California Governor Approves ‘Digital Financial Assets Law’ For Crypto Regulations

California Governor Approves ‘Digital Financial Assets Law’ For Crypto Regulations

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In a significant development for the crypto world, California Governor Gavin Newsom has given the green light to a cryptocurrency bill that ushers in more stringent regulations for businesses involved in crypto operations. This legislative move, titled the ‘Digital Financial Assets Law,’ has a clear message: crypto in the Golden State is about to transform.

In a recent crypto announcement released on October 13, Newsom proclaimed that the legislation, known as the ‘Digital Financial Assets Law,’ will compel both individuals and businesses to secure a Department of Financial Protection and Innovation (DFPI) license for involvement in digital asset business activities. This game-changing legislation is slated to take effect on July 1, 2025, giving entities 18 months to prepare for compliance.

This new crypto bill introduces even more rigor by drawing parallels to California’s money transmission laws, prohibiting banking and transfer services from operating without a DFPI Commissioner-granted license. The DFPI will be able to impose rigorous audit requirements on crypto firms and obligate them to maintain meticulous records. The statement explicitly stipulates:

“[This bill] would require a licensee to maintain […] for 5 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.”

California’s Crypto Regulatory Shift

It’s worth noting that roughly a year ago, Governor Newsom rejected a similar bill to establish a licensing and regulatory framework for digital assets in California. His primary objection then was its inflexibility in adapting to the rapidly evolving crypto landscape. Newsom preferred to wait for federal regulations to take shape before collaborating with the legislature on crypto licensing initiatives.

In a broader national context, the United States is also contemplating extending the reach of the Electronic Fund Transfer Act (ETFA) to cryptocurrencies. This move is designed to combat fraudulent transfers and bolster consumer protection. Rohit Chopra, Director of the Consumer Financial Protection Bureau (CFPB), has voiced his support for this initiative, highlighting its potential to “reduce the harm caused by errors, hacks, and unauthorized transfers.”

As California pioneers more stringent crypto regulations, the industry’s landscape is set for a significant transformation. With these changes, crypto businesses must adapt to a new era of compliance and oversight. In contrast, the broader crypto community keeps a watchful eye on developments at both state and federal levels.

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