California Implements New Cryptocurrency Regulations Set to Take Effect in 2025

California’s Governor, Gavin Newsom, has recently endorsed new cryptocurrency regulations within the state, set to be enacted in July 2025. These regulations, known as the Digital Financial Assets Act, aim to bolster the framework for crypto businesses on the West Coast. Starting from 2025, any individual or business wishing to engage in cryptocurrency activities in California will need to secure a license from the Department of Financial and Innovation Protection (DFPI). This move grants the DFPI the power to enforce stringent audit requirements and mandates that companies maintain detailed records for review.

The introduction of these regulations is a significant step for California, a state already known for its vibrant cryptocurrency market. The aim is to regulate crypto activities without stifling legitimate crypto development. Cryptocurrency is widely used in California for various purposes, including investments, online purchases, and gaming, despite the current illegality of online betting in the state. The presence of crypto and Bitcoin ATMs is also increasing, making digital currencies more accessible to Californians.

The new regulations will enable state officials to better monitor crypto activities and combat crypto-related crimes. Entities holding a crypto license will be required to keep transaction records for five years, with severe penalties for non-compliance. Unlicensed entities operating post-July 2025 could face fines of up to $100,000 per day, while licensed entities could be fined up to $20,000 per day for material violations.

The regulations cover a broad spectrum of digital financial activities but exempt certain groups like banks, credit unions, and entities with transactions under $50,000 per year. Interestingly, Governor Newsom had previously vetoed similar crypto regulations in 2022, deeming them too restrictive. However, his stance has since evolved, likely influenced by California’s growing crypto adoption and its status as the largest crypto market in the U.S. Despite his support for the Digital Financial Assets Act, Newsom acknowledges that some aspects of the law might need refinement as the 2025 deadline approaches.