This week, at the tail-end of the legislative session, California legislators have introduced a bill (amended from a bill originally introduced in April 2015) that statutorily addresses the increasingly topical question of how to regulate the emerging crypto-currency market.

The amendment, introduced on August 8, 2016, is a vast departure from the earlier iterations of the proposed bill and addresses many questions about regulating this unique space. With the legislative session ending this month, however, the changes have many in the industry asking: Is this proposed bill ripe for lawmaker approval? While the attempt at specializing the Program towards this unique industry appears to have many advantages over other licensing systems, the bill as-written also introduces various ambiguities — especially regarding questions of the proposed bill’s scope, definitions, and how a statute will be applied in practice. Involvement of industry members in drafting such a bill could help alleviate those concerns. Moreover, several states have already attempted to address this space — with varying success. The ULC is currently engaged in drafting a uniform Virtual Currency Business Act, which aims to unify state systems and avoid a patchwork of conflicting state laws. By enacting this proposed bill, California would be going it alone with an approach that does not appear to be harmonized with the best (or the worst) state solutions out there to date.

What is now essentially a complete overhaul of the original bill, the current version changes what was originally a licensing structure to an enrollment program. To illustrate, the new enrollment program requires digital currency businesses in California to enroll and introduces various industry-specific definitions and enrollment requirements. The proposed bill also gives the DBO authority to regulate. Here is our Summary and Comparison – California Legislature Assembly Bill No. 1326 of the different aspects of the newly proposed bill, which also includes a side-by-side comparison of the new language with the earlier proposed bill.

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Photo of Joseph P. Cutler Joseph P. Cutler

Joe Cutler’s litigation work focuses on combating cybercrime and enforcing website terms of use.

Photo of J. Dax Hansen J. Dax Hansen

J. Dax Hansen helps innovators transform and adopt technology and financial services. He is a technology transactions and regulatory attorney who has pioneered blockchain, digital currency, payments, and fintech law.

Laurie Rosini

Laurie Rosini, an attorney in the Technology Transactions & Privacy practice, focuses her practice on electronic financial services, blockchain technology and digital currencies, and privacy and data security. Laurie has experience reviewing clients’ products and services to ensure sound privacy policies, data security…

Laurie Rosini, an attorney in the Technology Transactions & Privacy practice, focuses her practice on electronic financial services, blockchain technology and digital currencies, and privacy and data security. Laurie has experience reviewing clients’ products and services to ensure sound privacy policies, data security practices and transaction processing. Laurie also counsels clients regarding the regulatory compliance issues facing electronic financial services businesses and virtual currency firms.