Cryptocurrencies have found fertile ground in California, once one of the best crypto-prepared jurisdictions and supporters in the United States. Last year, the Golden State ranked the highest among the US states in terms of countries with the most searches for crypto-related keywords, with a 10 out of 10 market score. Because interest in cryptocurrency can take many forms, so do users’ most pressing questions. In this regard, among the words with the highest interest rates were “cryptocurrency” and abbreviations, “Binance” and cryptocurrency names.
Any question that pops in a crypto supporter finds the answer online, whether you seek advice from online communities, want to understand more about candlesticks or research how to invest in cryptocurrencies. Concerning the latter topic, cryptocurrency exchange platforms provide several payment channels, including the option to buy Bitcoin with a credit card.
California is still a leader in blockchain technology usage, encouraging continuous growth and development in the sector. However, with greater interest in cryptocurrencies comes an increased necessity to create a regulatory framework that protects both businesses and users in the cryptocurrency realm, preventing fraud, scams, money laundering and other criminal activities. As such, Bitcoin, Ethereum, and other cryptocurrencies are on the Californian government’s radar, and cryptocurrency lobbyists want to ensure the recently proposed scrutiny won’t impact how they conduct business.
California is eyeing cryptocurrency kiosks and trying to regulate cryptocurrency transaction ATMs, leaving other cryptocurrency-related aspects like non-fungible tokens for the upcoming year.
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California is to protect consumers by passing licensing bill
Regulators’ attention has turned to cryptocurrency kiosks or Bitcoin ATMs, especially in light of last year’s crypto scandals and failures, the FTX bankruptcy, and other disheartening incidents. Without imminent federal action, lawmakers want to develop a basic regulatory framework that would also approach aspects yet to be regulated. Examples include decentralized autonomous organizations (DAOs) and non-fungible tokens (NFTs).
So far, the cryptocurrency licensing system in New York serves as an inspiration for Californian regulatory efforts. Starting last year, the state required companies willing to deal with cryptocurrency transactions to acquire a unique “BitLicense” for cryptocurrency businesses. Two of the objectives of the licensing program are to prevent money laundering and enable regular audited financial statements.
Assemblymember Timothy Grayson introduced the bill that proposes licensing for businesses engaging in cryptocurrency transactions. The Californian bill stands a good chance to pass, as there’s a shared belief that cryptocurrency user protection is enhanced with supervision by imposing licensing and afferent documentation. Moreover, Timothy Grayson considers that refusing to implement the necessary procedures will only maintain users’ exposure to scams and risks that could be prevented and avoided.
Other previous efforts emphasized the same aspects
More efforts in this direction were made throughout time. Gov. Gavin Newsom introduced a similar bill last year that tackled the same issues and promoted innovation in the blockchain realm, securing the state’s position as a leader in blockchain technology in the United States. His administration’s officials stated that efforts were already made to create the foundation for a regulatory framework in a bid to reduce the concerns over the administrative burden and costs a similar bill would involve.
However, the bill didn’t pass as lawmakers expressed dissatisfaction with the department’s response in February. The department seems to focus mainly on major central bank collapses, overlooking the importance of cryptocurrency guidelines for credit unions and banks.
The Crypto Council for Innovation proposed the creation of clear and concise guidelines to approve the application process and define what activities necessitate licensure more straightforwardly.
Lawmakers are eyeing crypto kiosks
State legislators want to eliminate the risks that cryptocurrency kiosks involve. The ATMs are electronic kiosks where you can purchase and sell crypto coins in exchange for debit cards or cash, and while each offers Bitcoin, some also provide another alternative. However, they have several disadvantages that need to be tackled, including the following two:
High fees. Cryptocurrency ATMs can have a hefty price tag, as some transactions may be charged over 10%. The legislation would limit the amount that consumers transact, as well as the fees the ATM charges, setting the limit at 2% or 5% of the transaction value. The bill would also limit the amount of cryptocurrency consumers can get or purchase to $1,000 a day.
Lack of insurance. ATMs don’t work like cryptocurrency exchanges that provide custody services to enable you to store your funds safely. Instead, you’ll have to turn to self-custody and store your assets in your own virtual wallet. While this method will keep your assets safe, it involves risks as you’re not insured against loss or theft, should anything happen to your cryptocurrencies.
Some consumer proponents are of the opinion that the limits would threaten the existent businesses in the industry which rely on cryptocurrency kiosks to conduct operations and serve the customers that represent important players in the digital economy. According to some pundits, the move would force some participants out of business as they won’t be able to generate income from the ATMs anymore.
Other aspects are postponed until 2024
There are also other minor bills lawmakers are working on, like measures that deliver a more compelling definition of money laundering that would introduce criminal activities through blockchain. Additionally, the bills should approach and encourage the introduction of blockchain training in several or all 116 Californian community colleges.
The cryptocurrency topic is additionally delayed for next year, together with other aspects, regardless of whether the existing proposed bill passes or fails. The following target is non-fungible tokens, their regulation and what precisely digital ownership implicates. Another bill would legalize decentralized autonomous organizations or groups of investors who gather money into one crypto bank account to determine further whether and how the funds will be invested or spent.
Putting off the bills will give lawmakers more time to think and analyze the situation and project the outcomes thoroughly, better understanding how the result will impact citizens and the financial system.
So far, lawmakers are eyeing cryptocurrency kiosks, but other aspects will also come under the radar in the upcoming period.
