California Gov. Gavin Newsom (D) has taken a step toward regulating Bitcoin and other cryptocurrencies in the state by signing a new crypto licensing bill. The law will require the California Department of Financial Protection (DFPI) and Innovation to create a regulatory framework for cryptocurrencies, including a licensing regime and enforcement authority over the sector.
Newsom is known for being a prominent supporter of blockchain and crypto technologies. In signing the bill, he stated, “I am signing Assembly Bill 39, which establishes the Digital Financial Assets Law. Beginning July 1, 2025, this bill requires the Department of Financial Protection and Innovation (DFPI) to create a robust regulatory framework, including licensure and enforcement authority, for certain crypto activities.”
NEW: 🇺🇸 California Governor Gavin Newsom signs licensing bill that will require #Bitcoin businesses to obtain a license from the Department of Financial Protection and Innovation (DFPI) by 2025.
DFPI will also have enforcement and rulemaking authority over the crypto sector. 🧐 pic.twitter.com/nw4ritrJTj
— Bitcoin News (@BitcoinNewsCom) October 17, 2023
The bill has been compared to New York’s “BitLicense,” but with some differences. For example, California’s law allows the DFPI to take 18 months to ensure that the regulatory framework is “thoughtfully tailored to address industry trends and mitigate consumer harm.” This reflects a more cautious and deliberate approach to regulation.
The need for regulation in the crypto industry has been highlighted by recent events, such as the FTX debacle and other setbacks related to regulatory compliance. As crypto continues to grow in popularity, it’s becoming more important for governments to establish clear rules and guidelines to protect consumers and prevent fraud. California, home to almost 25% of North America’s blockchain and digital asset companies, is leading the way in this regard.
The law will also regulate stablecoins, requiring that they be issued by a bank or licensed by the California Department of Financial Protection and Innovation. This is an essential step in ensuring that stablecoins, which are designed to have a stable value, are backed by appropriate assets.
However, it’s worth noting that the law has faced criticism from some quarters. Critics argue that Bitcoin’s entire utility requires no regulation by the government or any other authority. They see this move as an unnecessary power grab by the state and a threat to the decentralized nature of Bitcoin.
Despite these criticisms, the California government has decided that regulation is necessary to protect consumers and prevent fraud. With this new law, California claims to be taking a measured approach to regulating the crypto industry, arguing that it is done in a way that balances the need for consumer protection with the need to foster responsible innovation.