California Governor Approves Crypto Licensing Bill
California Governor Gavin Newsom has signed a crypto licensing bill that will establish a regulatory framework for businesses operating in the crypto industry. The bill, called the Digital Financial Assets Law, mandates that individuals and firms obtain a license from the Department of Financial Protection and Innovation (DFPI) to continue operating in California. This law is similar to New York’s “BitLicense” and extends the state’s existing money transmission laws. It also grants the DFPI the authority to impose audit requirements on crypto firms and requires them to maintain comprehensive financial records.
Implementation Period and Record-Keeping Requirements
The DFPI has been given 18 months to implement the regulatory framework and adapt it to industry developments. The bill specifies that license holders must retain records for at least five years, including a detailed general ledger of all assets, liabilities, capital, income, and expenses. Failure to comply with these requirements will result in enforcement measures against non-compliant firms.
Governor Newsom’s Change of Heart
This approval marks a change in Governor Newsom’s stance on crypto regulation. In 2022, he chose not to sign a similar bill, expressing concerns about its flexibility in adapting to the evolving cryptocurrency market. However, he now believes it is essential to strike a balance between consumer protection and responsible innovation. The federal government is also exploring regulatory strategies for the crypto industry, such as applying the Electronic Fund Transfer Act (EFTA) to combat fraudulent transfers on cryptocurrency platforms.
Hot Take: California Takes Steps Towards Crypto Regulation
With Governor Newsom’s approval of the crypto licensing bill, California joins other states in establishing regulatory frameworks for the crypto industry. This move aims to protect consumers while fostering responsible innovation. While federal regulations are being considered, it is up to individual states to take action. The implementation of the Digital Financial Assets Law and the potential application of the EFTA to crypto platforms demonstrate a growing recognition of the need for oversight and security in the cryptocurrency space.
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