A bill that would create a regulating body for bitcoin companies in California is moving forward in the state senate.
The California State Appropriations Committee advanced AB-1326 in a 6-1 vote last Aug. 27. Only Republican Sen. Jim Nielsen casted the dissenting vote, CoinDesk reported. The bill had its second reading last Monday, while a third reading has yet to be scheduled.
AB-1326, introduced by Assemblyman Matt Dababneh in February, sought to have virtual currency companies regulated just like banks. If the bill is passed, bitcoin businesses in California will be required to get a license—renewable every year—from the Department of Business Oversight.
Under California’s general financial code, companies applying for license will have to pay a non-refundable fee of $5,000 to register; provide the business’s identifying information; and keep a specified amount of funds in “investment-grade permissible investments,” such as money market funds, state bonds and U.S. government agency securities. Virtual currencies are not allowed.
The bill passed the lower chamber in June, but went through a revision this summer to include new reporting requirements.
“Each licensee shall file an annual report with the commissioner, on or before the 15th day of March, providing the relevant information that the commissioner reasonably requires concerning the business and operations conducted by the licensee within the state during the preceding calendar year,” the amended bill reads. “Each licensee shall also make other special reports to the commissioner that may be required by the commissioner from time to time.”
The amended bill also provides for a provisional regulatory on-ramp for up-and coming virtual currency businesses.
“The bill would authorize the commissioner to request reports and documents, to examine the provisional licensee, and gather information regarding the business and operations of provisional licensees,” according to the new text.
But the more broadly focused digital advocacy groups, such as the Electronic Frontier Foundation (EFF) and Copia Institute, took a critical stance against the bill.
CoinDesk quoted EFF, who said the “bill threatens to both stunt the growth” of the virtual currency industry, and that it “fails to adequately consider” the issues of privacy and free speech.
Copia Institute, on the other hand, warned lawmakers to “be exceptionally careful when implementing rules that have the potential to shape—or strangle—the very roots of innovation.”
Dababneh called out EFF on its claims, saying the group “has little expertise in the area of financial regulation.”
“The language in the bill is very clear and has been negotiated with the companies that actually develop platforms in the virtual currency ecosystem. The very entities that will be licensed have been comfortable with clarity contained in the legislation, and AB 1326 even includes provisions friendly to innovators,” the assemblyman said in a statement.
If it passes the Senate, the bill will proceed to the governor’s desk who can either sign it into law or veto it. But there’s still hope, because vetoed bills can be overridden by a two-thirds of votes from both houses.
AB 1326, once signed into law, will take effect on July 1, 2016.