California Governor Gavin Newsom has signed a new cryptocurrency bill that introduces stricter regulations for businesses involved in crypto operations. The bill, called the ‘Digital Financial Assets Law,’ will require both individuals and firms to obtain a license from the Department of Financial Protection and Innovation (DFPI) to engage in digital asset business activities. The new regulations are set to take effect on July 1, 2025.
In a statement released on October 13, Newsom highlighted the need for increased oversight in the crypto industry. He compared the new regulations to California’s existing money transmission laws, which require licenses from the DFPI Commissioner for banking and transfer services. The Digital Financial Assets Law will empower the DFPI to impose rigorous audit requirements and mandate the maintenance of detailed records by crypto firms. These records must include a general ledger that lists all assets, liabilities, capital, income, and expenses for a period of at least five years.
Non-compliance with the new legislation will result in enforcement actions against firms. It should be noted that last year, Newsom declined to sign a similar bill aimed at establishing a licensing and regulatory framework for digital assets in California. At that time, he expressed concerns that the bill lacked flexibility to keep pace with the rapidly evolving crypto industry.
Newsom stated that he was waiting for federal regulations to be established before working with the legislature on crypto licensing initiatives. The possibility of applying the Electronic Fund Transfer Act (ETFA) to crypto as a measure to combat fraudulent transfers is currently being explored in the U.S. This regulatory approach, if implemented, aims to reduce the harm caused by errors, hacks, and unauthorized transfers in the crypto market.
The introduction of stricter regulations in California reflects a growing trend of governments worldwide taking a closer look at the crypto industry. In his recent speech, Rohit Chopra, the director of the Consumer Financial Protection Bureau (CFPB), expressed his intent to authorize measures that can protect consumers from potential risks associated with cryptocurrencies.
The new cryptocurrency bill in California signifies an important step towards creating a more secure and transparent environment for digital asset business activities. By enforcing stricter regulations and imposing record-keeping requirements, the state aims to enhance accountability and protect investors and consumers in the rapidly expanding crypto market. These measures are expected to foster trust and confidence in the industry, ultimately leading to its further growth and development.