California’s AB 786, a piece of legislation that will make doing in-state business easier for Bitcoin startups, passed in early September. This amends California Money Transmission Act with a couple of key points:

Businesses that pay their employees’ salaries in Bitcoin might qualify for a payroll exemption.

Minimum capital requirements are reduced for a Bitcoin startup that operates in the payments or remittance markets.

The MTA initially imposed strict requirements on California-based business classified as money transmitters, and these are enforced by the Department of Business Oversight. This is the same body that sent a cease and desist letter to the Bitcoin Foundation over the summer.

The amendment will create some exemptions to the MTA. First, payroll processors will no longer fall under the MTA. Second, the minimum net worth requirement for any licensee who wants to do business falls to a range of $250,000 and $500,000.

All this means some Bitcoin businesses will not need to worry about licensing at all in California.

That said, the moves could backfire. The amendment also gives the DBO’s commissioner a great deal of discretion when it comes to raising or lowering the minimum capitalization requirement. This can be done based on any factor the commissioner deems relevant.

That power could be abused by a commissioner whose interests are influenced by persuasive people, for example. That, in turn, would make it harder for Bitcoin businesses to start up in California.

A small check against this power is a new law that the commissioner must notify any applicant for a license what the minimum net worth required is and how that was calculated. And these decisions will have to be transparent, as decisions and opinions regarding the MTA will have to be posted on the commissioner’s website.

AB 786 passed on September 6, 2013, almost unanimously. There were 77 yes votes, 0 no votes, and one vote for “other” from the 36th District’s Steve Fox (D).

The Department of Business Oversight, as of the first of July, assumed the duties of the Department of Financial Institutions. As part of Governor Jerry Brown’s Reorganization Plan No. 2, the DFI merged with the Department of Corporations to become the Department of Business Oversight.