California takes a new crucial step in regulating memecoins and digital assets linked to California elected officials. The AB 2409 project, led by Avelino Valencia, distinguishes the rules applicable to public officials and digital suppliers. After its adoption by the Senate on August 26, the Assembly validated the amendments unanimously. The text must still go through the final formalities before being examined by Governor Gavin Newsom. It targets in particular the issuance of tokens by certain persons exercising public authority in California. A targeted ban on public officials
In brief
- The California Senate passed AB 2409, a bill to prohibit public officials from issuing derivative currencies.
- The Assembly unanimously validated the amendments, with 78 votes in favor and no against, before Governor Gavin Newsom’s review.
- The measure targets elected officials and certain public employees, particularly those with decision-making power over contracts and calls for tenders.
- The text aims to prevent conflicts of interest, risks of corruption and circumvention of financial transparency rules.
A targeted ban on public officials
AB 2409 would prohibit any public official or relevant public sector employee from issuing a derivative currency. The rule targets memecoins when a public official offers a token for value. The text considers as emission any provision of a token for purchase, donation or exchange. This definition applies even without promotion of the project.
The definition of public official in the text covers those elected or appointed at the state and local level. It includes members of the California Legislature, as well as members of boards, commissions and advisory committees. Memecoins are therefore not the only element targeted, since the measure relates more broadly to derivative currencies.
The provision concerning public employees adopts a more restricted scope. It concerns employees of government entities with decision-making power over calls for tenders and contracts. The bill would add these prohibitions to a new chapter of the California Government Code on prohibited digital financial transactions.
The law aims to limit conflicts of interest
California lawmakers justify this restriction through the use of public authority. According to the text, public officials should not exploit their position to enrich themselves. Issuing or promoting memecoins could create conflicts of interest and corruption risks. The device also evokes exploitation and foreign influence.
Avelino Valencia had already defended this logic in April, during the examination of the project by the Banking and Finance Committee of the Assembly. He explained that the platforms facilitated the creation of cryptocurrencies based on memes. According to him, this facility could allow people with bad intentions to circumvent certain existing rules. These rules concern financial transparency and conflicts of interest.
In this context, memecoins become a particular case of the debate on the political use of digital assets. The law does not only target meme-inspired tokens, however. Its mechanism is based on the status of the person issuing a currency and on their public power. The text therefore seeks to frame the relationship between public service, digital transactions and financial interests.
Vote paves way for governor’s review
The California Senate passed AB 2409 on August 26. The Assembly then approved the Senate’s amendments by 78 votes to zero. After this step, the text was sent for editing. It must now be submitted to Governor Gavin Newsom.
The timing comes as some memecoins linked to public officials have sparked losses. THE report from Public Citizen estimates losses for investors in the Official Trump token at $3.2 billion. The majority of these losses would remain latent. TRUMP ranks fifth among memecoins, with a capitalization of $688 million according to data from CoinMarketCap.
Over the last week mentioned, TRUMP had progressed by 53%. This increase came after a drop of 67% over the past year. The Trump family’s activities in cryptocurrencies have also created obstacles 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 final steps. If the text continues, Memecoins issued by public officials could be subject to a specific ban in California. AB 2409 would thus strengthen the regulation of cryptocurrencies by establishing a limit between public service and the issuance of digital currencies. Its evolution will indicate how the State intends to regulate these instruments in the future.
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