The State of California is all set to follow New York’s footsteps. The Golden State has drafted a new digital currency regulation along the lines of New York’s BitLicense and it will be voted upon soon.
The California Bitcoin License assembly bill designated as AB 1326 was first introduced by the Assembly member Matt Dababneh. Since its introduction in the month of February last year, it has gone through multiple amendments in the assembly and senate. As the California legislature prepares to vote on the AB 1326 California Bitcoin License, digital currency community and businesses in the region have raised their concerns.
Bitcoin is a relatively new ‘disruptive’ digital currency. Both Bitcoin and its underlying blockchain technology have a huge potential to change the whole economic system, undermining the authority of government and conventional financial institutions. This combined with its potential uses in money laundering and terrorist financing has driven governments to implement legislations to control the digital currency ecosystem. In order to exercise their control, companies working in the digital currency sector are being subjected to various rules and regulations. California Bitcoin License and New York BitLicense are examples of such regulations.
At the same time, being a nascent technology, there are numerous applications of digital currencies which are still being explored. Unless these Bitcoin laws factor in the need for further innovation in the sector, they will end up causing more damage than good.
Electronic Frontier Foundation has expressed its concerns about California Bitcoin License, which if passed in its current form will end up smothering the state’s Bitcoin ecosystem. The foundation has pointed out various shortcomings in the bill. Some of the concerns include
- The vague language used in the Bill fails to offer a proper definition of ‘virtual currency business’.
- While smaller companies and software developers have some leeway when it comes to California Bitcoin License, it can still prove to be detrimental to innovation and experimentation.
- The Commission of Business Oversight can either accept or reject a license by exercising its discretion.
- The Business Oversight Commission can also ask for irrelevant information from companies applying for Bitcoin License.
- All decisions taken by the Business Oversight Commission is final and businesses can’t appeal against its decision.
If the bill gets approved, it may have a similar impact on California as BitLicense had on the Bitcoin ecosystem in New York. California has to consider its thriving startup ecosystem in San Francisco and the implications of digital currency startups moving out of the nation’s startup hotbed because of Bitcoin License.