California Governor Newsom Vetoes Crypto Bill

California’s governor has vetoed a bill — born out of an executive order he issued in May — that sought to establish a licensing and regulatory framework for digital assets.

The bill would have tasked crypto companies with applying for a license to offer their services or digital assets to state residents.

It would also have formally adopted new rules for stablecoins, including requiring that licensed companies only engage with bank-issued stablecoins, which must remain 100% backed by reserves.

Gov. Gavin Newsom said his reasoning was because of the bill’s “premature” nature to lock in a licensing regime under Assembly Bill 2269 without first considering past research and upcoming federal actions.

At least four US watchdogs – the Treasury, State, Commerce and Agency for International Development – ​​as well as “other relevant agencies” participated in one of many reports on digital asset regulation in July.

The report included the usual well-worn arguments from government officials, including the need to regulate stablecoins after Terra’s collapse, as well as the potential for criminal use and financial instability resulting from the new asset class.

“A more flexible approach is needed to ensure that regulatory oversight can keep pace with rapidly evolving technology and use cases and is tailored with the right tools to address trends and reduce consumer harm,” the governor said in a statement addressed to members of the California State Assembly .

Newsom also said that presenting a new regulatory program was a costly undertaking that, the governor said, would require a loan from the state’s general fund that exceeds tens of millions of dollars during the first passage of the bill.

“Such a significant commitment of general fund resources should be considered and accounted for in the annual budget process,” the governor said.

Crypto advocates across California and the US have been calling for clearer guidelines for digital assets since at least 2015 shortly after the birth of Ethereum. Several boom and bust cycles throughout crypto’s short history have also prompted regulators to act.

The governor said that while he had declined to sign the bill, he would “cooperate” with the California legislature to achieve regulatory clarity only after federal regulators had gauged their own stance on the new asset class.

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