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Governor Newsom's Approval Signals New Era of Crypto Regulation in California

Governor Newsom's green light to the Digital Financial Assets Law paves the way for stricter cryptocurrency regulations in California from July 2025.

Governor Newsom has green-lit the Digital Financial Assets Law.
Credit: Shutterstock Copyright: 2018 Ms. Li/Shutterstock.

SACRAMENTO - Governor Gavin Newsom has given his approval to the Digital Financial Assets Law, a landmark piece of legislation poised to reshape the state's crypto regulatory landscape.


With this new law, which comes into effect in July 2025, California seeks to establish a more rigorous framework for cryptocurrency businesses, marking a departure from the governor's previous stance and reflecting the evolving dynamics of the crypto sector.


The Digital Financial Assets Law


California's cryptocurrency landscape is set to undergo a significant transformation with the approval of the Digital Financial Assets Law.


The new law introduces a set of rules and requirements that individuals and businesses engaged in digital asset activities must adhere to, mirroring the regulatory standards imposed on traditional financial institutions like banks and money transmitters.


The Digital Financial Assets Law builds upon California's existing money transmission laws, which already mandate that banking and transfer services acquire a valid license issued by the Department of Financial Protection and Innovation (DFPI) commissioner.


However, the new legislation goes further by granting the DFPI greater authority to enforce compliance. This includes the power to impose rigorous audit requirements on cryptocurrency firms and oblige them to maintain comprehensive financial records.


Licensees will be required to keep meticulous records for a minimum of five years following any financial activity. These records must contain a detailed general ledger updated at least monthly, covering all aspects of their financial operations, such as assets, liabilities, capital, income, and expenses. Failure to meet these stringent requirements will result in enforcement measures being taken against non-compliant cryptocurrency businesses.


Strengthening Oversight and Compliance


This decisive move towards stricter regulations in California comes as Governor Newsom revises his stance on cryptocurrency. Previously, he had rejected a similar bill in 2022, citing concerns about the need for flexibility in the rapidly evolving crypto landscape and the importance of waiting for federal regulations.


In the meantime, the federal government has been exploring various regulatory approaches to enhance security and oversight in the cryptocurrency industry, including the application of the Electronic Fund Transfer Act to combat fraudulent transfers.


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