California continues to take strict steps towards stronger crypto regulations with the reintroduction of a new bill, known as AB 39. This legislation follows an earlier endeavour in 2022 when AB 2269 was introduced, proposing staunch licensing requirements for enterprises dealing in digital financial transactions with residents of California. The previous regulatory proposal had close resemblances to New York’s BitLicense, aiming to place a heavy burden of operational and reporting responsibilities on such entities.
AB 39 seems to be setting a different path for Bitcoin adoption in California. When the preceding legislation was vetoed by Governor Newsom in September 2022, he pointed out the need for a transparent regulatory landscape, a balance between consumer protection and fostering innovation, heeding the rapidly evolving federal regulations around digital assets.
The revised AB 39, starting July 1, 2025, dictates that any person or business dealing in digital financial asset activities with Californians must meet specific conditions, such as having a license, an application for one, or be exempt from any licensing requirements. This wide-ranging act will cover activities like transferring, exchanging, or storing digital assets, including Bitcoin.
Stablecoins are also included under the classification of digital assets as per this bill, and it stipulates regulatory responsibilities for enterprises transacting with stablecoins. Businesses must keep detailed records for all digital financial asset activities for five years hence from the date of the activity according to new California Financial Code sections.
The legislation grants the Department of Financial Protection and Innovation (DFPI) the power to inspect licensees and enforce the law. Civil penalties could be imposed on such licensees and non-licensees that violate any terms of AB 39 or any relevant California laws.
The bill is, however, not without its drawbacks. One ambiguous provision allows the DFPI to take legal action against those who are “about to engage” in digital financial ventures, but it’s uncertain what exactly being “about to engage” means.
As AB 39 advances and the likelihood of its approval this year increases, entities operating in the digital financial sector need to comprehensively review and understand the bill’s potential impact on their businesses. While it marks another attempt by California to establish a regulatory structure for the crypto industry, this could have far-reaching impact on Bitcoin adoption and cryptocurrency regulation in the U.S. While consumer protection is the primary goal, the vagueness in some provisions may pose hurdles for new companies intending to operate in California, muddying Governor Newsom’s call for a transparent regulatory environment.
Source: Cryptonews
