California Governor Gavin Newsom has given his approval to a groundbreaking cryptocurrency bill, marking a significant step towards regulating the rapidly evolving digital asset landscape. The new legislation, known as the Digital Financial Assets Law, is set to take effect in July 2025, ushering in a series of stringent regulations for individuals and businesses involved in cryptocurrency operations.
In an official statement released on October 13th, Governor Newsom emphasized the necessity of this bill to ensure financial protection and innovation in the state. Under the new law, anyone wishing to engage in digital asset business activities, be it individuals or companies, will be mandated to obtain a license from the Department of Financial Protection and Innovation (DFPI).
The legislation, in large part, draws upon California’s existing money transmission laws, which dictate that banking and transfer services cannot operate without proper authorization from the DFPI commissioner. However, what sets this bill apart is the authority it grants the DFPI to enforce rigorous audit requirements and maintain a thorough record of financial transactions. It specifies that licensees must maintain detailed records, including a general ledger updated monthly, listing all assets, liabilities, capital, income, and expenses for a period of five years from the date of each transaction.
The bill’s enforcement measures underscore the seriousness of compliance, making it clear that businesses failing to adhere to these regulations will face significant penalties and consequences. This is a notable shift from Governor Newsom’s stance just a year prior when he declined to sign a similar bill, citing concerns about its adaptability to the swiftly changing crypto landscape.
Newsom then expressed a preference for waiting until federal regulations provided a more comprehensive framework. This new development signifies California’s proactive stance in regulating digital assets, creating a potentially influential model for other states to follow.
As the United States explores measures like applying the Electronic Fund Transfer Act to cryptocurrencies, the broader financial landscape is experiencing a push for tighter regulations to combat fraudulent transfers and ensure the security of crypto transactions. The director of the Consumer Financial Protection Bureau, Rohit Chopra, has recently expressed his intention to authorize such measures to minimize the risks of errors, hacks, and unauthorized transfers in the crypto space. These developments reflect a growing awareness of the need for digital asset regulation to protect consumers and maintain financial integrity.