Legislation to Regulate Cryptocurrency Approved by Legislature, Heads to Governor’s Desk

(SACRAMENTO, CA) – Today, Assembly Bill 39, authored by Assembly Banking and Finance Chair Timothy Grayson (D-Concord) and co-authored by Senate President pro Tempore Toni G. Atkins (D-San Diego), Senate Banking and Financial Institutions Chair Monique Limón (D-Santa Barbara), and Assemblywoman Cottie Petrie-Norris (D-Irvine), was approved by the Legislature and sent to Governor Newsom for his consideration. If signed, AB 39 will establish a licensing program for crypto assets within the Department of Financial Protection and Innovation (DFPI) to protect Californians from bad actors and foster responsible innovation. The bill passed with bipartisan support in both the Assembly and the Senate.

“To me it’s simple: the government has a duty to respond when people are being hurt, and until we license crypto companies, Californians will continue to be frequent targets of financial scams,” said Assemblymember Grayson. “Licensure is the next natural step for this industry, and AB 39 strikes the right balance of fostering innovation while providing strong consumer protections.”

Assembly Bill 39 is a companion bill to Senate Bill 401 (Limón and Atkins), which will set a regulatory framework for crypto kiosks, a part of the crypto industry rife with fraud and abuse. Crypto kiosks are ATM-like machines that allow consumers to purchase cryptocurrencies such as Bitcoin. However, these machines charge exorbitant fees and are hubs of criminal activity, scams, and consumer fraud.

“Banks, lenders, and Wall Street have to abide by a laundry list of rules to ensure that the hard earned assets of working people are protected from fraud. California has shown throughout its history that we can foster innovation and protect consumers and that’s the balance that these bills strike,” said Senate President pro Tempore Toni G. Atkins. “Thank you Senator Limón and Assemblymember Grayson for your tireless work and leadership for having the back of California consumers.” 

“California consumers deserve legal protections when doing business with all financial companies, including crypto companies. We have seen the consequences of allowing an unregulated market to run wild – companies go bankrupt, consumers lose funds, and the public loses faith in these products,” said Senator Monique Limón, Chair of the Senate Banking and Financial Institutions Committee. “I am proud of the strong package advanced by the Legislature this year, which will help to establish safer and more reliable markets for crypto assets.”

The use of crypto assets has grown significantly in recent years, but the under-regulated “wild west” nature of this market has left California consumers vulnerable to fraud, insider trading, and other nefarious behavior. Between 2021 and 2022, DFPI saw a 238% increase in crypto-related consumer complaints. According to the Federal Bureau of Investigation, in that same year crypto investment fraud rose from $900 million to $2.57 billion, an increase of 183%.

“Recently, we’ve seen a dramatic increase in scammers capitalizing on the unregulated, free-for-all nature of the cryptocurrency marketplace, sometimes conning victims out of their entire life savings,” said Assemblywoman Petrie Norris. “Until California ensures basic regulatory clarity and investor protections, consumers will remain vulnerable to preventable financial scams.”

AB 39 is sponsored by the Consumer Federation of California and its provisions reflect months of conversations with industry stakeholders, issue area experts, and consumer advocates.

Robert Herrell, Executive Director of the Consumer Federation of California:

"California has an opportunity to move to the top tier of states protecting consumers while still making space for innovation. AB 39 and SB 401 do just that in crypto, an area where far too many consumers have been scammed, ripped off and taken advantage of. We thank Assemblymember Grayson and Senator Limón for their leadership on the issue and commend the California Legislature for supporting these bills. We hope that Governor Newsom chooses to sign these bills and assert California's national leadership in consumer protection, putting California back where it historically has been."

The California Bankers Association:

“The California Bankers Association is pleased to support AB 39, which creates important consumer protections for Californians. The banking industry is highly regulated with a licensing and examination framework to protect customer assets and ensure the safety and soundness of the financial system. Similar regulatory oversight is needed for digital assets as crypto currencies are now a ubiquitous part of the economy.”

If the Governor signs these measures, crypto companies must obtain or apply for a license by July 1, 2025, to continue doing business in California. Due to provisions included in the legislation, AB 39’s enactment is contingent on SB 401 also being signed into law. Additional information and the text of both bills can be found here.

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Tim Grayson is the Chair of the California Assembly Banking & Finance Committee, and represents the 15th Assembly District that includes the communities of Antioch, Bay Point, Brentwood, Clayton, Concord, Martinez, Pittsburg, and Pleasant Hill. For more information please visit the Assemblymember’s website.