California-based Bitcoin startups, of which there are many, have applauded California’s proposed approach toward virtual currency regulation.
Last month, the California Assembly approved a draft bill that would regulate how businesses dealing in virtual currency can operate in the state. The regulations would effectively impose the equivalent of money services business rules on businesses holding virtual currency on behalf of others. It would not, however, make additional virtual currency-specific demands as found with New York State’s BitLicense, thereby exempting businesses already licensed for money services from duplicate licensing.
The Bitcoin startups commenting on the letter include: BitGo, Blockstream, Xapo, Chain, Gem, Bitnet, as well as blockchain technology startup Mirror. In their letter, the companies highlight the fact the California is home “for much of the innovation in Bitcoin and blockchain technology,” which has already brought thousands of jobs to the state. As such, the right approach to regulation is especially important in California relative to elsewhere.
The companies highlighted the multiple value-adds that digital currency and its technology bring to the table, and how it can provide opportunities for financial inclusion in the state and beyond.
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For taking a different path than New York’s BitLicense, they write:
“We applaud the crafters of AB 1326 “Virtual Currency” for exempting holders of Money Transmission licenses and eliminating unnecessary redundancy. Such licensing already addresses much of the risk from a consumer standpoint, as most of the services that are holding full custody of users’ digital currency funds interact with US dollars.”
They also applauded a recent amendment that allowed companies with less than $1 million in obligations, and whose business models are deemed no or low risk, to get a provisional license for a lower fee.
In addition, they acknowledged the removal of conversion or exchange services from those constituting a virtual currency business.
The only outstanding item was further clarification requested on the definition of “full custody” or “control” over customer funds. In the New York regulations, concern was raised for some multisignature configurations, where private keys are held by more than one party.