New York’s 2015 BitLicense reboot is making a comeback. Currently, the California Department of Financial Protection and Innovation (DFPI) has announced updates to the Digital Financial Assets Law (DFAL), clarifying that all individuals or companies providing crypto asset services to California residents must obtain a DFAL license, submit an application, or meet exemption criteria by July 1, 2026. Failure to do so will result in enforcement actions. California accounts for about a quarter of all blockchain companies in the U.S.
(Background: Bitwise CIO: DeFi can lead crypto out of winter, Aave earns over $100 million annually! Michael Saylor also acknowledges the “crypto winter.”)
(Additional context: Putin signs new law authorizing Russian courts to confiscate Bitcoin and other cryptocurrencies during criminal investigations.)
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- DFAL Licensing System
- Applications open March 9, effective July 1
- Global influence of California’s regulatory approach
The California Department of Financial Protection and Innovation (DFPI) recently announced the latest schedule for implementing the Digital Financial Assets Law (DFAL), officially launching a licensing system for crypto assets at the state level. Signed into law by California Governor Gavin Newsom in October 2023, through AB 39 and SB 401, the law establishes a comprehensive crypto licensing and regulatory framework covering various digital asset services and crypto ATMs.
DFAL Licensing System
Under DFAL, any individual or business engaged in “digital financial asset activities” serving California residents must apply for a DFAL license with the DFPI, regardless of whether they are licensed in other states. Covered activities include “exchanging or transferring Bitcoin, stablecoins, and other digital assets, holding digital assets in custody for others, and issuing digital tokens with exchangeable value.”
For crypto ATMs (kiosks), DFAL imposes stricter consumer protection rules: a daily transaction limit of $1,000 per customer, fees not exceeding $5 or 15% of the transaction amount (whichever is higher), and full disclosure of fees and exchange rates before transactions.
In 2025, DFPI issued a $300,000 fine to a Bitcoin ATM operator for exceeding transaction limits and failing to register equipment.
Applications open March 9, effective July 1
According to DFPI’s schedule, DFAL license applications will open on March 9, 2026, via the Nationwide Multistate Licensing System (NMLS). The initial application fee is $7,500 (non-refundable).
Regulators advise companies to review the NMLS application checklist in advance and participate in industry training scheduled for March 23.
It’s important to note that the original effective date of July 1, 2025, has been postponed to July 1, 2026, through AB 1934. All crypto businesses operating in California that do not hold a license, have not submitted an application, or do not qualify for an exemption will face enforcement actions starting from that date.
The global impact of California’s regulatory approach
Joe Ciccolo, Executive Director of the California Blockchain Advocacy Coalition (CBAC), stated that California, as the world’s fourth-largest economy, could influence the standardization of compliance across the U.S.
- Clear and predictable rules help attract serious operators and institutional capital, with compliance thresholds filtering out unqualified players.
- Overly aggressive enforcement or disconnect from industry realities could push some firms to exit California or move overseas.
- Balancing consumer protection and market vitality will be key—overregulation may stifle innovation, while too lax oversight risks investor protection.
Industry experts generally see the launch of DFAL as a new phase in U.S. state-level crypto regulation. Following federal initiatives like the GENIUS stablecoin bill and the CLARITY regulatory framework, California’s approach—home to the highest density of blockchain companies—will serve as a critical reference point and test whether regulators can strike a balance between compliance and innovation.
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