California State Governor, Gavin Newson, recently approved new cryptocurrency regulations for the state of California that will take effect in July 2025. The regulations aim to strengthen and promote crypto business regulations in the West Coast state and are known as the Digital Financial Assets Act.
In short, the new crypto regulations will require all businesses and individuals who want to operate in crypto activities to obtain a license if they want to continue crypto operations in California after the law comes into effect in 2025. Licenses will be issued by the Department of Financial and Innovation Protection (DFPI). Newson’s newly passed crypto law gives DFPI certain authority, like allowing them to implement strict audit requirements or require companies to store comprehensive records for DFPI’s review.
These regulations are seen as a step forward for California, which already has a bustling cryptocurrency market. While these new rules will allow the government to monitor and regulate crypto activity, they should not hinder reputable crypto development.
California residents already use cryptocurrency in a variety of ways. Investing in crypto is most common, with businesses and individuals alike purchasing crypto as a store of value and considering it a long-term investment. Other crypto holders in the state use digital currency for purchases. Consumers can purchase goods and services online using digital currency, from shopping at high-end stores like Gucci to booking global travel. Furthermore, gamers can play and wager online using cryptocurrency, however, because online betting is not yet legal in California, gambling fans often use international betting sites to play with crypto. Jonathan Askew from Techopedia notes that players in California can use international betting sites to access a variety of games and payment options, like crypto. Beyond using cryptocurrency for purchases, like gaming at crypto casinos and buying physical items, California residents have also been noticing a growing number of crypto and Bitcoin ATMs popping up around the state, making access to crypto easier than ever before. With so many ways for Californians to buy, spend, and trade cryptocurrency, it is no wonder the state government is putting regulations in place.
The regulations that Newsom recently approved will help state officials monitor the plethora of crypto activity already occurring in the Golden State and curb crypto crime at the same time. Crypto license holders will be required to keep a detailed record of transactions for five years after each transaction occurs. Failure to comply with this or any of the other rules could end with licenses being revoked or law enforcement activities against the non-compliant companies.
Non-compliance with the new crypto regulations comes with heavy penalties from the state government. If an entity is not licensed after July 2025, the DFPI is able to charge fines up to $100,000 per day, for each day the non-licensed entity violates the new regulations. In addition, the DFPI can fine licensed entities up to $20,000 per day if a material violation occurs. With such hefty fines, businesses are sure to quickly comply with the rules outlined in the new regulations in an effort to avoid being fined.
The new regulations will apply to any person or business that engages in exchanging, transferring, or storing digital financial assets, engages in digital financial asset administration, holds electronic certificates, or exchanges digital representations of value when gaming online. Some groups are exempt from the new rules. Those groups include banks, credit unions, trust companies, government agencies, software providers, Commodity Exchange Act entities, and those whose digital financial asset transactions are less than $50,000 per year.
Interestingly, Newsom rejected similar proposed crypto regulations in 2022, stating that they were too restrictive for the crypto market, which is constantly changing and growing. Between 2022 and the current day, Newsom’s approach and opinion on the matter changed, with him now firmly backing the new Digital Financial Assets Act that will take effect in July 2025. The shift in opinion may have resulted from California’s growing crypto adoption, and being identified as the biggest crypto market in the US. Even with firm backing, the new regulations may see small tweaks and changes as California approaches the July 2025 deadline. During his own announcement about the Digital Financial Assets Act, Government Newsom mentioned that some of the terms in the regulations were ambiguous and that upon implementation, the law may require refinement
