Back in September of last year, California passed AB 786, a piece of legislation that makes it easier doing in-state business for Bitcoin startups. This time, a bill dubbed as AB-129 Lawful Money, which would legalize cryptocurrencies in the state, passed the Senate Banking and Financial Institutions Committee yesterday by a 7-1 vote.
Previously, the bill was unanimously approved in the California Assembly by a 75 to 0 vote. The next step for the bill will be a full vote in the state senate, after which, depending on the outcome, it could go to Governor Jerry Brown’s desk for approval.
If signed by the governor, the proposed law would legalize the development, distribution, and use of cryptocurrencies in California, which would greatly facilitate Bitcoin-related businesses such as the San Francisco-based Coinbase, by making them feel more comfortable operating in the state. Moreover, it would repeal the current state law titled the California Corporations Code Section 107, which reads:
“No corporation, flexible purpose corporation, association or individual shall issue or put in circulation, as money, anything but the lawful money of the United States.”
While the current law is fairly vague, it could potentially serve as grounds for authorities to clamp down on cryptocurrencies and other forms of money if they deem it necessary. However, the emergence of Bitcoin and other digital currencies is quickly forcing people to re-examine the definition of “money.” And with California and Silicon Valley, in particular, being a hotbed for cryptocurrency startups, it appears that law-makers are beginning to realize the tax revenue potential for a state that is facing $US340 billion in debt.
The latest version of the bill was altered from its earlier drafts by omitting a provision that would have required currencies to have a “value based on the dollar” or, in other words, any cryptocurrency would be fine as long as it has an official US dollar exchange rate. This is a fairly important point, especially if Bitcoin becomes widely adopted, which could result in many people opting not to convert it to fiat at all – a scenario that would still be within the limits of the proposed law.
Merely a formality?
Many cryptocurrency related startups and investors were probably not even aware that alternatives forms of money are technically illegal in California since neither was ever persecuted in the state. Therefore, taking into account the lack of enforcement and the surging momentum of Bitcoin and other cryptocurrencies, the potential change in the law can be said to be merely a formality.
Nevertheless, California law requires companies that transmit monetary value to obtain licenses from its Department of Business Oversight. And while it is not yet clear whether companies that only transmit cryptocurrencies fall under this rule, bill AB-129 would certainly remove any confusion and potentially help create a regulatory framework for businesses who would be able to apply for the so-called ‘Bit Licenses,’ which have been mulled by both California and New York.
The potential change in legislation could also give the green light for Silicon-Valley including such internet giants as Apple, Google, Facebook, eBay, and PayPal who may have been wary of embracing Bitcoin due to present Money Transmitter regulations.
Seemingly, legislators are starting to realize that cryptocurrencies are here to stay with the increasing popularity of Bitcoin, the FEC approving BTC campaign donations and an increasing number of politicians accepting BTC for campaign contributions. Judging from the landslide early votes, things are certainly looking good for the Bitcoin economy in the state of California, which appears to be heading towards a world of legal cryptocurrencies.