Legislation in California aims to regulate virtual currency, but still, the cryptocurrency community happens to observe heated debate among Bitcoin advocates over whether new bill would consolidate the new industry or if it would destroy young bitcoin companies.
The bill under discussion was created by Matt Dababneh, California Assembly member, and it deals with virtual currency firms. Briefly, the bill seeks to forbid operating unless virtual currency companies receive a license from the Department of Business Oversight (DBO) or an exemption from the agency. Plus, according to the bill, applicants would pay a non-refundable fee of $5,000, and an annual renewal fee of $2500.
“AB 1326 is a balanced approach that will give consumers confidence that they are dealing with a legitimate business and still allow for innovation in the virtual currency industry,” Dababneh says on his website.
On August 7, the Electronic Frontier Foundation (EFF), a San Francisco-based digital rights advocacy group, launched an online petition opposing the California bill.
The Foundation said: “The bill could chill virtual currency innovation in California. We have philosophical issues with A.B. 1326-both the type of regulatory scheme it’s proposing as well as the timing of this regulation in relation to the development of new virtual currency technologies-and we also have concerns about how the bill is technically written.”
The Washington, D.C.-based Coin Center supporting the proposed California legislation stated that the bill offers the best possible compromise under the circumstances. Peter Van Valkenburgh, director of research at Coin Center, said that the California law is a “model for sound regulation in this sector.”
“A Bitcoin company that actually holds all of the private keys for some user is acting just like a bank or a money transmitter. It’s very difficult to convince politicians that between two companies with very similar risk profiles, one that holds peoples bitcoins and one that holds their fiat, the Bitcoin business should get special treatment,” he added.
“The biggest problems with this legislation aren’t for large, established Bitcoin companies that have the resources to engage in Sacramento,” EFF activism director Rainey Reitman said in the e-mail to Bloomberg BNA on August 13th. The proposed rules would impact “all the other creators and innovators in the virtual currency space … who would have to go through the application process, and who would be completely at the whim of a Commissioner with total power,” Reitman added.
In a press release Dababneh responded to all of EFF critisisms, saying they have “little expertise in the area of financial regulation and is generally beyond its depths on the appropriate levels of safety and soundness regulation required of financial service providers.”
“I have met with individuals and companies from the largest virtual currency trading platforms to individual hobbyist developing apps while at coffee shops. Every suggestion they have provided has led to a direct change to AB 1326 or we have otherwise resolved their concerns”, he said.
He said that the language in the bill is very clear and has been negotiated with the companies that develop platforms in the virtual currency ecosystem. According to Dababneh, the bill is far friendlier to innovators and the long-term future of virtual currency than the New York’s BitLicense, reports EconoTimes.