On September 29, California Governor Gavin Newsom signed Assembly Bill (AB) 1934 into law, marking a significant update to California’s Digital Financial Assets Law (DFAL). In addition to extending the compliance deadline for digital financial asset businesses, providing them with additional time to meet regulatory requirements and implement necessary operational changes, this new legislation includes significant modifications to the DFAL.
The key provisions of AB 1934 are:
- Extended Deadline for Licensure. One of the most notable changes introduced by AB 1934 is the extension of the deadline for obtaining a license to engage in digital financial asset business activities. Originally set for July 1, 2025, the new deadline is now July 1, 2026. This extension grants digital financial asset businesses an additional year to comply with the licensure requirements mandated by the DFAL.
- Enhanced Record-Keeping Requirements. The new law also imposes more stringent record-keeping obligations on licensed entities. In addition to maintaining general financial records, businesses must now keep monthly compliance reports that demonstrate adherence to DFAL conditions. These records must be preserved for five years and include detailed transaction logs, general ledgers, and any disputes with residents. This change aims to enhance transparency and ensure that businesses are consistently meeting regulatory standards.
- Stablecoin Regulations. AB 1934 introduces specific provisions regarding the handling of stablecoins, a type of digital financial asset pegged to a stable reserve asset like the U.S. dollar. The law stipulates that a covered person may only engage in the exchange, transfer, or storage of stablecoins if the stablecoin is approved by the commissioner and complies with established requirements. The commissioner has the authority to impose additional restrictions or revoke approval if the stablecoin issuer fails to meet regulatory standards or if market conditions change.
- Digital Financial Asset Transaction Kiosks. Operators of digital financial asset transaction kiosks are also affected by the new law. Starting July 1, 2026, kiosk operators must ensure that any person engaging in digital financial asset business activities via their kiosks holds a valid license. Additionally, operators must comply with fee limits and other regulatory provisions to protect consumers.
The extension of the compliance deadline provides a much-needed reprieve for digital financial asset businesses, allowing them more time to navigate the increasingly complex regulatory landscape. This additional time can be used to develop robust compliance programs, secure necessary licenses, and implement enhanced record-keeping systems. Stablecoin issuers must be prepared to meet stringent requirements and face potential scrutiny from the commissioner to ensure the stability and reliability of their digital financial assets.
