California Governor Gavin Newsom has greenlighted a new cryptocurrency regulation law that aims to create a stricter regulatory framework for crypto companies – set to come into effect in July 2025.
The legislation – known as the Digital Financial Assets Law – will require individuals and companies engaged in digital asset activities to obtain a license from the Department of Financial Protection and Innovation (DFPI) if they wish to continue operating in California.
Digital Financial Assets Act
The new regulations build on the state’s existing money transmission laws, which currently prohibit banking and transfer services from operating without a valid license issued by the DFPI Commissioner.
The Digital Financial Assets Law introduces additional measures by allowing the DFPI to impose strict audit requirements on cryptocurrency companies and require them to maintain comprehensive financial records.
In concrete terms, the bill stipulates that permit holders must keep records for a period of at least five years after the date of any activity. These records must include a detailed ledger that is updated at least monthly and includes all assets, liabilities, capital, income and expenses of the licensee.
Failure to comply with these requirements will result in enforcement action against non-compliant businesses.
Newsom is changing his position on the changing regulatory landscape
Passage of the crypto regulation bill marks a significant shift from Governor Newsom’s previous perspective on the issue.
In 2022, Newsom rejected a similar bill aimed at establishing a regulatory framework for digital assets in California, sending it back without signature over concerns that it lacked the flexibility needed to adapt to the rapidly evolving crypto landscape.
Newsom said at the time that it was wiser to wait for federal regulations before undertaking comprehensive crypto licensing initiatives in collaboration with the state legislature.
Meanwhile, the federal government has explored various regulatory approaches to improve security and oversight in the cryptocurrency industry.
One notable measure under consideration is the application of the Electronic Fund Transfer Act to cryptocurrencies as a means to combat fraudulent transfers. The Consumer Financial Protection Bureau recently announced its intention to adopt the measure to “reduce the harm caused by errors, hacks and unauthorized transfers.”
As California prepares to implement its digital financial assets law, it remains to be seen how this new regulatory landscape will impact the cryptocurrency industry within the state and whether it will set a precedent for further regulatory developments in the broader US market.
California’s post-governor approves strict crypto regulatory framework by 2025 appeared first on CryptoSlate.