California has recently broadened its legislative approach towards digital assets, enacting a law that forefronts regulatory specifics in the sphere of online finance. Signed into law by Governor Gavin Newsom on October 13, Assembly Bill 39 (AB 39) is set to come into operational effect on July 1, 2025. This act titled the Digital Financial Assets Law (DFAL) holds significance as one of the substantial regulatory steps in the state’s digital asset policies. Read more details here.
Formerly, the California Department of Financial Protection and Innovation (DFPI) exhibited reluctancy to extend its money transmission regulations, choosing not to include digital asset activities within their statutes. However, this stance seems to be undergoing a substantial change with the enactment of the new DFAL.
The DFAL establishes a far-reaching licensing and examination regime. Some industry observers compare this new framework to New York’s BitLicense, an industry-specific licensing policy that was enacted by the New York State Department of Financial Services in 2015 for businesses engaged in cryptocurrency activities.
The BitLicense framework has long been a motive of discussion and controversy since it potentially frames a precedent for subsequent state legislation. It curtails the activities of companies pivoting around cryptocurrency, demanding regulatory compliance which is perceived as too burdensome by certain digital currency start-ups. Comparisons between the DFAL and the BitLicense thus generate considerable curiosity concerning the influence that California’s new regulations might have on the state’s digital currency market.
Authored by Fenwick & West LLP, this analysis helps to give us a preliminary glimpse into the regulatory future of digital finance in California.