California Digital Currency Update

CA DBO  •  Digital Currency

Anyone unhappy with New York’s proposed digital currency regulations, should head West, at least for now. As of January 1, 2015, the use of digital currencies (along with reward cards, virtual tokens, and other forms of payment most people likely never knew were of questionable legality) is legal in California, and unlike in New York, California currently has no proposals for comprehensive digital currency regulations.

California legalized digital currencies through a bill, AB 129, which was signed by Governor Jerry Brown last summer. California AB 129 repealed a 165-year-old provision that originated in the California Constitution and eventually found its way into Section 107 of the California Corporations Code. This historical provision made it illegal for any corporation, association, or individual to put into circulation as money anything other than “lawful money of the United States,” including digital currencies such as Bitcoin, Ripple, Litecoin, Peercoin, Namecoin, Dogecoin, and Primecoin, which were specifically mentioned in the California Senate floor report. This legal modernization was, unsurprisingly, supported by California’s large number of digital currency-related startups.

So far, this legalization has not come with a corresponding regulatory proposal.  However, the California Department of Business Oversight (“DBO”), which regulates California’s financial services and money transmitters, has issued an advisory about digital currencies, and expects to make a decision about whether to regulate digital currencies soon. A spokesman for the DBO, Tom Dresslar, has explained that consumers would be the prime concern of any regulatory structure, though Mr. Dresslar mentioned that a possible way of regulation may be to require virtual currency companies to obtain a California license.

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