California Governor Gavin Newsom has officially approved a groundbreaking crypto bill. This significant decision marks a notable shift in the regulatory landscape for digital assets. Known as the Digital Financial Assets Law, this legislation is scheduled to take effect in July 2025.
In a statement issued on Oct 13, Governor Newsom shared that the new law will mandate individuals and businesses engaged in crypto activities to obtain a license from the Department of Financial Protection and Innovation (DFPI).
The Digital Financial Assets Law draws upon California’s existing money transmission laws. Banking and transfer services are required to possess a DFPI-granted license to operate. However, this new legislation introduces additional and stringent requirements specifically tailored to the crypto industry.
Notably, the DFPI will have the authority to impose strict audit standards on cryptocurrency firms and compel them to maintain comprehensive records. According to the bill, license holders must keep detailed records for at least five years. This includes maintaining a monthly general ledger that documents all assets, liabilities, capital, income, and expenses.
Governor Newsom’s Crypto Reversal: The Digital Financial Assets Law
The bill includes a crucial provision aimed at effectively enforcing the new regulations. This demonstrates the state’s unwavering commitment to ensuring that businesses operating in the crypto sector adhere to the law.
Governor Newsom’s recent approval of the Digital Financial Assets Law marks a notable departure from his previous stance in 2022. During that time, he opted not to sign a similar bill to establish a regulatory framework for digital assets within California.
His decision was based on concerns about the bill’s adaptability to the rapidly evolving cryptocurrency landscape. Instead, Governor Newsom chose to await federal regulations before pursuing any state-level initiatives regarding crypto licensing.
In the realm of crypto regulation, the United States is actively exploring different approaches to enhance oversight. One avenue being considered is utilizing the Electronic Fund Transfer Act with cryptocurrency transactions. This strategic move aims to tackle fraudulent transfers effectively.
Rohit Chopra, Director of the Consumer Financial Protection Bureau, recently expressed his intent to authorize this action as a preventive measure against potential harm caused by errors, hacks, and unauthorized transfers.
These developments highlight the increasing significance of regulatory frameworks in governing the rapidly expanding cryptocurrency industry at both state and federal levels. The introduction of stricter regulations by California serves as a noteworthy example, raising curiosity about its future implications in the years to come.
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