly allow companies enrolled in the program to be exempt from money transmission licensing.

"We would expect the creation of a new 'enrollment program' would take the place of money transmission licensing, thus providing clarity," Brito said. "If it does not, then it is difficult to see what is the purpose of this bill."

The next version of the bill, which could be introduced as early as January 2017, will look different, Farouk said. "I think there's going to be a lot of things that are going to be modified," he said. Legislators, he said, are considering taking a closer look at a model virtual currency bill being developed by the Uniform Law Commission.



For reprint and licensing requests for this article, click here.