Amanda Griffiths | Reason
California Gov. Gavin Newsom’s surprise veto of a cryptocurrency regulation bill looks like a boon to consumers and creators alike. Unfortunately, his rationale for rejecting it is antithetical to promoting currency competition: Newsom is rolling out the welcome mat for even more expansive federal regulation, and anyone with a stake in the crypto market should be on guard.
A.B. 2269, sponsored by some of Newsom’s fellow Democrats, soared through the California Assembly with unanimous approval. When the governor blocked it at the end of September, he explained that he felt the bill was “premature”—not because it would compromise the potential of the industry it targets, but because it could impede looming federal regulation.
As written, the bill would already strike a fatal blow to the California crypto market and send devastating shock waves throughout the crypto space. Akin to New York’s famed BitLicense law, it would, as policy group Blockchain Association notes, “effectively outlaw” crypto businesses in California in two ways.
First, the bill would have forced all crypto exchanges—platforms where cryptocurrency tokens can be bought, sold, swapped, sent, or received—to apply for and obtain state-issued licenses in order to operate in California. That would strangle small exchanges and startups unable to navigate a costly and cumbersome waiting game. It would also choke consumers’ access to the latest platforms and apps, which are usually the first to carry the newest tokens. These volatile assets often get scooped up by mainstream exchanges like CoinBase only after they’ve already skyrocketed in value from their launch price.
