California Creates New ‘Assembly Bill 1489' For Crypto Business Regulations, Imposes Up to $50,000 In Daily Penalties For Violations

California Establishes Regulations For Cryptocurrency Businesses, Imposing Up To $50,000 In Daily Penalties For Violations

New York made headlines when they decided to impost a bill that introduces the BitLicense. Their regulatory framework dictated that companies that want to operate within their state would need to get approval for a license first. While states like Wyoming are promoting a heavily welcoming atmosphere, California has taken on a stance that is more like New York with Assembly Bill 1489.

According to Daily HODL, the new bill, introduced by Assembly Majority Leader Ian Calderon, dictates the way that the virtual currency business activity will be allowed to take place within the state. Each company will be required to get approval to operate within the state.

The legislation adds,

“This bill would enact the Uniform Regulation of Virtual Currency Businesses Act. The bill would prohibit a person from engaging in virtual currency business activity, or holding itself out as such unless licensed or registered with the Department of Business Oversight, subject to a variety of exemptions.”

Presently, regardless of the attachment to legal tender, the bill is clear that cryptocurrency and other digital assets are not classified in the same way. Instead, as Daily HODL states, it is considered to be “a representation of value for exchange, storage of value, or unit of account.”

Furthermore, in section 25, this type of activity is outlined with the following definitions:

  • “Exchanging, transferring, or storing virtual currency or engaging in virtual currency administration, whether directly or through an agreement with a virtual currency control services vendor.”
  • “Holding electronic precious metals or electronic certificates representing interests in precious metals on behalf of another person or issuing shares or electronic certificates representing interests in precious metals.”
  • “Exchanging one or more digital representations of value used within one or more online games, game platforms, or family of games for either of the following:
    • Virtual currency offered by or on behalf of the same publisher from which the original digital representation of value was received.
    • Legal tender or bank credit outside the online game, game platform, or family of games offered by or on behalf of the same publisher from which the original digital representation of value was received.”

The proposed bill is still pending approval, but it would ultimately present any virtual currency business from operating without meeting the requirements to establish a license. These requirements include certain standards to be met with net worth, security, and reserves, though the applicant could still be subjected to examinations and other protocols to confirm their compliance.

There are several groups excluded from the bill, outlined in Section 3103 of AB-1489. Banks, for one, do not have to abide by the rules, along with anyone that holds a money transmission license or offer data-only storage for crypto businesses, since they do not actually handle cryptocurrencies. Someone that only handles their personal activity for crypto investments and transactions is also exempt. Daily HODL adds that anyone that makes $5,000 from crypto-related businesses does not have to abide by the rules.

The sixth chapter of the proposal includes certain policies and procedures that applicants must abide by, along with programs that should be implemented in their platform. As per Daily HODL, those programs include:

  • An information security program and an operational security program
  • A business continuity program
  • A disaster recovery program
  • An antifraud program
  • An anti-money laundering program
  • A program to prevent funding of terrorist activity

The penalties range from $10,000 (violations with a license) to $50,000 (violations without a license) for each day that a company is in violation of the stringent requirements for compliance.

Right now, the regulators in California are doing their best to prioritize the safety of consumers, considering the many scams and frauds that have plagued the crypto industry. However, adding a positive regulatory climate is essential to supporting the innovation that companies of all sizes can grow from, without having immeasurable fees charged in the process.

The bill dictates that any resident of California that has personal crypto investments can keep their Bitcoin, along with a plethora of altcoins. Residents are also permitted to hold their own private keys.

Assembly Bill 2658 was introduced with the help of Calderon as well in 2018. This bill outlined the definitions of blockchain technology and smart contracts while addressing updated versions of the definitions of “electronic record,” “electronic signature,” and others.

To view the entire legislation, visit https://legiscan.com/CA/text/AB1489/id/1926477.

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Krystle M
Krystle is an American cryptocurrency blogger that wants to see the future of crypto and blockchain technology evolve. She has been writing about cryptocurrency for about a year, with a special interest in blockchain technology and regulatory measures around the world. While away from writing and learning about the changes in the cryptocurrency industry, she likes to indulge in science fiction novels and further her experience in playing both guitar and piano.

[Alert] Use the author's self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

[Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses. Editorial Policy \\ Investment Disclaimer

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