California Revisits Stringent Licensing for Crypto Businesses with New Bill AB 39 - Here's What You Need to Know

cryptonews.com:

California is once again taking steps to tighten crypto regulation with a new bill, AB 39, introduced on Tuesday.

The legislation follows a previous attempt in February 2022, when the state introduced AB 2269. The older bill also proposed strict licensing requirements for companies engaged in digital financial activities with California residents. Modeled after New York’s BitLicense, it also sought to impose hefty reporting and operational responsibilities on such entities.

Governor Newsom vetoed the previous legislation in September 2022, arguing that the bill was premature and that there is a need for a more transparent regulatory environment. This would allow for balanced innovation and consumer protection, especially given the quickly changing federal rules around digital assets. 

The industry had readied itself for temporary relief from regulations, expecting collaborative efforts between state and federal bodies. The reintroduction of AB 39 suggests that California is taking another route, however.

The newly introduced AB 39 states that starting July 1, 2025, no person may engage in or claim to engage in digital financial asset business activity with California residents unless they meet certain conditions. 

These conditions include being licensed, having a pending application for a license, or being exempt from licensing requirements altogether. The legislation defines "digital financial asset business activity" broadly, covering activities such as exchanging, transferring, or storing digital assets, including Bitcoin.

The bill has specific clauses that bring stablecoins under the umbrella of digital assets. It also outlines various regulatory responsibilities for businesses that deal with stablecoins. As per the new