California first proposed a licensing framework for digital currency companies in February 2015, though the bill was inactive by September 2015. Just last week, California legislators introduced a bill that was amended from the original bill in February 2015. Known as AB 1326, the amended bill proposed the enactment of a Digital Currency Business Enrollment Program, to be administrated by the Department of Business Oversight, which would be granted authority to make rules and regulations for this purpose. So while the bill did not create a new licensing scheme (such as New York’s Bitlicense), the bill sought to prohibit a person from engaging in the digital currency business without enrolling in the program and would prohibit the conduct of digital currency business through an unenrolled agent. The definition of digital currency business was significantly more broad than earlier versions of the legislation, potentially encompassing nearly all parties in the virtual currency ecosystem.
As the end of California’s legislative session was fast approaching, it was expected that the bill would move quickly. So the halt on the proposed bill was somewhat unexpected and came comes after many industry leaders and digital currency advocates’ repeated concerns regarding the proposed bill. As noted by Coin Center, a non-profit research and advocacy center focused on the public policy issues facing cryptocurrency and decentralized computing technologies, the proposed bill provided a definition of “digital currency business” that can be interpreted to mandate “enrollment” of several parties beyond the exchanges and hosted wallet providers present genuine consumer protection risks to customers.
According to Mark Farouk, a spokesman for the California State Assembly’s Committee on Banking and Finance, the bill will not be introduced again until 2017.