California Governor Approves Stricter Crypto Regulation Bill for 2025

California Governor Gavin Newsom has sanctioned a crypto regulation bill that imposes stricter rules on businesses conducting crypto transactions, slated to commence in 18 months.

In a statement released on October 13, Newsom announced that the crypto regulation bill, referred to as the 'Digital Financial Assets Law,' will necessitate both individuals and companies to acquire a license from the Department of Financial Protection and Innovation (DFPI) in order to participate in digital asset operations. The bill is set to take effect on July 1, 2025.

The bill draws parallels with California's money transmission laws in legal documents, which prohibit banking and transfer services from functioning without a license sanctioned by the DFPI Commissioner.

However, the new crypto regulation bill will authorize the DFPI to enforce rigorous auditing requirements on crypto firms and compel them to adhere to record-keeping mandates. The statement indicated:

“[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.”

It additionally clarifies that firms failing to comply with the bill will be subject to enforcement actions.

Approximately a year ago, Newsom opted not to endorse a similar bill designed to establish a licensing and regulatory structure for digital assets in California.

Despite the bill passing through the California State Assembly without opposition, Newsom conveyed that he was returning the bill "without my signature."

Newsom suggested that the bill lacked flexibility to keep pace with rapidly changing crypto trends.

At the time, Newson articulated that he was awaiting federal regulations to be implemented before collaborating with the legislature to establish crypto licensing initiatives.

Meanwhile, the U.S. is exploring the potential application of the Electronic Fund Transfer Act (ETFA) to crypto as a means to counter fraudulent transfers.

In a recent speech, Rohit Chopra, the director of the Consumer Financial Protection Bureau (CFPB), conveyed his intention to authorize this in order to "minimize the harm of errors, hacks, and unauthorized transfers."