California to require cryptocurrency companies to be licensed

California to require cryptocurrency companies to be licensed

California is taking a page from New York’s cryptocurrency regulatory handbook

A new crypto licensing bill was signed into law by California Governor Gavin Newsom on Friday and will go into effect in July 2025. Regarded as California’s answer to New York’s “BitLicense,” the Digital Financial Assets Law was heavily criticized by the industry but was approved by the state Assembly in September 2022.

The new law requires California’s Department of Financial Protection and Innovation (DFPI) to adopt a new crypto regulatory framework. It will include a licensing authority and give the agency rules and enforcement control over the industry. The DFPI also receives an 18-month implementation period to guarantee that “the adopted regulatory framework can be thoughtfully tailored to address industry trends and mitigate consumer harm,” according to the letter.

“Ambiguity of certain terms and the scope of this bill will require further refinement in both the regulatory process and in statute to provide clarity to both consumers, regulators and businesses subject to this new licensure framework,” Newsom stated in the letter. “It is essential that we strike the appropriate balance between protecting consumers from harm and fostering a responsible innovation, and I look forward to working with the author [of the bill] to achieve this.”

The bill aims to sustain the balance between developing a responsible creation environment and consumer protection. It also extends the regulation of stablecoins, stating they must be issued by a bank or hold a license from the DFPI. The agency will calculate the market cap of stablecoins according to US Generally Accepted Accounting Principles (GAAP).

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