Memecoins: California Adopts a Law Banning Their Issuance by Public Officials

California takes a new crucial step in regulating memecoins and digital assets linked to Californian elected officials. Bill AB 2409, led by Avelino Valencia, distinguishes rules applicable to public officials and digital providers. After its adoption by the Senate on August 26, the Assembly unanimously validated the amendments. The bill still has to go through final formalities before being reviewed by Governor Gavin Newsom. It notably targets the issuance of tokens by certain individuals exercising public authority in California. A targeted ban for public officials

A targeted ban for public officials

Bill AB 2409 proposes to prohibit any public official or concerned public sector employee from issuing a derivative currency. The rule targets memecoins when a public official offers a token in exchange for value. The bill considers issuance any making available of a token for purchase, gift, or exchange. This definition applies even without project promotion.

The definition of public official in the text covers individuals elected or appointed at the state and local government levels. It includes members of the California Legislative Assembly, as well as members of councils, commissions, and advisory committees. Memecoins are therefore not the only element targeted, as the measure more broadly addresses derivative currencies.

The provision concerning public employees adopts a narrower scope. It concerns employees of government entities holding decision-making power over calls for tenders and contracts. The bill would add these prohibitions to a new chapter of the California Government Code regarding prohibited digital financial transactions.

The law aims to limit conflicts of interest

California lawmakers justify this restriction by citing the use of public authority. According to the text, public officials should not exploit their position to enrich themselves. The issuance or promotion of memecoins could create conflicts of interest and risks of corruption. The provision also mentions exploitation and foreign influence.

Avelino Valencia had already defended this logic in April during the bill’s review by the assembly’s banking and finance committee. He explained that platforms facilitated the creation of cryptocurrencies based on memes. According to him, this ease could allow ill-intentioned individuals to circumvent existing rules. These rules concern financial transparency and conflicts of interest.

In this context, memecoins become a specific case in the debate over the political use of digital assets. However, the law does not only target tokens inspired by memes. Its mechanism relies on the status of the person issuing a currency and their public authority. The bill therefore seeks to regulate the relationship between public service, digital transactions, and financial interests.

The vote paves the way for the governor’s review

The California Senate adopted AB 2409 on August 26. The Assembly then approved the Senate’s amendments by 78 votes to none. After this stage, the bill was sent for finalization. It must now be submitted to Governor Gavin Newsom.

The timing comes as some memecoins linked to public officials have caused losses. The report from Public Citizen estimates losses for investors in the Official Trump token at 3.2 billion dollars. The majority of these losses would remain hidden. TRUMP ranks fifth among memecoins, with a market capitalization of 688 million dollars, according to CoinMarketCap data.

In the most recent week mentioned, TRUMP had increased by 53%. This rise followed a 67% drop over the past year. The Trump family’s activities in cryptocurrencies have also created challenges around the US CLARITY Act. A bipartisan, non-public ethics amendment could allow Trump to defer capital gains tax on mandatory sales.

Everything now depends on the governor’s review and the final stages. If the bill continues its course, memecoins issued by public officials could be specifically banned in California. AB 2409 would thus strengthen cryptocurrency regulation by establishing a boundary between public service and digital currency issuance. Its development will indicate how the state intends to regulate these instruments in the future.

Ghiles A.

Journaliste et rédacteur web passionné par l’univers des cryptomonnaies et des technologies Web3. J’y traite les dernières tendances et actualités afin de proposer un contenu de haute qualité à un large public du secteur.

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The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.