California Governor Gavin Newsom vetoed a bill Friday (Sept. 23) that would have required crypto financial services businesses to have a special license to operate.
Newsom said the Digital Financial Assets Law, which was passed by the state assembly and senate last month, would be “premature and costly.”
While Newsom said he agrees with the bill’s intent to protect people from financial harm and establish clearer regulations, he said his administration has been doing research on how to approach things in what he considers the right way.
“It is premature to lock a licensing structure in statute without considering both this work and forthcoming federal actions,” Newsom said in a statement. “A more flexible approach is needed to ensure regulatory oversight can keep up with rapidly evolving technology and use cases, and is tailored with the proper tools to address trends and mitigate consumer harm.”
He also said the bill would have to have a loan of “tens of millions” of dollars from the general fund during the first few years. That would be “significant” and would need more work to fit with the state annual budget process.
The bill has seen opposition by some of the industry, including the Blockchain Association, which said the legislation would see “shortsighted and unhelpful restrictions that would impede crypto innovators’ ability to operate and push many out of the state.”
Crypto regulation is changing across the country, with the Department of Justice looking to change how it deals with crypto criminals.
In the DOJ’s recently-released crypto regulatory advisory report titled “The Role of Law Enforcement in Detecting, Investigating, and Prosecuting Criminal Activity Related to Digital Assets,” the department had numerous recommendations for how to deal with criminals.
For example, there was a proposal to double the maximum jail term for unlicensed money transmitting violations, increasing the term from five to 10 years. There was also a recommendation to change judicial guidelines to ensure longer sentences.