California Gov. Gavin Newsom vetoed a bill that would have required crypto financial services businesses to have a special license to operate. Newsom regarded the bill, called the Digital Financial Assets Law, as being “premature and costly.”
The law, had it been signed by Newsom, would have established a licensing and regulatory framework for digital financial assets and related activity administered by the California Department of Financial Protection and Innovation.
“It is premature to lock a licensing structure in statute without considering both this work and forthcoming federal actions,” Newsom said in the statement accompanying his veto. “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.”
Newsom also expressed concern regarding the cost of establishing a new regulatory program which would require a loan from the state’s general fund in the tens of millions of dollars over the first several years.
“Such a significant commitment of general fund resources should be considered and accounted for in the annual budget process,” Newsom said.
Newsom signaled an openness to revisiting the topic of digital asset regulation and working with the state legislature to create “appropriate regulatory clarity” once federal regulators have achieved some level of clear regulatory framework on the matter.
Recent activity on the subject in Washington, D.C. suggests that a clear regulatory framework may still be some years away. It is still unclear where the divide between digital assets regulated by the Securities and Exchange Commission and the Commodities Futures Trading Commission lies. A recent report from the Treasury showed little urgency to address the subject, though it did offer some starting points. The Federal Reserve Vice Chair Michael Barr recently stated that crypto regulation should just resemble banking regulations. And, as much as some members of both chambers of Congress are trying, neither is anticipated to pass relevant legislation this year.