California watchdog tries to regulate crypto firms again – Cryptopolitan
The Consumer Federation of California is once again making an effort to license and regulate the activities of cryptocurrency exchanges in the state.
Assemblyman Timothy Grayson (D-Concord) introduced the legislation, sponsored by the Consumer Federation of California, in an effort to protect Californians from financial hardship and promote responsible innovation in the crypto industry.
As we now know, the cost of lax oversight is so much higher: real people get hurt. We must do more.
Timothy Grayson
Protecting Californians from scams and fraud
However, this development has been hampered by fraudulent operations, insider trading and other negative behavior by bad actors in the market.
Cryptocurrency has witnessed significant growth in recent years, but this progress has been hampered by this negative behavior.
Consumers suffer from financial uncertainty and lack of confidence as a direct result of crypto fraud, which causes billions of dollars in annual losses.
Assembly Bill 39 (AB 39) would give the Department of Financial Protection and Innovation (DFPI) the authority to issue licenses to companies dealing in digital financial assets.
This will provide long-term protection for consumers and regulatory clarity for industry players on how to act safely.
Robert Herrell, executive director of the Consumer Federation of California, expressed his support for the legislation, stating that the federation applauds Grayson for leading the charge in licensing and providing basic consumer protections in the cryptocurrency industry.
Additionally, he said the bankruptcies and scams that occurred over the past year only served to highlight the need for consumer protection in the cryptocurrency market.
The bankruptcies and scams of the past year only reinforce our collective interest in ensuring basic and fundamental consumer protections in this marketplace, which until now has looked like the Wild West in terms of “anything goes” behavior by key players in the cryptocurrency industry.
Robert Herrell
What more?
In addition to establishing a licensing process and DFPI enforcement mechanisms, AB 39 also establishes guardrails for stablecoins, requires crypto exchanges to self-certify that a listed token meets certain requirements, ensures that consumers have access to basic customer assistance such as a toll-free phone line, and provides a path for companies with a New York State BitLicense to be conditionally licensed right away.
The provisions included in AB 39 reflect continued conversations with industry stakeholders, subject matter experts, and consumer advocates following the veto of AB 2269 (Grayson, 2022).
Co-sponsoring AB 39 are lead co-authors Senator Monique Limón, Chair of the Senate Democratic Caucus and Chair of the Senate Committee on Banking and Financial Institutions, and Assemblywoman Cottie Petrie-Norris, a member of the Assembly Committee on Banking and Finance.
AB 39 has been referred to the Assembly Banking and Finance Committee for hearing, and new, amended language for AB 39 will be published soon.
The law seeks to find a compromise between consumer protection and industry compliance, and ideally will put an end to the widespread financial fraud and fraudulent activities prevalent in the cryptocurrency space.
