In a significant move, California Governor Gavin Newsom has given the green light to a cryptocurrency bill that imposes stricter regulations on businesses involved in crypto operations. The regulations are set to come into effect in July 2025.
The bill, known as the “Digital Financial Assets Law,” mandates that both individuals and companies engaged in digital asset-related activities must obtain a license from the Department of Financial Protection and Innovation (DFPI). This requirement aligns with California’s existing money transmission laws, which prohibit banking and transfer services from operating without a DFPI commissioner-granted license.
A notable feature of this new crypto bill is the authorization it grants to the DFPI. The department will be able to impose rigorous audit requirements on crypto firms and compel them to maintain detailed financial records for at least five years. These records must include a comprehensive monthly general ledger listing all assets, liabilities, capital, income, and expenses of the licensee.
Furthermore, the bill stipulates that companies failing to comply with these regulations will face enforcement actions.
Notably, Newsom’s decision comes after he declined to sign a similar bill in 2022. At that time, he expressed concerns about the bill’s flexibility to adapt to the rapidly changing crypto landscape. Newsom had indicated that he preferred to wait for federal regulations to materialize before collaborating with the state legislature to establish comprehensive crypto licensing initiatives.
The move is part of the broader regulatory landscape in the United States, with various state and federal authorities considering measures to enhance oversight and security within the cryptocurrency industry. Recently, Rohit Chopra, the director of the Consumer Financial Protection Bureau, expressed his intention to authorize the application of the Electronic Fund Transfer Act to cryptocurrencies as a means to mitigate fraudulent transfers and enhance consumer protection.
Newsom’s approval of the Digital Financial Assets Law represents a significant step toward regulating the crypto industry and ensuring greater transparency and accountability among businesses operating in the sector. With this law set to take effect in 2025, California joins the ranks of states actively seeking to address the evolving challenges posed by cryptocurrencies and digital assets.
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