California’s Amended Digital Assets Act Would Protect Crypto Payments, Self-Custody

A member of the California State Assembly has introduced an amendment to a recently introduced money transmission bill that would protect the ability of state residents to use cryptocurrencies as a means of payment.

First introduced by Democrat Senator Laura Richardson on February 20 as the Money Transmission Act, the bill had been concerned primarily with requiring digital wallet providers operating in California to “take certain actions” to ensure the security of their products, including the use of two-factor authentication.

Introduced on Friday, the new amendment from Democrat assembly member Avelino Valencia renames the bill as the Digital Assets Act, and adds several new clauses protecting the use of cryptocurrency in California.

Its main focus is on authorizing individuals and businesses within California to accept cryptocurrencies as payment for goods and services, as well as in payments between private individuals.

Added to this, the amendment also prohibits “public entities from prohibiting, restricting, or imposing any requirements on that use,” while also preventing the state of California from imposing taxes on the use of crypto as payment for goods and services.

Related to this is a clause which, as Satoshi Action Fund CEO and co-founder Dennis Potter told Decrypt, “explicitly affirms the right of individuals to self-custody their Bitcoin and digital assets.”

According to Potter, this ensures that residents can manage their cryptocurrencies independently, without being forced to send their tokens to a centralized wallet or custody service.

“New legal protections”

While the amended bill may not introduce anything that many cryptocurrency users aren’t doing already, Potter argued that its introduction is highly significant for California and its stance on crypto.

He explained, “These provisions introduce new legal protections and frameworks that were not previously codified in California law, thereby adding significant new elements to the state’s approach to digital assets.”

Other provisions in the bill include a stipulation that California’s Unclaimed Property Law would apply to crypto—meaning that exchanges, for example, would have to transfer crypto to the state in the event that the corresponding customer had been inactive and unresponsive for at least three years.

The amendment also widens the application of the Political Reform Act of 1974 to crypto, and as such prohibits “a public official from issuing, sponsoring, or promoting a digital asset, security, or commodity.”

According to Potter, the intent of this provision “is to prevent conflicts of interest and maintain the integrity of public office,” something that was important to Assemblymember Valencia.

Potter said, “By prohibiting public officials from issuing, sponsoring, or promoting digital assets, securities, or commodities, the bill aims to ensure that officials do not use their positions to unduly influence the market or benefit personally from such promotions.”

This latter section may also be the response of California—which is a predominantly Democrat-controlled state—to Official Trump (TRUMP), the Solana-based meme coin which U.S. President Donald Trump launched prior to taking office on January 20.

While there is no record of any state official in California openly promoting or launching a cryptocurrency, the ban’s inclusion could serve as a sweetener for Democrats who may otherwise be reluctant to promote the use of digital currencies.

A bill with a similar, albeit federal prohibition against crypto promotion has also been put before Congress, although with both chambers controlled by Republicans, it has almost zero chance of passing, at least not before the 2026 midterms.

In a tweet, the Satoshi Action Fund championed the bill, saying that if California passes it, “nearly 40 million Americans will have their right to self-custody protected.”

The Satoshi Action Fund, a non-profit Bitcoin advocacy organization founded by former alumni of the first Trump administration, has been instrumental in recent months in meeting with lawmakers and encouraging other states to pass pro-Bitcoin and -crypto legislation.

It recently had a hand in the passage of a law in Kentucky which establishes the right of individuals to self-custody crypto, while also confirming that neither mining rewards nor staking rewards are securities.

Similarly, it has taken credit for helping to shape the discussion surrounding a BTC strategic reserve bill in Oklahoma, which recently went to the state’s senate.

And for Dennis Potter, California’s introduction of the Digital Assets bill, along with other similar bills, “reflects a broader shift” in the US towards integrating cryptocurrencies such as Bitcoin into legacy financial and legal systems.

“California, as the fifth-largest economy in the world with a gross state product of nearly $3.9 trillion in 2023, plays a pivotal role in setting regulatory trends,” he said. He added that the amended bill, “indicates an evolving attitude where digital currencies are increasingly seen as legitimate financial instruments, warranting regulatory frameworks that both protect consumers and foster innovation.”