California DFAL License Requirements and July 2026 Deadline
Summary
The California Department of Financial Protection and Innovation (DFPI) has begun accepting Digital Financial Assets Law (DFAL) license applications through the Nationwide Multistate Licensing System (NMLS). Any person engaging in digital financial asset business activity with California residents must submit a complete application by July 1, 2026, or cease operations. The DFAL establishes a "BitLicensesque" regime covering digital asset custody, exchange, issuance, and digital asset kiosks.
What changed
California's DFAL licensing regime has become effective, requiring entities engaged in digital financial asset business activities with California residents to obtain a license from the DFPI. The DFPI will assess applications for completeness, including financial information, control person details, independent BSA/AML program review, and information security programs meeting NIST Cybersecurity Framework 2.0 standards. Stablecoin-related activities and digital asset kiosks face specific additional requirements. The DFPI has also proposed regulations (PRO_02-23) addressing the interaction between DFAL and the Money Transmission Act.
Entities must immediately assess whether their business activities fall within the DFAL's scope and begin the application process through NMLS well before July 1, 2026. A "complete" application must be submitted by the deadline to continue operations past that date. Companies involved in stablecoin custody/exchange or digital asset kiosks should review DFAL chapters specific to those activities. Businesses should not assume DFAL licensure exempts them from other applicable state licenses—each activity requires separate evaluation against licensing triggers under each law.
What to do next
- Assess whether your business activities fall within DFAL's scope (digital asset custody, exchange, issuance, kiosks, stablecoin activities)
- Begin DFAL license application through NMLS immediately to ensure completion before the July 1, 2026 deadline
- Review and prepare NIST Cybersecurity Framework 2.0-compliant information security program and independent BSA/AML review documentation
Source document (simplified)
April 6, 2026
The California DFAL License Application Is Open: Assess Your Business Model Now for the July 1 Deadline
Ximeng (Sammy) Tang Goodwin + Follow Contact LinkedIn Facebook X Send Embed
We published a client alert in April 2024 about the implementation of a “BitLicensesque” regime in California, the Digital Financial Assets Law (DFAL). After an extended delay of the effectiveness of the licensing provisions, the wait is over. The California Department of Financial Protection and Innovation (DFPI) has started accepting applications through the Nationwide Multistate Licensing System (NMLS). Any person who engages in digital financial asset business activity with or on behalf of a California resident and is not otherwise exempt must submit a complete DFAL license application by July 1, 2026, to continue serving California residents.
In the April 2024 alert, we discuss the activities that would be subject to the DFAL licensure requirement. Digital asset custody, exchange, and issuance and certain activities involving online game platforms are all in scope. The DFAL includes specific requirements for stablecoin-related activities and digital asset kiosks. Companies planning to engage in stablecoin exchange or custody or operating a digital asset kiosk should review the relevant chapters carefully.
In addition to the financial and legal information about the applicant and their control persons, a DFAL license applicant must provide an independent review of its Bank Secrecy Act/anti-money laundering program, and develop and maintain an information security and operational security program, among other internal compliance policies and procedures, meeting the requirements of the DFAL. The DFPI will assess the sufficiency of an applicant’s information security program following the National Institute of Standards and Technology Cybersecurity Framework 2.0. Preparation of these items may require significant lead time if an applicant has not already done the groundwork. Because the DFPI requires a “complete” application by July 1, 2026, to continue operations past that date, applicants must assess their licensure applicability and start the application process early.
The DFPI has proposed regulations under the DFAL that would provide some clarification about the interaction between the DFAL and the Money Transmission Act. While the proposed regulations purport to exempt certain digital financial asset business activities from the scope of the Money Transmission Act, one should not assume being a DFAL licensee automatically means that no other license is required. Each business activity should be evaluated against the licensing triggers and available exemptions under each applicable law.
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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