Crypto Law Profile
California’s DFAL creates a DFPI licensing and supervision regime for many digital-asset businesses serving California residents, with phased kiosk rules and a July 1, 2026 license/application deadline.
The California Digital Financial Assets Law (DFAL) is California’s state framework for certain digital-asset business activity involving California residents. The law is codified as Division 1.25 of the California Financial Code and was created by AB 39 and SB 401, with later amendments in AB 1934. As of June 3, 2026, DFAL is enacted and in phased implementation: certain kiosk provisions are already operative, license applications opened in March 2026, and the main DFPI license/application deadline is July 1, 2026.
DFAL applies to a person doing business in California, or a person wherever located, when that person engages in covered digital financial asset business activity with or on behalf of a California resident. The statute defines a digital financial asset as a digital representation of value used as a medium of exchange, unit of account, or store of value that is not legal tender, subject to exclusions for certain rewards value, in-game value, and securities registered with or exempt from SEC registration or California qualification.
Covered activity includes exchanging, transferring, or storing a digital financial asset, or engaging in digital financial asset administration. It also captures specified electronic precious-metals activity and certain conversions of in-game or platform value. The law includes exemptions and exclusions for, among others, government entities, many banks and credit unions, certain trust companies, merchants accepting digital assets as payment for goods or services, personal-use activity, specified low-volume activity, and certain federally or state-regulated market participants acting within those regulated capacities.
Beginning July 1, 2026, DFPI states that covered businesses serving Californians must be licensed, have submitted a completed DFAL application, or be otherwise exempt. DFPI says applications opened through the Nationwide Multistate Licensing System on March 9, 2026. The statute also gives DFPI authority to examine licensees, require records, impose conditions, suspend or revoke licenses, seek cease-and-desist orders, pursue penalties, and seek restitution where the statutory standard is met.
DFAL includes pre-activity disclosure requirements for covered persons, including disclosures related to fees, calculation methods, timing, insurance, irrevocability, liability, and service outages. The law also addresses custody-like obligations by requiring covered persons to maintain sufficient digital financial assets for resident entitlements and by providing statutory trust treatment for certain customer assets in bankruptcy, receivership, or creditor actions.
For covered exchanges, DFAL establishes asset-listing certification and review obligations, including evaluation of security-law risk, conflicts of interest, cybersecurity, malfeasance, code or protocol defects, market risks, and procedures for reevaluation or delisting. For stablecoins, the statute gives the commissioner authority to approve stablecoins for covered exchange, transfer, storage, or administration activity and to impose conditions intended to protect California residents.
Chapter 9 contains separate rules for digital financial asset transaction kiosks. DFPI states that kiosk operators became subject to location reporting, daily transaction limits, and receipt requirements on January 1, 2024. On January 1, 2025, fee caps and pre-transaction written disclosures became operative. By July 1, 2026, kiosk operators engaged in digital financial asset business activity must comply with DFAL licensing requirements, and operators that facilitate another covered person’s activity must ensure that person is appropriately licensed.
AB 39 and SB 401 were approved and chaptered on October 13, 2023. AB 1934, approved and chaptered on September 29, 2024, amended the law to move the July 1, 2025 licensing dates to July 1, 2026. As of June 3, 2026, DFPI’s PRO 02-23 rulemaking page reports that the Office of Administrative Law disapproved proposed DFAL regulations on May 12, 2026, and notes that an agency may rewrite and resubmit disapproved regulations within the OAL process. This profile should be rechecked around July 1, 2026 and after any DFPI rulemaking update.
From July 1, 2026, covered persons must hold a DFPI license, have timely submitted an application, or qualify for an exemption before engaging in covered activity with California residents.
Covered activity includes exchanging, transferring, storing, or administering digital financial assets, plus specified electronic precious-metals and game-value activity.
The statute excludes or exempts specified government, bank, credit union, trust, merchant, personal-use, low-volume, broker-dealer, CFTC-regulated, and other activities.
Covered persons must provide applicable disclosures on fees, insurance, transfer finality, liability, conflicts, and service outages before activity with residents.
Covered persons must maintain customer-entitlement assets and eligible securities, with statutory trust treatment for certain customer digital assets.
Covered exchanges must certify asset-listing reviews and maintain procedures to reevaluate or cease listings when appropriate.
DFPI may approve stablecoins for covered exchange, transfer, storage, or administration activity and may impose conditions on covered persons or issuers.
Kiosk operators face location reporting, daily limits, receipts, fee caps, disclosures, and a July 1, 2026 licensing deadline if covered.
DFPI applications opened through NMLS on March 9, 2026; DFPI’s PRO 02-23 page later reported OAL disapproval of proposed DFAL regulations.
Governor approved and Secretary of State chaptered AB 39, adding Financial Code Division 1.25, Chapters 1-8.
Governor approved SB 401, adding Chapter 9 on digital financial asset transaction kiosks.
Kiosk operators became subject to location reporting, daily transaction limits, and receipt requirements.
Amendment extended DFAL licensing/application dates from July 1, 2025 to July 1, 2026.
Kiosk fee cap and pre-transaction disclosure obligations became operative.
DFPI began accepting online DFAL license applications through NMLS.
DFPI rulemaking page reports OAL disapproval of proposed DFAL regulations.
Consumers, Crypto kiosk operators, Custodians, Exchanges, Stablecoin issuers
Digital assets, Stablecoins
Status verified June 3, 2026. DFPI’s PRO 02-23 rulemaking page reports Office of Administrative Law disapproval on May 12, 2026; editors should recheck DFPI rulemaking and any amendments around the July 1, 2026 licensing deadline.
