A proposed digital currency bill has been amended in the California Senate to include a provisional application process for early-stage industry services.
AB-1326, if passed, would require individuals and companies offering services that involve bitcoin or other digital currencies to first obtain a license. A new draft version of the bill, was amended and re-referred to the California Senate Committee on Banking and Finance on 6th July after it passed with a 55-22 vote in the State Assembly last month.
Notably, a new change to the draft text enables small-scale business concepts to receive conditional approval from the state’s Commission of Business Oversight under the state’s Money Transmission Act.
The text reads:
“The bill would authorize a person or entity conducting virtual currency business with less than $1,000,000 in outstanding obligations and whose business model, as determined by the commissioner, represents low or no risk to consumers to register with a $500 license fee and, if approved, receive a provisional license to conduct virtual currency business.”
Under the proposed law, those seeking licensure would be required to register with the US Financial Crimes Enforcement Network (FinCEN). Additionally, provisional approval would be subject to a process that would consider anticipated transaction volume, existing risk mitigation strategies and the overall nature of the business.
The provisional licenses carry a two-year duration, and entities that no longer qualify would have 15 days to contact state regulators, and an additional 30 days to seek full licensure.
The inclusion of a provisional process marks a potential victory for developers and startups in California looking to work on bitcoin and blockchain-related projects, enabling development that, under existing law, might run afoul of financial regulation. A similar provision was included in New York’s BitLicense framework, which officially became law late last month, allowing for the provisional approval of digital currency startups.
The updated text also redefines what constitutes "virtual currency business", reducing its scope from a previous definition that would have captured any entity that maintained “full custody or control of virtual currency in this state on behalf of others” or offered exchange services to Californian citizens.
Under the new definition, exchanges would not be required to seek licensure.
Language governing the hiring of agents was also removed. Initially, those individuals would have been subject to a state background check, and would also have been required to to sign a contract governing the scope of their work and confirming their compliance with the law.
The new version also adds provisions for transaction receipts and license conversions.
California State House image via Shutterstock