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Crypto Bill That Would Have Transformed Industry Vetoed by California’s Newsom

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California Gov. Gavin Newsom.

Photo by Monica Schipper/Getty Images for Bloomberg Philanthropies

California Gov. Gavin Newsom on Friday vetoed a bill that would have brought strong regulations to the crypto market which industry participants said would have stifled innovation in the state.

The bill had flown under the radar until it passed both houses of California’s legislature with near-unanimous support. If it had become law, the bill would have brought many regulations to the crypto industry that consumer advocates had long sought—including a requirement that trading platforms seek the best price when executing trades for customers. Such changes could have transformed the digital-asset market not just in California, but nationally, if firms modified their businesses to comply with the state’s law.

The bill also would have banned until 2028 certain kinds of “stablecoins,” whose values are pegged to a dollar, and likely required others—including those issued by Circle Internet Financial and Tether Holdings—to acquire California licenses to be offered on exchanges to state residents.

“It is premature to lock a licensing structure in statute” without considering an ongoing effort to research the crypto market and potential upcoming federal regulations, Newsom, a Democrat, wrote in a letter accompanying the veto. “A more flexible approach is needed to ensure regulatory oversight can keep up with rapidly evolving technology and use cases, and is tailored with the proper tools to address trends and mitigate consumer harm.”

Newsom said in the letter he would work with the legislature on a new bill once federal regulations “come into…


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