Assembly Bill 39 (AB 39) would establish a licensing process for crypto exchanges and provide consumers with needed protections
(SACRAMENTO, CA) – Today, Assemblymember Timothy Grayson (D-Concord) introduced legislation, sponsored by the Consumer Federation of California, which will license and regulate the activities of cryptocurrency exchanges in order to protect Californians from financial hardship and foster responsible innovation.
“It’s clear that licensure is the next natural step for this industry,” said Assemblymember Grayson. “And it is equally clear that until we take that step, Californians will continue to be vulnerable to prevalent and preventable financial scams.”
Cryptocurrency has grown significantly in recent years, but this growth has unfortunately been accompanied by fraud, insider trading, and other nefarious behavior by bad actors in the market. Each year, billions of dollars are lost to crypto scams, decimating consumers’ financial stability and trust in legitimate crypto actors. AB 39 will license digital financial assets companies under the Department of Financial Protection and Innovation (DFPI), establishing long-overdue protections for consumers and giving industry necessary regulatory clarity on how to operate safely.
Robert Herrell, Executive Director of the Consumer Federation of California, provided the following statement:
"The Consumer Federation of California applauds Assemblymember Grayson for leading the way in licensing and creating fundamental consumer protections in the cryptocurrency industry. The bankruptcies and scams of the past year only bolster our collective interest in ensuring basic and foundational consumer protections in this marketplace, which has up to now looked like the Wild West in terms of 'anything goes' behavior by key players in the cryptocurrency industry. How many more Californians have to get scammed and be victims of fraud before California reasserts our leadership and takes the reasonable step of licensing these activities? We look forward to working with Assemblymember Grayson in seeing strong licensing and enforcement actions to protect consumers in the crypto space in 2023."
In addition to establishing a licensing process and DFPI enforcement mechanisms, AB 39 also establishes guardrails for stablecoins, requires crypto exchanges to self-certify that a listed token meets certain requirements, ensures consumers have access to basic customer assistance, such as a toll-free telephone line, and provides a path for companies with a New York State BitLicense to be conditionally licensed right away. These provisions reflect continued conversations with industry stakeholders, issue area experts, and consumer advocates after the veto of AB 2269 (Grayson, 2022).
“Last year, AB 2269 opponents expressed concerns about the costs of complying with fair and reasonable rules for crypto companies,” continued Assemblymember Grayson. “As we now know, the costs of lax oversight are so much higher: real people are getting hurt. We need to do more.”
Joining in support of AB 39 are principal coauthors Senator Monique Limón, Senate Democratic Caucus Chair and Chair of the Senate Committee on Banking and Financial Institutions, and Assemblymember Cottie Petrie-Norris, member of the Assembly Committee on Banking and Finance. AB 39 has been referred to the Assembly Banking and Finance Committee for a hearing. New, amended language for AB 39 will be published here within a day.