California Governor Signs Digital Financial Asset Law! Effective July 2025

California's "Digital Financial Assets Law," which is seen as an imitation of New York's "BitLicense," was passed by the state's legislature last year. Governor Gavin Newsom has now signed it into law, and it will take effect in July 2025. This marks California's second attempt at introducing cryptocurrency business regulations. However, the bill has been controversial since its proposal.

The Digital Financial Assets Act to Take Effect in 2025

On October 13, California Governor Gavin Newsom signed into law the Digital Financial Assets Act, a cryptocurrency company licensing bill that was passed by the state legislature in September 2022 and is set to take effect in July 2025.

The act is seen as a cryptocurrency regulatory measure modeled after the "BitLicense" implemented by New York State in June 2015.

This is California's second attempt to establish a system similar to "BitLicense." The previous attempt to regulate cryptocurrency businesses with AB-1326 in 2015 was shelved and failed due to opposition from state senators.

The statement notes that the Digital Financial Assets Act will require the California Department of Financial Protection and Innovation (DFPI) to develop a cryptocurrency regulatory framework that includes company licensing and empowers the department to enforce and formulate regulations related to the cryptocurrency industry.

Additionally, the DFPI has been granted an 18-month implementation period to ensure the regulatory framework can adapt to industry trends and minimize harm to consumers.

In a statement, Newsom stated:

The bill still has some unclear definitions of technical terms, and the scope of regulation will need further precise delineation in the future to provide clear guidance for consumers, regulatory agencies, and businesses subject to the new regulatory framework.

He emphasized, "It is important that we strike the right balance in the implementation of the bill to protect consumers from harm while also fostering innovation. I am confident that we can work together with the bill's sponsors to achieve this goal."

Criticism of Excessive Restrictions?

As the initiator of the bill, California State Assembly Member Timothy Grayson previously stated the legislative rationale:

The novelty of cryptocurrency makes investing attractive, but it also increases risks for investors; and the regulation of crypto businesses is still inadequate and incomplete, so rules that do not necessarily need to be followed or applied to others.

However, the extent of its restrictions has been heavily criticized, with the trade organization Blockchain Association previously stating:

The cumbersome reporting requirements in the bill are burdensome restrictions that will hinder the operational capabilities and development of crypto businesses and drive many companies and job opportunities out of the state.

What is BitLicense?

"BitLicense" is a cryptocurrency business licensing regime introduced in New York State to regulate the operation of crypto companies in the region, requiring specific licenses and oversight.

The system was first proposed in 2013 and launched by the New York Department of Financial Services (NYDFS) in June 2015, recognized as an expensive license in the crypto space, leading many crypto companies to choose to leave New York State.