California Governor Gavin Newsom has given the green light to a new cryptocurrency bill that will usher in stricter regulations for businesses engaged in cryptocurrency activities, slated to take effect in July 2025.
In an announcement made on October 13th, Newsom revealed that the legislation, officially titled the Digital Financial Assets Law, will necessitate both individuals and companies to obtain a Department of Financial Protection and Innovation (DFPI) license if they intend to participate in digital asset-related business activities.
This move builds upon California’s existing money transmission laws, which already prohibit financial and transfer services from operating without proper licensing from the DFPI commissioner.
The Digital Financial Assets Law goes a step further by empowering the DFPI to impose robust audit requirements on cryptocurrency firms and compel them to maintain detailed financial records.
According to the bill, licensees must maintain records, including a comprehensive general ledger updated at least monthly, listing all assets, liabilities, capital, income, and expenses for a minimum of five years following each activity.
The legislation also underlines that non-compliance will result in enforcement actions against offending firms.
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Interestingly, in a similar timeframe in 2022, Governor Newsom declined to endorse a comparable bill designed to establish a regulatory framework for digital assets within California.
Even though the bill had garnered unanimous support in the California State Assembly, Newsom opted not to sign it, explaining that it lacked the adaptability needed to keep pace with the swiftly evolving cryptocurrency landscape.
Instead, he expressed his preference for waiting until federal regulations were in place before collaborating with the legislature to formulate comprehensive cryptocurrency licensing measures.
This development aligns with broader discussions within the United States about extending existing financial regulations, like the Electronic Fund Transfer Act, to encompass cryptocurrencies as a means of combating fraudulent transfers.
Rohit Chopra, the director of the Consumer Financial Protection Bureau, recently voiced his intention to grant such authorization, aiming to minimize the risks associated with errors, hacks, and unauthorized cryptocurrency transfers.
In summary, California’s Digital Financial Assets Law, set to take effect in July 2025, represents a significant step forward in regulating cryptocurrency activities, requiring licensing for individuals and businesses and introducing stringent audit and record-keeping requirements to ensure compliance with financial regulations.
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