Key Takeaways
- The bill mandates that crypto companies operating in California must obtain a license.
- The new regulations are scheduled to take effect in January 2025.
California Governor Gavin Newsom has given the green light to a significant crypto bill, a milestone in the state’s evolving crypto landscape.
This new legislation, known as the Digital Financial Assets Law, ushers in a structured regulatory framework for the state’s burgeoning crypto industry. The bill, which was initially passed by the California legislature in August, mandates that crypto companies operating in California must obtain a license. This move comes in response to the increasing concerns stemming from the market turbulence and the FTX exchange collapse in the past year.
Given the uncertain federal regulatory climate, California has taken it upon itself to provide a foundation for the crypto industry’s regulation. Governor Newsom, a vocal advocate for blockchain and crypto technologies, had previously rejected a similar bill, expressing concerns about its resemblance to New York’s stringent BitLicense regulation.
With the Digital Financial Assets Law, California positions itself at the forefront of state-level crypto regulation, providing a clear and structured framework for crypto industry participants, all under the watchful eye of the DFPI. As the crypto landscape continues to evolve, the Golden State’s role in shaping its future remains significant.
Under the new Digital Financial Assets Law, both individuals and firms engaging in digital asset business activities in California will be required to obtain a license from the Department of Financial Protection and Innovation (DFPI).
The legislation draws from California’s money transmission laws, ensuring that banking and transfer services within the state operate with the necessary licenses from the DFPI commissioner.
Crucially, this bill grants the DFPI authority to impose rigorous audit requirements on crypto firms and necessitates the maintenance of comprehensive records for at least five years, including a monthly general ledger detailing assets, liabilities, capital, income, and expenses.
The new regulations are scheduled to take effect in January 2025, affording crypto companies ample time to adapt to these changes.
An essential facet of this law is its extended oversight to include stablecoins, mandating that they must either be issued by a bank or licensed by the California Department of Financial Protection and Innovation.
Furthermore, non-compliance with this crypto bill will result in enforcement measures.
While the bill sailed through the California State Assembly without opposition, Governor Newsom’s decision to sign it is a stark departure from his previous stance in 2022 when he declined to sign a similar bill aimed at establishing a regulatory framework for digital assets in the state.
