CA AB 39 Unveiled: The Impact on Crypto Compliance with Joseph Ciccolo

Joseph Ciccolo, the compliance wizard from the traditional banking realm, took a leap of faith into the exciting world of cryptocurrencies after a chance encounter with a Bitcoin and crypto conference. It was there that he got bitten by the crypto bug, quickly realizing the immense potential it held compared to the dusty old traditional banking system. With a newfound passion, Joseph started attending crypto meetups, only to discover a glaring gap in the industry – a lack of compliance services for the daring entrepreneurs diving headfirst into the crypto space. This eye-opening revelation led him to make a career move, bidding adieu to traditional banking, and wholeheartedly embracing the wild world of crypto, with a mission to provide it with the much-needed compliance solutions.

Today, Joseph wears the prestigious hat of the founder at BitAML, a compliance advisory firm exclusively catering to the enigmatic realm of Bitcoin and cryptocurrencies. He’s also taken a position on the Board of Digital Currency Traders Alliance. This pro-cryptocurrency consumer protection group was birthed in 2021 by a team of California’s sharpest lobbyists and public policy experts.

Now, let’s talk about AB 39, the shiny new law in California’s legal arsenal. Governor Gavin Newsom gave it the nod, giving the Department of Financial Protection and Innovation (DFPI) the authority to regulate businesses dealing with digital financial assets. What’s intriguing is that, historically, California was a bit of a crypto haven, as it didn’t bother itself too much with slapping money transmitter regulations on crypto exchanges. This was like a siren call for those wanting to dive into the crypto exchange business. But AB 39 changed the game.

AB 39 went through some major transformations in its journey to becoming law. Thanks to the wisdom and insights of industry pros like Joseph Ciccolo, it became crypto-friendly while still keeping a tight grip on consumer protection. Now, it’s up to the DFPI to put AB 39 into action by processing applications from crypto exchange heroes and keeping an eagle eye on their operations. While some might grumble about AB 39’s requirements being a tad stringent compared to places like Florida, Joseph’s primary concern is the speed and fairness of application processing.

In addition to keeping a general eye on various cryptocurrencies, AB 39 zooms in on the unstable world of stablecoins. The legislation throws down the gauntlet, setting specific rules for issuing or supporting these shaky digital assets. Why, you ask? Well, the powers that be see them as a bit of a wild card in the crypto deck, especially after incidents like Terra Luna’s rollercoaster ride.

Now, what’s the crypto community’s take on AB 39? Well, it’s a mixed bag of reactions, with folks sitting on the edge of their digital seats, eager to see how the DFPI will make things happen. Joseph Ciccolo, our compliance champion, underlines the importance of doing your homework and assessing the risks before you play with the tokens on these exchanges. He compares California’s approach to other states’ take on regulation. While California’s way might be seen as a bit of a tough cookie with its requirements, Ciccolo hammers home the need for a speedy process and honest oversight.

The vibe in the crypto space is kind of like a party with a surprise guest. Some are excited, while others are wary of what’s to come. Ciccolo points out that crypto exchanges must not only register with FinCEN at the federal level but also collect licenses from every state they do business in.

Now, let’s talk about Bitcoin ATMs. They’re not immune from licensure under AB 39. Above and beyond that, operators must also submit to specific, targeted requirements under a companion bill, SB 401. This bill throws down some rules, including daily transaction limits, fee boundaries, and the need for disclosure. Ciccolo isn’t all sunshine and rainbows about these limits, especially the $1,000 daily cap, which might make reporting shady business to the authorities a bit tricky. He also points out that crafty scammers could start bouncing between multiple Bitcoin ATMs. It’s like a game of cat and mouse. And then there are the watchful eyes of regulatory agencies like the Consumer Financial Protection Bureau (CFPB), along with the DFPI, making sure the fees are disclosed for the safety of the consumers. Bitcoin ATMs are now playing in the big leagues, subject to the same scrutiny as other financial institutions. Ciccolo predicts a squeeze in new players entering the game due to regulations but foresees the big shots growing by snatching up or expanding their turf.

Joseph raises an important question about noncustodial exchanges. They weren’t in AB 39’s spotlight, but the conversation is on. The decision-makers didn’t want to leave any loopholes open, so they added an exemption clause rather than drawing a distinction between custodial and noncustodial exchanges. The DFPI has the authority to grant exemptions based on the greater good of California’s residents. Joseph doesn’t think crypto users will be rushing towards decentralized finance (DeFi) solutions anytime soon, given their limited mainstream adoption. But, with these new compliance demands, some exchanges might wave goodbye to certain states like California, leaving consumers with fewer choices.

So, what’s the measure of success for AB 39? It’s all about zipping through applications efficiently and keeping a close watch on the companies playing by the rules. Joseph suggests taking New York’s BitLicense as the gold standard. But he’s adamant about regulatory agencies going beyond just issuing licenses. To those who prefer anonymity and shun regulations in the crypto realm, Joseph hears you, but he firmly believes that rules are a must to safeguard the interests of the crypto crowd.


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