This legislation will require crypto companies to comply with licensing prerequisites, uphold financial records, and grant regulators the power to perform audits.
Governor Gavin Newsom of California has given the green light to a cryptocurrency bill that imposes more stringent regulations on businesses involved in crypto operations, scheduled to take effect in 18 months.
In a statement released on October 13, Newsom announced that the bill, known as the ‘Digital Financial Assets Law,’ will require both individuals and companies to acquire a Department of Financial Protection and Innovation (DFPI) license to participate in digital asset-related activities.
The bill is set to be enacted on July 1, 2025
The legislative documents liken it to California’s money transmission laws, which prohibit banking and transfer services from operating without a license issued by the DFPI Commissioner.
However, the new crypto bill will grant the DFPI the authority to impose rigorous audit standards on cryptocurrency companies and mandate them to maintain comprehensive record-keeping. The statement mentioned:
“This bill necessitates that a licensee must keep records, including a general ledger updated at least monthly, which comprehensively documents all assets, liabilities, capital, income, and expenditures of the licensee for a period of 5 years after the date of the activity.”
The bill also specifies that companies failing to adhere to its provisions will be subject to enforcement actions.
Around the same time last year, Newsom refrained from signing a comparable bill designed to establish a licensing and regulatory structure for digital assets in California. Although the bill had successfully passed through the California State Assembly without opposition, Newsom stated that he was returning the bill “without my signature.”
Newsom mentioned the previous bill lacked flexibility to adapt to crypto’s rapid changes. He’s waiting for federal regulations before establishing state licensing.
The U.S. explores applying the Electronic Fund Transfer Act (ETFA) to combat fraudulent crypto transfers, a move endorsed by CFPB’s director, Rohit Chopra.
