California DFAL Stablecoin Amendments

The underlying DFAL was created by AB 39 and is codified in Division 1.25 of the California Financial Code. It establishes a licensing and supervisory framework for digital financial asset business activity with or on behalf of California residents. DFAL defines a digital financial asset as a digital representation of value used as a medium of exchange, unit of account, or store of value, and not legal tender, subject to statutory exclusions. It also includes exchanging, transferring, storing, and digital financial asset administration within covered business activity.

For stablecoins, DFAL uses a specific definition: a digital financial asset pegged to the U.S. dollar or another national currency and marketed in a way intended to create a public expectation that its nominal value will remain effectively fixed. The original DFAL stablecoin chapter required issuer status and eligible-securities backing, subject to a commissioner approval pathway. AB 1934 updates the implementation date and clarifies the approval-based route for covered stablecoin activity.

AB 1934 provides that a covered person may exchange, transfer, or store a stablecoin, or engage in digital financial asset administration of that stablecoin, directly or through a digital financial asset control services vendor, if the stablecoin is approved by the commissioner and the covered person complies with any commissioner-imposed requirements, restrictions, or prohibitions.

The commissioner may approve a stablecoin for covered activities if the commissioner determines that it does not compromise the interests of residents who may use it as payment for goods and services or as a store of value. AB 1934 directs the commissioner to consider legally enforceable holder rights, including redemption rights; the amount, nature, and quality of issuer assets available for redemption; risks related to how those assets are owned or held; representations about potential uses; representations about risks; and any other material factors.

The amendments preserve broad DFPI discretion around approved stablecoins. As a condition of approval, the commissioner may require the stablecoin issuer to obtain a DFAL license and may impose additional requirements, restrictions, or prohibitions on either the issuer or the covered person that exchanges, transfers, stores, or administers the approved stablecoin.

The commissioner must revoke approval if, after notice and a reasonable opportunity to be heard, the issuer markets the stablecoin in a way that may create a reasonable public expectation that the stablecoin poses no more risk than bank credit or a stored-value product issued by a California Money Transmission Act licensee. The commissioner also may revoke approval based on changes in covered-person or issuer activities, market conditions, or violations of applicable requirements.

AB 1934 also adds a recordkeeping amendment relevant to stablecoin compliance. Licensees must maintain required records for five years and, if applicable, maintain at least monthly a report demonstrating compliance with Section 3601. DFPI’s October 2024 bulletin described AB 1934 as adding a monthly report showing stablecoin issuer compliance with DFAL stablecoin reserve requirements.

DFPI’s FAQ states that AB 39 and SB 401 together comprise DFAL, and that AB 1934 extended the licensing date from July 1, 2025 to July 1, 2026. DFPI began accepting online DFAL license applications through NMLS on March 9, 2026. Separately, DFPI’s PRO 02-23 rulemaking page reported Office of Administrative Law disapproval of proposed DFAL regulations on May 12, 2026; that rulemaking status does not change the enacted statutory text summarized here.

This is a California state-law profile within the United States. It does not cover federal stablecoin law, federal securities or commodities classification, money transmission requirements outside California, or every DFAL chapter. It is most relevant to stablecoin issuers, exchanges, custodians, control-services vendors, and other covered persons that may exchange, transfer, store, or administer stablecoins with or on behalf of California residents.