Newsom’s backing of the crypto regulation bill signals a major shift from his past position. California’s crypto industry readies for reforms with Governor Newsom’s approval of a groundbreaking regulatory bill.
The bill will transform the state’s digital asset landscape significantly. The Digital Financial Assets Law, a newly approved account, is scheduled to become effective in July 2025. This legislation imposes stringent rules on crypto activities for individuals and businesses in the state.
Furthermore, the bill’s provisions require all crypto entities to obtain a license from the Department of Financial Protection and Innovation (DFPI). They ensured state compliance, bolstered consumer protection, and fostered secure crypto innovation within a comprehensive regulatory framework.
Governor Newsom’s October 13 statement announced a new crypto bill empowering DFPI to regulate regional crypto activities. The implementation date is 18 months, giving ample time to tailor the regulatory framework and address industry trends. This will ensure the safeguarding of consumers from potential harm.
The DFPI, per legislative docs, gains authority under the new law for strict audits of cryptocurrency firms. These firms are now obligated to maintain detailed financial records in adherence to this comprehensive legislation.
[This bill] would require a licensee to maintain […] for five years after the date of the activity, certain records, including a general ledger maintained at least monthly that lists all assets, liabilities, capital, income, and expenses of the licensee.
The development comes as an expansion of the state’s money transmission laws. These laws currently only allow banking and transfer services to function with a valid license issued by the DFPI commissioner.
California’s 2025 Crypto Recognition Bill: Terms & Conditions
The legislative document also states that starting in 2025, the State of California will acknowledge cryptocurrencies as digital representations of value. These digital assets are used for transactions, accounting purposes, and storing wealth, but they are not considered legal tender. However, this recognition comes with certain specified conditions.
The bill has been scheduled to take effect on July 1, 2025. However, its enforcement depends on the enactment and effectiveness of the state’s Senate’s Bill Act SB 401 from the 2023-24 Regular Session. This act must be implemented on or before January 1, 2024.
Moreover, if, the new requirements are put into effect, and any failure to comply will lead to rigorous enforcement measures. This approach underscores a firm stance against lenient adherence within the sector.
The department can enforce actions on unlicensed entities in digital finance, safeguarding financial asset business integrity and security. This includes cases where a licensee or non-licensee violates the bill’s provisions, rules, or issued orders. They do this while conducting such activities for residents in certain circumstances.
In a significant shift from his previous stance, Governor Newsom’s endorsement of the crypto regulation bill marks a notable departure. Newsom rejected a bill for regulating digital assets in California just last year, highlighting the significance of this decision.
The Governor, at that time, expressed concerns about the lack of flexibility in the bill to adapt to the rapidly changing crypto landscape. The governor advises patience for federal crypto rules before pursuing robust state licensing efforts with the legislature.