ASSEMBLY BANKING AND
FINANCE COMMITTEE IS CALLED TO
ORDER. WE DO NOT HAVE A QUORUM,
BUT WE CAN'T START AS A
SUBCOMMITTEE WELCOME TO THE
ASSEMBLY BANKING AND FINANCE
COMMITTEE, WHETHER YOU'RE HERE
IN PERSON, OR YOU'RE WATCHING
VIRTUALLY I'M GRATEFUL TO HAVE
YOU WITH US HERE IN ROOM 444. I
WILL NOW GO OVER SOME KEY
ELEMENTS OF THE STRUCTURE OF
TODAY'S HEARING TODAY, WE WILL
ALLOW TESTIMONY IN PERSON. I
ALSO WANT TO NOTE THAT WE ARE
ACCEPTING WRITTEN TESTIMONY
THROUGH THE POSITION LETTER
PORTAL ON THE COMMITTEE'S
WEBSITE IN ORDER TO FACILITATE
THE GOAL OF HEARING AS MUCH FROM
THE PUBLIC WITHIN THE LIMITS OF
OUR TIME. WE WILL NOT PERMIT
CONDUCT THAT DISRUPTS, DISTURBS
OR OTHERWISE IMPEDES THE ORDERLY
CONDUCT OF LEGISLATIVE
PROCEEDINGS. WE WILL NOT ACCEPT
DISRUPTIVE BEHAVIOR OR BEHAVIOR
THAT INCITES OR THREATENS
VIOLENCE. EVEN VEILED THREATS.
WE APPLY THESE RULES TO ALL
PEOPLE WHO PARTICIPATE IN OUR
PROCEEDINGS AND THANK YOU FOR
BEARING WITH US AS WE IMPLEMENT
METHODS TO CONTINUE TO SERVE THE
PEOPLE OF CALIFORNIA WHILE ALSO
BEING MINDFUL AND RESPECTFUL OF
THE PUBLIC HEALTH CONCERNS THAT
WE ALL FACE AGAIN. I'M GOING TO
CHECK FOR A QUORUM AND IT
APPEARS LIKE WE HAVE IT. SO WITH
THAT SECRETARY, PLEASE CALL THE
ROLL. GRAYSON. CHEN CAN
CERVANTES CHOI MIKE FONG
GABRIEL. NGUYEN. PETRIE-NORRIS
HERE, STONE WICKS. WILSON.
CAREFUL. WITH THAT WE DO HAVE A
QUORUM SO WE WILL PROCEED AND I
WILL NOW HAND THE GAVEL OVER TO
THE VICE CHAIR. THANK YOU, MR
CHAIR. THE FIRST AND ONLY WILL
BE WELL HERE TODAY AS A B 22 69
BY CHAIR AND GRAYSON. TRADE
RACING AT YOUR PLEASURE, SIR.
THANK YOU. GOOD MORNING, MR
CHAIR AND COMMITTEE MEMBERS. I
AM PLEASED TO PRESENT ASSEMBLY
BILL 22 69, WHICH WILL HELP
CREATE A SAFER AND MORE
SUSTAINABLE CRYPTOCURRENCY
MARKET FOR CALIFORNIA CONSUMERS
AND CALIFORNIA BUSINESSES NEARLY
EVERY DAY SINCE I'VE BEEN CHAIR
OF THIS COMMITTEE, THE ISSUE OF
CRYPTOCURRENCY HAS COME UP. THE
EXCITEMENT FOR THIS NEW DIGITAL
FINANCIAL PRODUCT IS PALATABLE,
AND I BELIEVE THE CRYPTOCURRENCY
CAN BE A DISRUPTIVE AND IF
REGULATED, PROPERLY, POSITIVE
FORCE AND FINANCIAL SERVICES.
HOWEVER THE MARKET TURMOIL IN
RECENT MONTHS HAS REVEALED A
CRYPTOCURRENCY MARKET THAT IS
UNDER REGULATED, UNSAFE AND
RIGGED AGAINST EVERYDAY
CONSUMERS. THERE ARE NOW
COUNTLESS STORIES ABOUT INSIDER
TRADING FRAUD, PERVASIVE SERVICE
OUTAGES, POOR CUSTOMER SERVICE
AND SCAM PRODUCTS. AND LET'S NOT
FORGET THE STORIES ABOUT
EVERYDAY PEOPLE, MANY OF WHOM
ARE WORKING CLASS WHO HAVE LOST
THEIR LIFE SAVINGS BECAUSE THEY
BELIEVED THE PROMISES MADE BY
CRYPTO BUSINESSES. I WANT TO
READ A AT LEAST ONE TESTIMONY
FROM A 35 YEAR OLD CUSTOMER OF A
COMPANY CALLED CELSIUS, WHICH
RECENTLY DECLARED BANKRUPTCY
FOLLOWING THIS SUMMER'S MARKET
TURMOIL. IF I MAY CHAIR READ
THANK YOU. I AM ONE OF THE
LITTLE GUYS. IT WAS MY NEST EGG
. NOW WHEN I GO TO WORK, I DRINK
WATER AND EAT ANY SCRAPS I CAN
FIND FOR LUNCH. I AM IN DEEP
DEPRESSION AND DO NOT KNOW IF I
CAN PULL MYSELF OUT OF THIS.
THIS QUOTE CAME FROM THE RECENT
TIMES PIECE THAT FEATURED THE
REAL LIFE STORIES OF EVERYDAY
PEOPLE WHO BELIEVED THE
MARKETING HYPE OF CRYPTO
COMPANIES LIKE CELSIUS WHO WHO
BELIEVED THAT THE PRODUCTS THEY
WERE ADVERTISED WERE ACTUALLY
DELIVERABLE. BUT AS WE
UNDERSTAND NOW, THESE COMPANIES
COULDN'T THEY COULDN'T DELIVER
ON THESE PROMISES. AND THE
PEOPLE HAVE EXPERIENCED GREAT
GREAT FINANCIAL HARM. AS A
RESULT, NOW I AM A BELIEVER IN
THE PROMISE OF NEW TECHNOLOGY
AND FINANCIAL SERVICES. BUT
THERE THERE HAS TO BE A STRONG
AND THERE HAS TO BE COMMON SENSE
REGULATION IN ORDER TO PROMOTE
SUSTAINABLE AND RESPONSIBLE
INNOVATION. MAYBE 20 TO 69. IT
ACHIEVES EXACTLY THAT IT
REQUIRES THE LICENSOR OF DIGITAL
FINANCIAL ASSET COMPANIES THAT
CALIFORNIANS USED TO BUY TO SELL
AND TO TRADE THESE DIGITAL
FINANCIAL PRODUCTS. AND THEN
FINALLY, I WANT TO CLARIFY HOW I
VIEW THIS BILL FITTING IN WITH
THE GOVERNOR'S EXECUTIVE ORDER,
WHICH WAS IT ASKED THE FBI. TO
USE ITS AUTHORITY UNDER THE
CALIFORNIA CONSUMER FINANCIAL
PROTECTION LAW TO DEVELOP RULES
FOR THE CRYPTO INDUSTRY. THIS
CEO WAS A WELCOME STEP AND I
APPLAUD IT, BUT I FEAR IT WILL
NOT BE SUFFICIENT TO ADDRESS THE
MYRIAD OF ISSUES WE HAVE SEEN
CROP UP IN RECENT MONTHS UNDER
THE E O D F P. I MUST WORK WITH
THE EXISTING STATUTORY
AUTHORITY. IT HAS AND THEREFORE
IT WILL BE LIMITED IN ALL THAT
IT CAN DO. IF I CAN AGAIN
APPLAUDING THE GOVERNOR AND HIS
EFFORT HERE, I AM CONCERNED THAT
THESE EFFORTS THEY WILL NOT BE
ENOUGH AND LEAD TO ADDITIONAL
HARM FOR CALIFORNIANS. SO WITH
THAT, I WOULD LIKE TO INTRODUCE
ROBERT HORRELL, WHO WILL BE
TESTIFYING ON BEHALF OF CONSUMER
FEDERATION OF CALIFORNIA. THANK
YOU AS SOMEBODY MEMBER GRAYSON.
THANK YOU FOR YOUR LEADERSHIP ON
THIS ISSUE, MR VICE CHAIR AND
MEMBERS OF THE COMMITTEE ROBERT
CAROL I'M THE EXECUTIVE DIRECTOR
OF THE CONSUMER FEDERATION OF
CALIFORNIA WERE THE SPONSORS OF
A B 20 TO 69. I KNOW YOU ALL
HAVE A VERY LONG COUPLE OF BUSY
DAYS HEADED IN FRONT OF YOU. SO
I'LL TRY TO BE BRIEF. UM A FEW
QUICK POINTS ONE. THE HARM IS
REAL. THERE ARE EXAMPLES AFTER
EXAMPLES AFTER EXAMPLES OF
PEOPLE WE'RE NOT JUST TALKING
ABOUT WEALTHY INSTITUTIONAL SIZE
INVESTORS MEDIUM AND SMALL
INVESTORS PARTICULARLY BEING
TARGETED AND LOW AND MODERATE
INCOME COMMUNITIES AND
COMMUNITIES OF COLOR WHO ARE
BEING TAKEN ADVANTAGE OF HERE.
TO THAT NOTE. ONE OF THE TOP
PEOPLE AT D F P. I RECENTLY SAID
QUOTE PEOPLE ARE STRAIGHT UP
BEING DEFRAUDED UNQUOTE. AND AT
COMMISSIONER DFT COMMISSIONER
HEWLETT'S RECENT CONFIRMATION
HEARING AT THE SENATE RULES
COMMITTEE WHEN ASKED ABOUT THE
ISSUE OF DIGITAL ASSETS AND
CRYPTOCURRENCY UNPROMPTED, SHE
TWICE MENTIONED THE PHRASE PONZI
SCHEME. THAT IS NOT TO SAY THAT
THE WHOLE INDUSTRY IS A PONZI
SCHEME. WE DON'T BELIEVE THAT,
NOR DOES THE AUTHOR, NOR ANYBODY
ELSE, HOWEVER, SOME OF THE
SITUATIONS WHERE PEOPLE ARE
BEING RIPPED OFF AND DEFRAUDED.
LOOK A LOT LIKE THOSE KINDS OF
OPERATIONS AND YOU KNOW,
SCAMMERS TAKE ADVANTAGE OF
PEOPLE. NUMBER THREE. THIS IS A
VERY REASONABLE RESPONSE AT ITS
CORE. THIS IS A LICENSING BILL.
THE TOOLS THAT DFT HAS RIGHT NOW
ARE NOT SUFFICIENT TO MEET THIS
MOMENT. YOU'RE TALKING ABOUT AN
INDUSTRY THAT WENT FROM $3
TRILLION IN MARKET VALUE DOWN TO
ADJUST A BIT MORE THAN ONE. THAT
IS NOT AN ACCIDENT. THERE IS A
MASSIVE CRISIS OF CONFIDENCE IN
THIS AREA AND ONE OF THE WAYS IN
WHICH YOU BOOST CONFIDENCE. LONG
TERM IS BY HAVING REASONABLE
FOUNDATIONAL RULES OF THE ROAD
HAT PROTECT CONSUMERS AT A
BASIC LEVEL. WHAT AM I GONNA PAY
? ARE THE FEES DISCLOSED CLEARLY
WHAT KIND OF PROTECTIONS DID THE
COMPANIES HAVE AGAINST HACKING?
PEOPLE ARE GETTING FROZEN OUT OF
THEIR ACCOUNTS. AND THEN THOSE
COMPANIES ARE SOMETIMES GOING
BANKRUPT. AND THAT IS DOING REAL
HARM. SO THIS BILL AND WHOLE
WILL INCREASE CONFIDENCE. EVEN
SOME INDUSTRY LEADERS IN THIS
SPACE HAVE SAID PUBLICLY THAT
WHAT THIS INDUSTRY NEEDS IS
BETTER REGULATION AND RULES OF
THE ROAD SO THAT PEOPLE CAN BE
PROTECTED AND FEEL CONFIDENT
THAT THEY'RE NOT JUST JUMPING
INTO SOMETHING THAT THEY DON'T
UNDERSTAND AND THAT THEY'RE
GOING TO BE TAKEN ADVANTAGE OF
FINALLY CONSISTENT WITH WHAT THE
AUTHOR AND CHAIRMAN OF THE
COMMITTEE SAID. THIS IS
COMPLETELY CONSISTENT WITH
PRESIDENT BIDEN'S EXECUTIVE
ORDER FROM MARCH OF THIS YEAR
AND COMPLETELY CONSISTENT WITH
THE GOVERNOR'S EXECUTIVE ORDER.
UNDER ITS CURRENT TOOLS, FBI
ONLY ESSENTIALLY HAS SOME
REGISTRATION AUTHORITY. BUT
LICENSING WITH THE FULL PLANET
PLEA THAT GOES WITH THAT
PROVIDES MUCH BETTER AND MORE
COMPREHENSIVE CONSUMER
PROTECTION. AND IN THE LONG RUN
IS THE RIGHT ANSWER FOR THIS
INDUSTRY. THE ADMINISTRATION
COMMONLY TALKS ABOUT RESPONSIBLE
INNOVATION. THIS BILL IS
RESPONSIBLE INNOVATION. PLEASE
SUPPORT IT. THANK YOU. THANK YOU
VERY MUCH FOR YOUR TESTIMONY. AS
I UNDERSTAND. THERE'S ONLY ONE
PRIMARY WITNESS. ARE THERE ANY
OTHER WITNESSES IN SUPPORT IN
THE ROOM? GOOD MORNING CHAIR AND
MEMBERS NAOMI PADRONE WITH
MCHUGH CAPTAIN ASSOCIATES ON
BEHALF OF THE CALIFORNIA CREDIT
UNION LEAGUE IN SUPPORT. GOOD
MORNING, JASON LANE WITH
CALIFORNIA BANKERS ASSOCIATION
IN SUPPORT. THANK YOU VERY MUCH
NOW. WILL THERE BE ANY WITNESSES
AND OPPOSITION IN THE ROOM?
EXCUSE ME. I APOLOGIZE. UM LET
ME RETRACT THAT UNDERSTAND THERE
IS A SUPPORTED FROM ANY
POSITION. CAN THAT PERSON ALSO?
PLEASE COME UP? THANK YOU. GOOD
MORNING CHAIR AND MEMBERS OF THE
COMMITTEE WITH PERMISSION. THE
CHAIR. I'D LIKE TO SPEAK A FEW
WORDS. THANK YOU TO PRINT CUETO
ON BEHALF OF THE CHAMBER OF
PROGRESS TECH INDUSTRY
ASSOCIATION, WORKING HARD TO
ENSURE THAT ALL AMERICANS
BENEFIT FROM TECHNOLOGICAL LEAPS
. WE WOULD LIKE TO THANK THE
AUTHOR AND HIS STAFF FOR WORKING
WITH US TO ADDRESS OUR MOST
CRITICAL CONCERNS. THE MOST
RECENT AMENDMENTS DO ALLOW
COMPANIES TO OPERATE AS LONG AS
THEY SUBMIT AN APPLICATION FOR
LICENSURE BEFORE JANUARY. 1ST
2025 AVOIDING DISRUPTIONS IN
SERVICES PROVIDED TO CALIFORNIA
CUSTOMERS. ALSO THE AMENDMENTS
EXEMPT COMPANIES THAT HAVE
REVENUE BELOW 50,000. WE BELIEVE
THIS ALLOWS SMALL AND EW
COMPANIES TO DEVELOP INNOVATIVE
PRODUCTS. HOWEVER OUR CONCERNS
WITH THE VERSION OF THE BILL
THAT'S IN PRINT IS THAT IT BANS
ALGORITHMIC STABLE COINS NOT
BACKED BY RESERVES UNTIL 2028 WE
BELIEVE THIS TENDERS INNOVATION
AND DOES NOT BENEFIT CALIFORNIA
CUSTOMERS. INSTEAD WE PROPOSE
THAT CALIFORNIA ESTABLISHED A
REGULATORY SANDBOX, WHICH IS
LIMITED REGULATORY SPACE, WHERE
COMPANIES CAN CONTINUE TO OFFER
ALGORITHMIC STABLE COINS, BUT-WITH INCREASED OVERSIGHT AND
CONSUMER EDUCATION TO
DEMONSTRATE THEIR UTILITY RATHER
THAN A BLANKET BAN. AGAIN WE
THANK YOU FOR THE TIME AND
EFFORT THAT YOU'VE TAKEN TO
ADDRESS THIS ISSUE. THANK YOU.
THANK YOU VERY MUCH. NOT
WITNESSES IN OPPOSITION, PLEASE.
GOOD MORNING, CHAIRING COMMITTEE
AND JAMIE MINOR ON BEHALF OF THE
BLOCKCHAIN ADDED, SEE COALITION
, ALSO EXTENDING MY REMARKS
TODAY ON BEHALF OF THE
ELECTRONI TRANSACTIONS
TRANSACTION ASSOCIATION. UM THE
BLOCKCHAIN ADVOCACY COALITION IN
OUR MEMBERS ALIGNED WITH THE
GOALS OF ACHIEVING REGULATORY
CLARITY FOR DIGITAL FINANCIAL
ASSETS. HOWEVER DESPITE GREAT
COLLABORATION WITH THE AUTHOR
AND HIS STAFF ON THIS BILL OVER
THE SUMMER SINCE ITS
INTRODUCTION, WE DO CONTINUE TO
HAVE CONCERNS THAT THIS BILL
WILL ADD ADDITIONAL CONFUSION.
THE COMPANIES THAT ARE LOOKING
FOR COMPLIANCE CLARITY IMPACTING
OUR STATE'S COMPETITIVENESS WHEN
IT COMES TO ATTRACTING
INNOVATION INVESTMENTS IN THE
CRYPTO INDUSTRY. REMAINING
CONCERNS COME DOWN TO THREE
MAJOR ISSUES. THE FIRST THE BILL
NEEDS GREATER FLEXIBILITY TO
ENSURE D F P. I CAN TAILOR
LICENSES TO THE PRODUCT AND ITS
ASSOCIATED RISK TO ENSURE THAT
THE MOST MEANINGFUL COSTS
CONSUMER PROTECTIONS EVERY
CRYPTO PRODUCT ON THE MARKET
DOES NOT NEED THE SAME
REGULATORY FRAMEWORK OR LICENSE
BUYING A FEW BITCOIN TO HOLD IN
YOUR DIGITAL WALLET OR TO PAY
FOR GOODS AND SERVICES SHOULD
NOT BE HELD TO THE SAME STANDARD
AS INVESTORS PARTICIPATING IN
STOKE TOKEN SPECULATION AND
TRADING. SECONDLY THE COMPANIES
WE REPRESENT ONE A CLEAR PATHWAY
FOR COMPLIANCE. BUT
UNFORTUNATELY GREAT AMBIGUITY
REMAINS IN THE BILL. AS TO WHAT
COMPLIANCE WILL LOOK LIKE. AND
IT ALSO HOW MUCH IT WILL COST.
SEVERAL REQUIREMENTS ARE UNCLEAR
AND COULD RESULT IN DRAMATICALLY
DIFFERENT IMPACTS BASED ON
INTERPRETATION BY THE
ADMINISTRATIVE DEPARTMENT.
FURTHER THE DEFINITIONS IN A B
22 69 STORYLINE WITH THOSE
ALREADY FOUND IN FINANCIAL CODE
TO PROVIDE CLARITY AND
CONSISTENCY TO THE LICENSEES.
THE EXISTING DEFINITIONS ARE
OVERLY BROAD AND PRESENT
AMBIGUITY AROUND WHICH ENTITIES
WOULD NEED TO REGISTER WITH THE
D F B. I OR EVEN WHAT
TECHNOLOGIES ARE CAPTURED.
THIRDLY WHILE OUR MEMBERS WERE
DISAPPOINTED TO SEE A CASE IN
WHICH A HIGH PROFILE STABLE COIN
LOST ITS VALUE DURING A BEAR
MARKET AND OUTRIGHT BAN ON A
LARGE SWATH OF STABLE COIN
TECHNOLOGIES DOES NOT POSE GREAT
CONSUMER PROTECTIONS. WE WOULD
RECOMMEND SOMEWHERE TO THE
COMMENTS BEFORE THAT. WE SHOULD
GIVE D F P I THE FLEXIBILITY AND
THE AUTHORITY TO COME UP WITH A
LICENSING REGIME FOR THESE
PRODUCTS INSTEAD OF AN OUTRIGHT
BAN. ADDITIONALLY NEW SENATE
AMENDMENTS TO THE BILL
ARBITRARILY KEPT DEPOSITS AND
WITHDRAWALS FROM CRYPTOCURRENCY
CHAOS OR A T M'S LIMITING THE
SERVICES LOCKOUT CERTAIN
POPULATIONS FOR PARTICIPATING IN
THE CRYPTOCURRENCY ECOSYSTEM AND
THEY DO NOT POSE ADDITIONAL
SECURITY OR ANTI FRAUD MEASURES
. IN FACT, PUTTING FORWARD SUCH
A LIMIT MAKES IT MORE DIFFICULT
TO IMPLEMENT INDUSTRY SAFEGUARDS
THAT DETECT WRONGDOING IN BAD
ACTORS. SO WHILE WE DO
APPRECIATE THE COLLABORATIVE
NATURE OF THE AUTHOR AND HIS
WILLINGNESS TO DISCUSS INDUSTRY
CONCERNS, GIVEN THE
IMPLEMENTATION DATE HAS BEEN
PUSHED TO 2025. WE URGED THE
LEGISLATURE TO HOLD THIS BILL
COME BACK NEXT YEAR TO ALLOW FOR
ADDITIONAL DISCUSSIONS TO TAKE
PLACE AND INCLUDE THE FEEDBACK
THAT WE NEED FROM D. F P SINCE
THEY WILL BE THE ONES
IMPLEMENTING THIS THIS WILL ALSO
ALLOW FOR CRITICAL CLARITY FROM
OUR FEDERAL FEDERAL REGULATORY
AGENCIES FOLLOWING PRESIDENT
BIDEN'S EXECUTIVE ORDER WHERE
CERTAIN DETERMINATIONS NEED TO
BE MADE ON HOW CERTAIN TOKENS
SHOULD BE REGULATED, WHETHER AS
COMMODITIES SECURITIES OR
CURRENCIES AGAIN. WE REALLY
APPRECIATE THE ATTENTION TO THIS
ISSUE AND THE INTEREST IN A
REGULATORY FRAMEWORK, BUT THIS
BILL IS NOT READY YET AND COULD
HAVE A CHILLING IMPACT ON THE
INDUSTRY. SO FOR THESE REASONS
WE URGE AND NO THANK YOU FOR
YOUR TIME. THANK YOU FOR
COMMENTS. ARE THERE ANY
ADDITIONAL WITNESSES AND
OPPOSITION IN THE HEARING ROOM?
SEEING NONE. I'M GOING TO TAKE
IT TO THE ROOM AND SEE IF
THERE'S ANY QUESTIONS OR
COMMENTS FROM MEMBERS OF
COMMITTEE. REMEMBER BAUER-KAHAN
. AH, THANK YOU. CHAIR AND VICE
CHAIR FOR THIS CONVERSATION. I
THINK IT'S REALLY IMPORTANT AND
I HAVE A COUPLE QUESTIONS. SO
ONE IS FOR THE BAND STABLE COINS
, SO WE'VE DISCUSSED THEY CAN'T
MEET THE REQUIREMENTS IN THE
BILL. CONSUMERS THAT ARE
INVESTORS ARE HOLDERS OF THOSE
COINS TODAY. I ONLY CAN IMAGINE
THERE WOULD BE SIGNIFICANT
NEGATIVE IMPACTS ON THOSE
CONSUMERS WHOSE COIN THEY HOLD
IS NOW BANNED. AM I RIGHT OR
PROTECTING THOSE CONSUMERS? IF
I'M I WANT, UH, MR HAROLD, TO BE
ABLE TO ANSWER THAT. HOWEVER I
DO WANT TO CLARIFY THIS IS NOT
AN OUTRIGHT BAN. AND MY WITNESS
CAN ACTUALLY PROVIDE TESTIMONY
ON THAT RIGHT AND LET ME CLARIFY
JUST GIVEN THAT BECAUSE I
UNDERSTAND IT'S NOT NOT RIGHT
BAND, RIGHT? BUT IF I CAN'T, UM
IT REQUIRES A SURETY BOND FOR ME
TO CONTINUE TO DO BUSINESS. FOR
EXAMPLE, IF I CAN'T GET THAT
SURETY BOND AS THE OPPOSITION IN
THE, UM END OF WHAT BETWEEN ER
MENTIONED THEN I CAN NO LONGER
OPERATE IF I'M A HOLDER OF THAT
STABLE COIN. WHAT HAPPENS TO ME?
ASSEMBLYMEMBER'S THANK YOU VERY
MUCH FOR THE QUESTION. IF YOU
LOOK AT SECTION 36 01 OF THE
BILL SUBDIVISION, A PROVISION
ONE AND TWO. IT'S VERY CLEAR,
NOT A BAN. YOU JUST HAVE TO HAVE
SUFFICIENT RESERVES.RIGHT?
HAVING SAID THAT, UM I THINK
YOUR FOLLOW UP QUESTION WHICH IS
ABOUT WHAT HAPPENS TO PEOPLE.
WHAT HISTORICALLY HAPPENS IS YOU
HAVE THE REGULATOR WITH SOME
SORT OF TRANSITION PERIOD. I
WOULD JUST NOTE THAT THAT
PROVISION IN THE BILL ALSO HAS A
FIVE YEAR SUNSET, THE AREA
THAT'S CAUSING THE MOST PROBLEM
HERE ARE SO CALLED ALGORITHMIC
STABLE COINS. UM FOR EXAMPLE.
TERROR US DOLLAR THEIR SISTER
PRODUCT, LUNA, UM, LOST ITS
QUOTE PEG TO THE U. S DOLLAR,
WHICH WAS NOT A REAL PEG TO
BEGIN WITH. THAT'S AN I WAS AN
ALGORITHMIC STABLE COIN. AS A
RESULT, $60 BILLION IN MARKET
VALUE WAS WIPED OUT IN A FEW
DAYS. MUCH OF THAT WAS WIPED OUT
FOR MEDIUM AND SMALLER
INVESTORS. AND THAT PROBLEM WHEN
YOU HAVE, YOU KNOW, BY SOME
ESTIMATES, MORE THAN A COUPLE OF
1000 STABLE COINS OUT THERE IS
THAT THE QUALITY CONTROL IS
VARYING WIDELY AND THE VERY NAME
WHICH I WOULD ARGUE IN SOME
CASES IS A MISNOMER. WE KNOW
IT'S NOT A PHYSICAL COIN BECAUSE
WE'RE IN THE DIGITAL ASSETS
WORLD. BUT JUST BECAUSE
SOMETHING IS CALLED A STABLE
COIN DOESN'T NECESSARILY MAKE IT
STABLE. UM AND SO IT'S BEEN A
BIT MISLEADING, SO PEOPLE HAVE
SEEN MILLIONS OF DOLLARS IN ADS
ON THE SUPER BOWL AND OTHER
PLACES. THAT'S A FORTUNE FAVORS
THE BRAVE ETCETERA. EVERY SPORTS
STAR KNOWN TO MAN SEEMS TO BE IN
ON THE ACTION AS WELL. AND SO
THEY THINK, OH, STABLE COIN.
IT'S NICE AND STABLE. IT'S TIED
TO THE DOLLAR. THE YEN THE EURO
GOLD SOMETHING BUT THE
ALGORITHMIC ONES ARE NOT SO THIS
IS ONE OF THE REASONS WHY WE
HAVE DELAYED IMPLEMENTATION
PROVISIONS BECAUSE THEY WANT O
MAKE SURE THAT THE FBI HAS THE
TIME TO SET FORTH SOME OF THE
RULES. WE WOULD ANTICIPATE
THEY'VE ALREADY BEEN SEEKING AND
SOLICITING SOME INPUT FROM ITS
INTERESTED PARTIES. WE HEADED UP
A COMMENT LETTER WITH ABOUT A
DOZEN GROUPS TALKING ABOUT SOME
OF THE WAYS THAT THE FBI MIGHT
THINK ABOUT FUTURE
IMPLEMENTATION. IF YOU ARE
INVESTED IN A STABLE COIN THAT
THEN DOES NOT HAVE SUFFICIENT
RESERVES PURSUANT TO THE BILL.
THEN THERE WOULD BE A TRANSITION
PERIOD WHERE ONE COULD BE
TRANSITIONED OVER INTO ANOTHER
STABLE COIN THAT DOES HAVE
SUFFICIENT RESERVES OR BE ABLE
TO GET YOUR INVESTMENT BACK PER
RULES THAT WOULD BE SET UP. I D
F P I WE THINK THAT'S THE MOST
REALISTIC. OPTION HERE. OKAY I
MEAN, I UNDERSTAND WHAT YOU'RE
SAYING. MY CONCERN IS THAT AND I
UNDERSTAND IT'S NOT OUR FAN. I'M
TALKING ABOUT THOSE WHO WOULD
FALL UNDER THE PERSIANS THE BILL
AND THEREFORE BE BANNED IN THE
FUTURE. AS I THINK THE
OPPOSITION LAID OUT VERY
CLEARLY. UM I JUST WORRY THAT
WE'RE LEAVING THOSE CONSUMERS IN
THE DARK AND THAT WE'RE GOING TO
BE THE CAUSE OF THEIR LOSSES,
THESE SMALL AND MEDIUM CONSUMERS
AND THAT WE HAVEN'T GONE FAR
ENOUGH IN PROTECTING THOSE
INDIVIDUALS. ALTHOUGH I
UNDERSTAND THE FUTURE CONSUMERS
WILL BE BETTER PROTECTED BY
THIS, AND THERE SEEMS TO BE A
GAP. THERE THAT WE'RE JUST
HOPING THE FBI FILLS AND THAT'S
CONCERNING FOR ME, UM. MY OTHER
QUESTION, THOUGH. I DON'T KNOW
IF THE OPPOSITION WANTS TO
ADDRESS MY QUESTION. DO EITHER
OF YOU WANT TO ADDRESS IT? YEAH
I GUESS. I MEAN, I THINK WE
STAND BY THE ALGORITHMIC STABLE
COIN, OBVIOUSLY, UM, IT'S BEEN
IN THE NEWS A LOT RECENTLY. IT'S
A NOVEL TECHNOLOGY. THAT'S
APPLICATIONS ARE STILL BEING
APPLIED. BUT YOU KNOW, WE WOULD
PREFER LANGUAGE THAT JUST ALLOWS
THE F P I TO COME UP WITH A
REGULATORY FRAMEWORK AND CAN
SUIT CERTAIN CONSUMER
PROTECTIONS AROUND THAT COIN.
INSTEAD OF AN OUTRIGHT BAN. WE
TO THINK THAT THERE SHOULD BE
GUARDRAILS AROUND HOW MUCH
COLLATERAL, FOR EXAMPLE, NEEDS
TO BE, YOU KNOW, AN ALGORITHMIC
STABLE COIN. IT MEANS IT'S ON
CHAIN, SO SOME OF THAT
COLLATERAL IS IN DIGITAL
CURRENCY SO THERE CAN BE CERTAIN
YOUR BENCHMARKS FOR CONSUMER
PROTECTIONS THAT CAN BE MET. BUT
IN THIS BILL. THERE IS NO
FLEXIBILITY GIVEN TO D F P I TO
DO THAT AND TO COME UP WITH THAT
FRAMEWORK. IT'S JUST AN OUTRIGHT
BANNED FOR THESE NON FIAT
BACKED, STABLE COINS TRANSITION
AS MENTIONED BY THE PROPONENT,
AND THEN PHASING OUT IN 2028 GOT
IT, OKAY. AND LIKE I SAID IN MY
STATEMENT, THERE IS AN
OPPORTUNITY TO TAKE THE NEXT
COUPLE OF YEARS TO HAVE A
DEMONSTRATION IN A DIGITAL
SANDBOX. WE DO THAT A LOT WITH
SOFTWARE DEVELOPMENT WHERE WE
CAN PRACTICE AND D A. I RIGHT
NOW IS FOUR YEARS OLD AND SEEMS
TO BE PRETTY STABLE SO THERE CAN
BE A DIFFERENTIATION BETWEEN THE
ONES THAT ARE LIKE TERRA AND
FAILING OUR CONSUMERS. AND THEN
THOSE THAT ARE THAT ARE ACTUALLY
PROTECTIVE AND HAVE A GREAT
ALGORITHM TO KEEP THEM STABLE SO
THAT WE CAN CREATE A SANDBOX IN
THE NEXT YEAR OR SO. AND I KNOW
THAT THE AUTHOR, THIS IS JUST
THE BEGINNING OF HIS WORK ON
CRYPTO CURRENCY, UM, FOR BETTER
OR FOR WORSE, BUT, UM, AND O I
DO HOPE THAT WE ACTUALLY GET
THERE BECAUSE I THINK THAT
CALIFORNIA BEING A LEADER IN
THIS AND MAKING SURE THAT WE SET
UP A SYSTEM WHERE WE CAN
CONTINUE TO INNOVATE AND PROTECT
CONSUMERS AT THE SAME TIME, IT'S
REALLY IMPORTANT MY SECOND
QUESTION AND THIS IS A
CONVERSATION. THIS COMMITTEE HAS
HAD A LOT AROUND PREDATORY
LENDING AND ONE OF OUR CONCERNS
AS WE REGULATED, PREDATORY
LENDING AND REALLY MEANINGFUL
WAYS FOR CONSUMERS WAS THAT WE
TEND TO REGULATE THE GOOD ACTORS
RIGHT BECAUSE THAT'S WHO'S
ACTUALLY DOING BUSINESS UNDER
OUR REGULATORY SCHEME, BUT
ESPECIALLY IN THE DIGITAL SPACE.
IT IS EASIER FOR AN OUT OF STATE
OR FOREIGN ACTOR TO BE VIOLATING
THESE ROLES AND FOR US TO HAVE
LITTLE OR NO ABILITY TO USE OUR
ENFORCEMENT MECHANISMS, AND I
COULD SEE A SIMILAR CONCERN
BEING RAISED HERE WITH ACTORS
WHO ARE ACTING IN THE DIGITAL
SPACE THAT WE STRUGGLED TO
ENFORCE THAT THEN FILL THIS
SPACE IN WAYS THAT HURTS
CONSUMERS. IS THAT SOMETHING
THAT YOU'VE THOUGHT ABOUT OR
WE'RE ADDRESSING IN ANY WAY OR
IS IT JUST HOPING FOR THE BEST,
SO THAT'S THE IMPORTANCE OF
HAVING THIS BILL TODAY THE
IMPORTANCE OF HAVING THIS BILL
TODAY EVEN THOUGH AN
IMPLEMENTATION IMPLEMENTATION
DATE IS SET OUT A COUPLE OF
YEARS IS THE FACT THAT IT GIVES
US THE LEGISLATURE OPPORTUNITY
TO BE INVOLVED IN THAT THE TABLE
WITH THE REGULATORS, HELPING
WITH THE RULES ADDRESSING ISSUES
JUST LIKE THIS. AND MAKING SURE
THAT ALL THE RULES WERE IN PLACE
. OF COURSE, THEY'RE GOING TO BE
ACTORS THAT ARE GONNA BE HARD TO
MAKE ENFORCEMENT AGAINST. BUT
THE FACT IS, IS THE PLAYERS. THE
GOOD PLAYERS OUT THERE RIGHT NOW
ARE WANTING THIS REGULATION TO
HELP DELINEATE AND DRAW A LINE
BETWEEN WHO IS FOLLOWING THE
RULES OF THE ROAD VERSUS THOSE
THAT ARE MORE APT TO BE
SCAMMERS. SO THIS IS ANOTHER
GREAT TOOL FOR IDENTIFYING BEING
AN IDENTIFIER OF THOSE THAT WE
CAN TRUST IN AND DO BUSINESS AND
TRADE VERSUS THOSE THAT WE
SHOULD PROBABLY AVOID SO AGAIN.
IT SENDS A GREAT MESSAGE TO THE
CONSUMER AND I DO WANT TO
ADDRESS AGAIN JUST TO CLARIFY
BECAUSE OF JUST PREVIOUS
ANSWERING THE QUESTION. THERE IS
NO OUTRIGHT BANNED. IT'S NOT AN
OUTRIGHT BAN AND WAS USED LIKE
THREE OR FOUR TIMES, BUT IT'S
NOT AN OUTRIGHT BANNED, SO I
JUST WANT TO CLEAR IT. OF
COURSE. THANK YOU. AND YOU KNOW,
I APPRECIATE THAT, AND I HAVE TO
SAY THAT SOME OF MY FAVORITE
PROVISIONS OF THE BILL ARE THE
TELEPHONE LINE. IT'S ALWAYS SO
SIMPLE. BUT FOR CONSUMERS TO BE
ABLE TO HAVE SOMEONE TO CALL IS
ACTUALLY REALLY IMPORTANT AND
THE DISCLOSURES AND I THINK TO
YOUR POINT TO THE EXTENT THAT WE
PROVIDE THAT. HOPEFULLY,
CONSUMERS CAN GET INTO THE
CRYPTOCURRENCIES. IT'S SAFER SO
WITH THAT I AM FINISHED. THANK
YOU. THANK YOU VERY MUCH ANY
ADDITIONAL QUESTIONS OR
COMMENTS? UM. TROY AND THANK YOU
. I THINK IT'S ABOUT TIME FOR US
TO, UM LOOK INTO REGULATING THE
CRYPTOCURRENCY MARKET BECAUSE OF
THE RECENT, UH EVENTS THAT WE
HAVE SEEN. I WOULD SUPPORT THE
CONCEPT, BUT I HAVE SOME
QUESTIONS IN DETAIL. THIS IS
BASICALLY TO PROTECT THE
CONSUMERS. UH AND BY REGULATING
AND THE THROUGH APPLICATION
PROCESS. BY REGISTERING AND THE
PAYING THE FEE. ITSELF TO IS NOT
GUARANTEE THE COMPANY IS A
SALAD. AND WHAT KIND OF
APPLICATION PROCESS WHAT
QUALIFICATIONS? UH, WITH THIS
LAW. WITHOUT THIS LAW, WHAT THE
DIFFERENCE WILL BE REGULATING
SOUNDS GOOD, BUT THE SPECIFIC
MECHANISM HOW CONSUMERS ARE
PROTECTED BY THIS LAW AND THE
THROUGH THE APPLICATION PROCESS
THAT THAT'S MY QUESTION. SECOND
QUESTION IS, I KIND OF
UNDERSTAND THAT THIS. IF IT
PASSES TO BE IMPLEMENTED FROM
JANUARY 1ST 2025. THAT'S A
RATHER. TO ME FAR AWAY. AH WHY
NOT NEXT YEAR OR EVEN 2000? 24.
RATHER THAN 2025. DOES IT TAKE
THAT LONG TO PREPARE? ARE THOSE
ALL YOUR QUESTIONS? OKAY THANK
YOU, DR TROY. FOR THOSE
QUESTIONS, ONE REASON FOR THE
DELAYED IMPLEMENTATION DATE IS
TO MAKE SURE THAT WE HAVE
CLARITY AS OPPOSITE SHOULD AND
BROUGHT UP TO MAKE SURE THAT WE
AS LEGISLATORS HAVE TIME TO BE
ABLE TO WORK WITH THE FBI, THE
REGULATOR ITSELF TO COME UP WITH
THE RIGHT POLICIES IN THE RIGHT
REGULATIONS, AND I WILL ALSO
TURN IT OVER TO MY PRIMARY
WITNESS, DR TROY. THANK YOU VERY
MUCH FOR THOSE EXCELLENT
QUESTIONS ON YOUR FIRST QUESTION
. I THINK ESSENTIALLY, YOU'VE
MADE THE CASE FOR THE BILL IN
THE DISTINCTION BETWEEN
AUTHORITIES PURSUANT TO
REGISTRATION VERSUS LICENSING
ONE OF THE KEY BENEFITS THAT IS
MORE PROTECTIVE OF CONSUMERS IN
THE LICENSING REGIME IS IN THAT
LICENSING APPLICATION PROCESS.
YOU CAN MAKE SURE THAT
SUFFICIENT, MINIMAL RULES OF THE
ROAD AND STANDARDS ARE MET BY
THE APPLICANT BY THE POTENTIAL
LICENSEE PURSUANT, FOR EXAMPLE,
TO THE QUESTION THAT MS BAUER
CAN JUST ASKED ABOUT TELEPHONE.
CAN YOU GET TO THE COMPANY?
DISCLOSURE OF FEES AND THINGS
LIKE THAT? THOSE ALL THEN BECOME
EMBEDDED IN THAT LICENSING
PROCESS. IT IS OF AN ORDER
MAGNITUDE, MUCH MORE CONSUMER
PROTECTIVE THAN REGISTRATION.
WE'RE NOT ANTI REGISTRATION,
CERTAINLY, BUT WE THINK THAT THE
LEGISLATURE IS APPROPRIATE TO
STEP IN AND SAY, GIVEN WHAT'S
HAPPENING IN THIS INDUSTRY,
GIVEN WHAT WE'RE SEEING
LICENSING IS THE PROPER PATH.
AND SO THAT YOUR QUESTION
COMPLETELY BUTTRESSES THAT POINT
AND THEN IN TERMS OF TIMING,
YEAH, WE'RE TRYING TO WORK
COLLABORATIVELY WITH THE
ADMINISTRATION AS THIS COMMITTEE
KNOWS ALL TOO WELL. THE FBI GOT
REORGANIZED INTO WHAT IT IS A
COUPLE OF YEARS AGO. THEY'RE
STILL KIND OF STANDING THINGS
UP. WE'VE SEEN, FOR EXAMPLE, IN
THE LICENSING OF DEBT COLLECTORS
THAT HAS TAKEN A BIT LONGER THAN
WHAT THEY HAD HOPED FOR. SO WHAT
WE'RE TRYING TO DO IS GIVE THEM
SUFFICIENT TIME TO BE ABLE TO
LAY OUT A PATH FOR LONG RUN MORE
EFFECTIVE PROTECTION OF
CONSUMERS AND RESPONSIBLE
INNOVATION IN THE INDUSTRY.
OKAY. THANK YOU. ANY ADDITIONAL
QUESTIONS OR COMMENTS. UM, WOULD
YOU LIKE TO CLOSE? I THANK YOU
FOR THE DIALOGUE OF COLLEAGUES
AND FOR TESTIMONY THAT HAPPENED
TODAY, AND I JUST SIMPLY AND
RESPECTFULLY ASK FOR MY VOTE
MAKE A MOTION FOR APPROVAL.
BUILD. THE MOVIES ARE A SECOND
MOVE THE SECOND, MADAM SECRETARY
, PLEASE CALL THE ROLL. THE
ACTION IS THE RECOMMENDATION IS
THAT THE SENATE AMENDMENTS BE
CONCURRED IN GRAYSON AND I, CHEN
CHEN, I BARRY CAN AND I,
CERVANTES CERVANTES, I CHOI CHOI
I MIKE FONG. LIKE FUNG, I
GABRIEL. WHEN I. PETRIE-NORRIS
PETRIE-NORRIS. AYE STONE STONE.
I WICKS WILSON. BY WILSON. AYE.
THAT BILL HAS 10 VOTES. THAT
GETS OUT AND WE'LL HOLD IT FOR
ABSENT MEMBERS. THANK YOU, MR
CHAIR. TEXTURE. OKAY?
WE HAVE COMPLETED OUR AGENDA FOR
TODAY'S HEARING. WE WILL NOW UH
CLOSE CLOSE THE ROLE. AND YEAH.
10 VOTES. THE VOTE HAS 10 VOTES
AND IT IS OUT OF COMMITTEE. IS
THAT IT? OKAY, COOL. I EXTEND MY
GRATITUDE TO THE VICE CHAIR OF
SPEAKER'S OFFICE. STAFF RULES
COMMITTEE STAFF, LEGISLATIVE
DATA CENTER, THE MODERATOR AND
ALL. WELL, WE DIDN'T HAVE ONE
TODAY, UH, BUT ESPECIALLY THE
VICE CHAIR AND ALL WHO ENSURED
THE HEARING TOOK PLACE. THE
ASSEMBLY BANKING AND FINANCE
COMMITTEE IS ADJOURNED. HAVE A
GOOD DAY.