California Governor Gavin Newsom has vetoed a statewide bill that would have established a regulatory framework for cryptocurrency regulation—and crypto proponents are thrilled.
In a Friday memo detailing the veto decision, Newsom called Assembly Bill 2269 “premature” and said a “more flexible approach” was essential for the state because he believes blockchain technology is still evolving.
The veto came despite strong support in the state legislature, where the bill secured 71 “yes” votes, 0 “no” votes, and nine abstentions.
If it had been signed into law, crypto firms would have been required to acquire a state-approved license to operate in California.
In his veto message, Newsom also cited the substantial cost of implementing the bill, sharing that the passage of AB2269 would require a loan in “the tens of millions of dollars” for the state.
Notably, Newsom also wants to wait until the federal government’s stance on crypto regulation is solidified and the results of his May Executive Order on cryptocurrency are presented. Earlier this year, Newsom signed Executive Order N-9-22 for his administration to research cryptocurrency and “establish a transparent regulatory environment” for it in California.
“It is premature to lock a licensing structure in statute without considering both this work and forthcoming federal actions,” Newsom wrote in the memo.
Newsom isn’t the only one who had concerns about AB 2269. The Chamber of Progress—a pro-crypto technology policy coalition with partners like Amazon, Apple, Circle, FTX US, and Meta—also took issue with aspects of the bill and requested multiple revisions back in June, which were incorporated into the final draft.
Chamber of Progress then issued a new memo approving of the latest version of the bill, pending a few additional revisions. Specifically, it did not want California to ban algorithmic stablecoin licenses and requested clarification on which cryptocurrencies would fall under the purview of the Department of Financial Protection and Innovation.
But Chamber of Progress CEO Adam Kovacevich is actually pleased with Newsom’s veto decision.
“This gives the California legislature a chance to take a less rushed, more inclusive approach to developing crypto regulations that protect consumers and allow for innovation,” Kovacevich said in a statement. “There’s a huge opportunity in the next few years for California and other states to get crypto regulation right.”
Attorney Hailey Lennon was also pleased with Newsom’s decision, calling it “good news” for the crypto industry.
🚨 Gavin Newsom has vetoed AB2269 (which would have introduced a “Bitlicense type” digital asset license requirement for crypto companies with CA customers). Good news for the industry 👏 pic.twitter.com/69hBkivwDE
— Hailey Lennon (@HaileyLennonBTC) September 24, 2022
Likewise, the crypto lobbying group the Blockchain Association was thrilled with the veto news, calling the bill “misguided.”
“We applaud Gov Gavin Newsom’s veto of California Assembly Bill 2269, which threatened to choke innovation and stop California’s burgeoning crypto industry in its tracks,” the group wrote in a statement.
We applaud Gov @GavinNewsom’s veto of Assembly Bill 2269. By vetoing this bill, and remaining true to the spirit and intent of his EO, California’s status as a crypto innovation leader remains a shining example for the rest of the country.
Our statement: https://t.co/SEPJQtZYhu
— Blockchain Association (@BlockchainAssn) September 24, 2022
The accolades continued to flow, as Jake Chervinsky, head of policy for Blockchain Association, said Newsom “deserves serious respect” for rejecting AB 2269.
Gov. @GavinNewsom deserves serious respect for making the right call by vetoing AB2269, the BitLicense copycat bill that passed the California legislature by a wide margin (71-0 in the Assembly).
That takes guts, & he did it for all the right reasons. 👏https://t.co/DPSsXLmGY2
— Jake Chervinsky (@jchervinsky) September 24, 2022
J.W. Verret, Associate Professor of Law at George Mason University, was also pleased Newsom rejected the “crazy crypto reg bill.”
While crypto proponents are pleased with the veto, Assemblyman Tim Grayson—who introduced the bill—expressed his frustration on Twitter.
“The cryptocurrency market is under-regulated at best and deliberately rigged against everyday consumers at worst,” Grayson argued in a statement.
The cryptocurrency market is under-regulated at best and deliberately rigged against everyday consumers at worst. A financial market cannot be considered healthy if there are no guardrails in place to protect consumers from scams & bad actors. My statement on the veto of AB 2269: pic.twitter.com/etEDRq2I4g
— Tim Grayson (@AsmGrayson) September 24, 2022
But the regulatory battle in California is far from over.
“Assemblymember Grayson signaled he will reintroduce his bill,” Kovacevich wrote.
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