Gov. Gavin Newsom (surprisingly) knocked down California’s Digital Financial Assets Law last week. Crypto enthusiasts are cheering, but efforts to reel in crypto aren’t over yet, my colleague Ben Pimentel reports.

The crypto industry needs better consumer protections, according to proponents of the bill. Opponents, meanwhile, worried that implementing the law would be too complicated and expensive.

• The plan was to create a new licensing system for crypto exchanges in California, which worried crypto advocates who compared it to a similar requirement in New York. Major crypto exchanges like Kraken ended up leaving the state as a result.
• The latter argument eventually won out, with Newsom saying a “more flexible” approach is needed to tackle the industry. Ben told me it’s not entirely clear what Newsom means by that, but added that it’s hard to create local rules for a global industry like crypto.
• Plus, there already are rules to protect consumers from illegal activity within financial services and products.

But efforts to police the crypto industry don’t end with this bill. Ben said we may see crypto critics find other avenues to address concerns in the field outside of legislative action.

• One area of concern, for instance, involves customer service protections. “A key complaint [that California’s Department of Financial Protection and Innovation] has been receiving is, ‘I invested in this crypto exchange and then I tried to ask questions about my money, and there's no way to get help,’” Ben told me.
• The state could double down on enforcement, “not just in crypto but in fintech in general,” he said, adding that the DFPI has already put more focus on this in recent years.

— Sarah Roach