Digital Asset Regulatory Bill Passes Senate Committee 7-0

On Thursday, a bill that would begin feasibility studies into regulating and classifying the virtual currency industry passed the Senate Banking and Financial Institutions Committee unanimously 7-0.

AB 2150 and the digital currency industry in California

Assembly Bill 2150, authored by Assembly Majority Leader Ian Calderon (D-Whittier), would have the Department of Business Oversight oversee a report on how greater regularity clarity in digital assets such as digital currency and blockchain technology, the digital records and transactions of various digital currencies. The report, which would spell out the pluses and minuses of such a system being enacted in California, would be due by January 1, 2022 and could lead to more permanent legislation.

Supporters of AB 2150 have said that the bill is a vital step to bring more innovative companies into California and would influence the United States government to make similar actions.

“AB 2150 is a step towards fostering an innovative business climate in California, without jeopardizing consumer protections,” noted  Blockchain Advocacy Coalition (BAC) board member Ben Weiss. “California is a giant economy whose regulatory approach will have impacts worldwide. The state will lead the federal government that is slow to provide regulatory clarity. If we don’t act now, we will continue to lose much-needed businesses and jobs to countries that have moved quicker in this sector.

“AB 2150 will help set up California as a hub for the burgeoning cryptocurrency and blockchain industry by encouraging virtual currency businesses to operate in the state, encouraged by regulatory clarity. Because the federal government has yet to provide a clear taxonomy of digital assets, regulatory uncertainty has caused many businesses to leave the United States, taking jobs and innovation with them.”

A recognized need for digital currency understanding

Other supporters agreed with Weiss, but stressed that to be successful they need to make the language into layman’s terms so that it could be understood by all legislators.

“A big thing we need to do is make it easily understood by everyone,” explained Sharon Waters, a technology writer who has helped legislators in other states make technology-based bill language be more easily understood, in a Globe interview. “We all saw how in Congress when Facebook founder Mark Zuckerberg was in a hearing and had to field questions from non-tech savvy Senators and kept confusing people.

“In layman’s terms, AB 2150 will have a study go out, answer questions about digital currency such as Bitcoin and the industry around it, try to find how to regulate it, and see how it can benefit the state. A lot of people see Bitcoin and other digital currencies out there as very risky and there are questions over how they can be used to pay things. It’s like investing in gold or a stock for many people, except there’s no real company around it like a stock and it isn’t physical like gold. This is still very new, and this bill would help set boundaries for something so new.

“And this can lead to California having the base needed to build on and bring these new currencies and technologies to California. No other state has that, and this would be California leading the pack in technology once again. LA benefited from the aerospace technology boom in the 50’s and 60’s in LA, the Bay Area has benefited from tech companies since the 70’s and 80’s centered around Silicon Valley, and the whole state has benefited from the clean transportation boom starting in the new 10’s. This would continue that tradition, and frankly, would need to be done at some point.”

Little Opposition to AB 2150

There has been little opposition to AB 2150 in the legislature so far. An Assembly vote in June brought out a strong bipartisan 66-1 passage, with 12 abstentions. However, there has been some pause for concern as the bill has moved up through legislative hearings.

“There’s a feeling among many that digital currencies have been co-opted by many as a ‘get rich quick’ sort of deal,” added Waters. “And not everyone is on board with that sort of knowledge about it.

“The general feeling is that Democrats want the bill because they want to bring regulations to an industry without them to a California standard and Republicans want to bring in more business and industry like digital currency into California but don’t want to overburden them with regulations in favor of more security. That’s where we’re seeing a lot of pause from, unsure legislators.

“But it is obvious that everyone wants to bring this quickly growing industry into the state. We just need to know where the boundaries are.”

AB 2150 is expected to be heard in the Senate Appropriations Committee in the coming days.