The Governor of California, Gavin Newsom, has vetoed a proposed bill that seeks to create license requirements for crypto companies in the state.

The bill sponsored by Democrat Assemblyman Tim Grayson was passed by the state assembly and senate last month. The Digital Financial Assets Law will create a much-needed framework for the crypto space. 

In his letter to the California State Assembly, Newsom stated, “It is premature to lock a licensing structure.” 

“A more flexible approach is needed to ensure regulatory oversight can keep up with rapidly evolving technology and use cases and is tailored with the proper tools to address trends and mitigate consumer harm,” he added.

The bill was first read on the floor of the California State Assembly in February this year. Both the senate and state assembly eventually passed it on August 30. But Newsom doesn’t think it is necessary, citing the cost of a new regulatory program. 

Newsom wrote that this bill “would require a loan from the general fund in the tens of millions of dollars for the first several years. Such a significant commitment of general fund resources should be considered and accounted for in the annual budget process.”

Newsom also said that he wants federal regulations on digital financial assets to be more certain before he commits to any licensing requirement in conjunction with the legislature. 

However, it might take a while before the federal government fully regulates the crypto sector. Federal agencies and White House offices have recently released various reports on different aspects of digital assets ranging from crypto mining to CBDCs.

Some of the reports based on President Biden’s executive order have attracted several criticisms from industry experts. Such criticisms focus on the failure of some of these reports to provide more clarity.

Meanwhile, the absence of licensing requirements in California means there is still regulatory uncertainty in the Golden state even though it is crypto-friendly. 

Unlike in New York, where there’s a strict licensing requirement in place, digital assets firms in California will continue to enjoy the flexibility.

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