USA – CALIFORNIA Trends and Developments Contributed by: Alexander Lindgren, Karl Lindgren and Daniel TeJumson, Lindgren, Lindgren, Oehm & You LLP
Lindgren, Lindgren, Oehm & You LLP 2447 Pacific Coast Hwy Office 234 Hermosa Beach CA 90254 USA Tel: 949-509-6577 Web: www.lloylaw.com
Background On 13 October 2023, Governor Newsom signed Assembly Bill 39 and Senate Bill 401, together called the Digital Financial Assets Law (DFAL) (Califor - nia Statutes 2023, Chapter 792; California Statutes 2023, Chapter 871). On 29 September 2024, Governor Newsom signed Assembly Bill 1934, extending the date of licensure under the DFAL from 1 July 2025 to 1 July 2026 (California Statutes 2024, Chapter 945; California Financial Code Section 3201). The DFAL establishes a licensing and supervision framework for certain crypto-related activities with or on behalf of California residents (California Financial Code Section 3201). Certain consumer protection rules for digital financial asset transaction kiosks apply earlier, includ - ing daily transaction limits from 1 January 2024 and fee caps and disclosures from 1 January 2025 (Cali - fornia Financial Code Sections 3902, 3904 and 3905). The Department of Financial Protection and Innova - tion (DFPI) has announced that it will begin accept - ing DFAL licence applications through the Nationwide Multistate Licensing System (NMLS) from 9 March 2026 (DFPI Monthly Bulletin – March 2026). Under the Money Transmission Act, a person gener - ally may not engage in the business of money trans - mission in California, or hold itself out as providing money transmission, unless licensed or exempt (Cal - ifornia Financial Code Section 2030). Assembly Bill 39 creates a parallel prohibition for “digital financial asset business activity” with or on behalf of a Califor - nia resident unless the person is licensed, has a timely application pending, or is exempt (California Financial Code Sections 3201 and 3103).
Senate Bill 401 adds consumer protection require - ments for operators of digital financial asset transac - tion kiosks (broadly, crypto “ATMs”) located in Cali - fornia, including location reporting, daily transaction limits, fee caps, disclosures and receipts (California Financial Code Sections 3901–3907). Application: AB 39 The DFAL prohibits a person from engaging in digital financial asset business activity, or holding itself out as being able to engage in digital financial asset busi - ness activity, with or on behalf of a California resident unless licensed, a timely applicant, or exempt (Cali - fornia Financial Code Section 3201). “Digital financial asset business activity” includes, among other activi - ties, (i) exchanging, transferring or storing a digital financial asset; (ii) digital financial asset administration (issuing a digital financial asset with the authority to redeem it for legal tender, bank or credit union credit, or another digital financial asset); and (iii) certain pre - cious metals certificate activity (California Financial Code Section 3102 (h) and Section 3102 (i)). This headline prohibition turns on two key defined terms: first, “digital financial asset” and, second, “digital financial asset business activity” (California Financial Code Section 3102 (g) and Section 3102 (i)). Part 1: “What is a Digital Financial Asset Under the DFAL?” California Financial Code Section 3102 (g)(1) defines “digital financial asset” as a digital representation of value used as a medium of exchange, unit of account or store of value, and that is not legal tender, wheth - er or not denominated in legal tender. The definition is intentionally broad, but it is narrowed by specific
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