More than a decade after the introduction of Bitcoin, millions of Americans now hold some kind of digital token. Bitcoin, the largest crypto in the world, boasts more than 80 million users globally while Ethereum is poised to become just as big after the conclusion of the long-awaited ETH merge. In total, there are more than 12,000 cryptocurrencies in the world.
But despite the immense popularity of digital tokens, few standard crypto regulations exist in the United States. And since decentralized blockchain technology allows for private and secure transactions, the crypto market has unfortunately attracted plenty of criminal elements. Recent efforts to pass cryptocurrency regulations have also been unsuccessful. In California, for example, Governor Gavin Newsom vetoed a bill that would have created a regulatory framework for crypto regulation.
Surprisingly, news of Assembly Bill 2269’s failure was met with praise by the crypto industry. Newsom called the legislation “premature” in a memo outlining the veto decision, stating that California needed a “more flexible approach” to regulating cryptocurrency as blockchain was still young and evolving. With 71 affirmative votes, no nays and nine abstentions, the bill came with plenty of support from the legislature.
It would have required cryptocurrency companies to obtain state-approved licenses before they could operate in the state of California. However, Newsom outlined the cost of implementing the crypto bill and said that it would force the state to take millions of dollars in loans to fund the creation of a crypto regulatory framework. He also believed that passing the bill right now, while the crypto market was still in flux and hadn’t matured, would be premature.
Newsom is waiting for the federal government to solidify its stance on cryptocurrency regulation as well as for the presentation of the results of an executive order he issued in May. Dubbed executive order N-9-22, the order required that the Newsom administration research digital tokens and establish a state-based “transparent regulatory environment.”
Newsom says that it is still too early to codify a licensing structure in the statute without considering the executive order or developments at the federal level. He wasn’t the only one who wasn’t taken in by the crypto bill. A procryptocurrency technology policy coalition called Chamber for Progress that partners with FTX U.S., Circle, Meta, and Apple had reservations and asked for several revisions in June.
More specifically, the chamber didn’t want the state to ban algorithmic stablecoin licenses and asked for clarification on which cryptos would be regulated by the Department of Financial Protection and Innovation.
While it would be beneficial to blockchain companies such as Canaan Inc. (NASDAQ: CAN) for a regulatory framework to exist guiding all activities within the industry, it is more important for those regulations to be well thought out so that they foster rather than hinder the growth of this nascent industry.
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