Governor Newsom’s endorsement of the crypto regulation bill represents a significant departure from his previous stance.
California’s crypto industry is bracing for significant changes as Governor Gavin Newsom signs off on a groundbreaking regulatory bill expected to revamp the state’s digital asset landscape.
The newly approved bill, the Digital Financial Assets Law, is slated to come into force in July 2025, bringing forth a series of stringent regulations for individuals and businesses engaged in crypto-related activities within the state.
Under the provisions of the bill, all crypto entities will be mandated to obtain a license from the Department of Financial Protection and Innovation (DFPI) to ensure compliance with the state’s comprehensive regulatory framework. The move aims to bolster consumer protection and foster a more secure and responsible environment for crypto innovation.
California to Enforce Robust Auditing for Crypto Companies
In an official statement on October 13, Governor Newsom said the new crypto bill provides the DFPI the authority to police crypto-related activities in the region with an 18-month implementation date to ensure the adopted regulatory framework can be thoughtfully tailored to address industry trends and mitigate consumer harm.
According to the legislative documents, the new law also empowers the DFPI to enforce robust audit obligations on crypto firms and mandates them to uphold comprehensive financial records. It reads:
“[This bill] would require a licensee to maintain […] for five 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.”
The development comes as an expansion of the state’s money transmission laws, which currently restrict banking and transfer services from functioning without a valid license issued by the DFPI commissioner.
DFPI to Take Enforcement Measures against Defaulters
The legislative document also revealed that the State of California would recognize cryptocurrencies as a “digital representation of value that is used as a medium of exchange, unit of account, or store of value, and that is not legal tender, whether or not denominated in legal tender, except as specified” under the new rules coming into effect in 2025.
While the bill was stipulated to commerce on July 1, 2025, and thereafter, it will only become effective when the state’s Senate’s Bill Act SB 401 of the 2023–24 Regular Session is enacted and takes effect on or before January 1, 2024.
If implemented, non-compliance with the new requirements will result in strict enforcement measures, signaling a no-tolerance approach to lax adherence within the sector.
“This bill would authorize the department to take an enforcement measure against a licensee or person that is not a licensee but has engaged, is engaging, or is about to engage in digital financial asset business activity with, or on behalf of, a resident in any of certain instances, including the licensee or person materially violates the provisions of the bill, a rule adopted or order issued under the bill.”
A Change of Heart
Meanwhile, Governor Newsom’s endorsement of the crypto regulation bill represents a significant departure from his previous stance. Last year, Newsom rejected a similar bill designed to establish a comprehensive regulatory framework for digital assets in California.
At the time, the Governor said the bill lacked the flexibility to accommodate the rapidly evolving crypto landscape. He proposed waiting for federal regulations before actively pursuing extensive crypto licensing efforts in conjunction with the state legislature.