California DFAL Licensing Takes Effect; SB 97 Removes Stablecoins From State Regime
Key Takeaways
- 01DFAL licensing requirements became effective July 1, 2026, and are administered by the California Department of Financial Protection and Innovation.
- 02Crypto exchanges, wallet providers, crypto kiosks, and transaction facilitators are among the businesses broadly covered by the law.
- 03Businesses without a completed application by July 1, 2026 must obtain a DFPI license before commencing covered activity in California.
- 04SB 97 repealed DFAL Chapter 6, meaning stablecoin issuers are not required to obtain a DFAL license under the former state stablecoin provisions.
- 05The framework excludes certain programs, including loyalty, affinity, and rewards programs, and provides three targeted MTA licensing exemptions for certain DFAL-regulated activity.
California’s Digital Financial Assets Law (DFAL) licensing requirements took effect on July 1, 2026, creating a statewide licensing, supervision, and enforcement framework for digital-asset businesses that operate in or serve California. The California Department of Financial Protection and Innovation (DFPI) administers the regime. Covered businesses that had not submitted a completed application by July 1, 2026—including companies formed after that date or entering the California market afterward—must obtain a DFPI license before beginning covered digital financial asset business in the state.
The DFAL applies broadly to businesses involved in digital financial asset activity, including cryptocurrency exchanges, wallet providers, crypto kiosks, and transaction facilitators. The framework establishes DFPI authority over licensing and related oversight and enforcement of covered activity, placing California among the states with a dedicated regulatory structure for digital-asset firms.
California Senate Bill 97 (SB 97) made a significant change to the DFAL by repealing Chapter 6 in its entirety, the chapter that had governed stablecoin regulation. As a result, stablecoin issuers are not required to obtain a DFAL license under those repealed provisions. The change was made against the backdrop of the developing federal framework under the GENIUS Act.
SB 97 also narrows the assets and programs within the DFAL’s scope. Among the exclusions identified are loyalty, affinity, and rewards programs, removing those programs from the DFAL regulatory regime. The legislation and related framework therefore distinguish between covered digital financial asset activity and specified excluded programs or assets.
In addition, the implementing regulations establish three targeted exemptions from separate licensure under California’s Money Transmission Act (MTA) for DFAL-regulated businesses. These exemptions are intended to limit duplicative state licensing requirements when a business’s DFAL-covered activity also involves related movement of fiat currency. Businesses must nevertheless assess whether their activities fall within the DFAL, the MTA, an exemption, or an excluded category.