California Governor Signs Cryptocurrency Regulation Law Effective in 2025

California is set to tighten the reins on cryptocurrency businesses starting from July 2025.

Find out how this could be a game-changer for the crypto-industry in California and possibly set a precedent for other states.

New Legislation to Tackle Cryptocurrency Challenges in California

California Governor Gavin Newsom has approved a stringent law imposing regulations on businesses dealing with cryptocurrencies, slated to take effect from July 2025.

In a statement released on October 13, Governor Newsom revealed that this legislation is named the "Digital Financial Asset Law."

The law mandates individuals and companies engaged in digital asset business activities to obtain a license from the Department of Financial Protection and Innovation (DFPI).

The document of the bill refers to California’s money transmission laws and prohibits banks and remittance services from operating without approval from the DFPI commissioner.

However, the new cryptocurrency bill stipulates that the DFPI can impose strict auditing requirements on cryptocurrency businesses and enforce compliance with record-keeping regulations. The statement elaborates as follows.

The law requires those with a license to maintain a general ledger for at least five years from the date of activity.

This ledger must be updated at least monthly and should list all assets, liabilities, capital, income, and expenses.

Moreover, it's clearly stated that penalties will be imposed on companies that do not adhere to the law.

Previous Rejection of Similar Laws

Interestingly, around the same time in 2022, Governor Newsom had rejected a similar bill aimed at establishing a framework for licensing and regulation of digital assets in California.

The Governor stated that he would "return the bill without my signature," pointing out that the bill was not flexible enough to adapt to rapidly changing cryptocurrency trends.

He had indicated a preference for waiting for federal regulations to fall into place before collaborating with the legislature to establish a licensing system for cryptocurrencies.

In a recent speech, Rohit Chopra, the Director of the Consumer Financial Protection Bureau, stated that the authorization is intended to "reduce damages caused by errors, hacking, and unauthorized remittances."