AB 236: Digital financial asset businesses: regulatory fees.
- Session Year: 2025-2026
- House: Assembly
- Latest Version Date: 2025-01-13
Current Status:
Failed
(2026-02-02: From committee: Filed with the Chief Clerk pursuant to Joint Rule 56.)
Introduced
In Committee
Awaiting First Chamber Vote
Passed First Chamber
In Committee
Awaiting Second Chamber Vote
Passed Second Chamber
Enacted
What does this bill do?
The bill limits the nonrefundable application fee for a California digital financial asset license to no more than $5,000. It affects companies applying to the Department of Financial Protection and Innovation to offer digital asset services (for example, cryptocurrency-related services) to California residents, replacing the previous practice of the department setting the fee to cover review costs.
The summary is provided by generative AI which can make mistakes. For original language, please view the details in the table below.
Existing law, the Digital Financial Assets Law, prohibits a person, on or after July 1, 2026, from engaging in digital financial asset business activity, or holding itself out as being able to engage in digital financial asset business activity, with, or on behalf of, a resident, unless certain conditions are met. These conditions include that the person is licensed with the Department of Financial Protection and Innovation, as prescribed, or the person submits an application on or before July 1, 2026, and is awaiting approval or denial of that application. Existing law defines digital financial asset for these purposes to mean a digital representation of value that is used as a medium of exchange, unit of account, or store of value, and that is not legal tender, whether or not denominated in legal tender, except as specified.
Existing law requires an applicant for a license under these provisions to submit the application with a nonrefundable fee in an amount determined by the department to cover the reasonable costs of application review.
This bill would prohibit that fee from exceeding $5,000.
(a)An application for a license under this division shall meet all of the following requirements:
(1)The application shall be in a form and medium prescribed by the department.
(2)Except as otherwise provided in subdivision (b), the application shall provide all of the following information relevant to the applicants proposed digital financial asset business activity:
(A)The legal name of the applicant, any current or proposed business United States Postal Service mailing address of the applicant, and any fictitious or trade name the applicant uses or plans to use in conducting the applicants digital financial asset business activity with or on behalf of a resident.
(B)The legal name, any former or fictitious name, and the residential and business United States Postal Service mailing address of any executive officer and responsible individual of the applicant and any person that has control of the applicant.
(C)A description of the current and former business of the applicant for the five years before the application is submitted, or, if the business has operated for less than five years, for the time the business has operated, including its products and services, associated internet website addresses and social media pages, principal place of business, projected user base, and specific marketing targets.
(D)A list of all of the following:
(i)Any financial regulatory license the applicant holds in another state.
(ii)The date the license described in clause (i) expires.
(iii)Any license revocation, license suspension, or other disciplinary action taken against the licensee in any state and any license applications rejected by any state.
(E)A list of any criminal conviction, deferred prosecution agreement, and pending criminal proceeding in any jurisdiction against all of the following:
(i)The applicant.
(ii)Any executive officer of the applicant.
(iii)Any responsible individual of the applicant.
(iv)Any person that has control over the applicant.
(v)Any person over which the applicant has control.
(F)A list of any litigation, arbitration, or administrative proceeding in any jurisdiction in which the applicant or an executive officer or a responsible individual of the applicant has been a party for the 10 years before the application is submitted determined to be material in accordance with generally accepted accounting principles and, to the extent the applicant would be required to disclose the litigation, arbitration, or administrative proceeding in the applicants audited financial statements, reports to equity owners and similar statements or reports.
(G)A list of any bankruptcy or receivership proceeding in any jurisdiction for the 10 years before the application is submitted in which any of the following was a debtor:
(i)The applicant.
(ii)An executive officer of the applicant.
(iii)A responsible individual of the applicant.
(iv)A person that has control over the applicant.
(v)A person over which the applicant has control.
(H)The name and United States Postal Service mailing address of any bank in which the applicant plans to deposit funds obtained by its digital financial asset business activity.
(I)The source of funds and credit to be used by the applicant to conduct digital financial asset business activity with, or on behalf of, a resident.
(J)Documentation demonstrating that the applicant has the capital and liquidity required by Section 3207. Documentation shall include, but is not limited to, both of the following:
(i)A copy of the applicants audited financial statements for the most recent fiscal year and for the two-year period next preceding the submission of the application, if available.
(ii)A copy of the applicants unconsolidated financial statements for the current fiscal year, whether audited or not, and, if available, for the two-year period next preceding the submission of the application.
(K)The United States Postal Service mailing address and email address to which communications from the department can be sent.
(L)The name, United States Postal Service mailing address, and email address of the registered agent of the applicant in this state.
(M)A copy of the certificate, or a detailed summary acceptable to the department, of coverage for any liability, casualty, business interruption, or cybersecurity insurance policy maintained by the applicant for itself, an executive officer, a responsible individual, or the applicants users.
(N)If applicable, the date on which and the state in which the applicant is formed and a copy of a current certificate of good standing issued by that state.
(O)If a person has control of the applicant and the persons equity interests are publicly traded in the United States, a copy of the audited financial statement of the person for the most recent fiscal year or most recent report of the person filed under Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78m).
(P)If a person has control of the applicant and the persons equity interests are publicly traded outside the United States, a copy of the audited financial statement of the person for the most recent fiscal year of the person or a copy of the most recent documentation similar to that required in subparagraph (N) filed with the foreign regulator in the domicile of the person.
(Q)If the applicant is a partnership or a member-managed limited liability company, the names and United States Postal Service mailing addresses of any general partner or member.
(R)If the applicant is required to register with the Financial Crimes Enforcement Network of the United States Department of the Treasury as a money service business, evidence of the registration.
(S)A set of fingerprints for each executive officer and responsible individual of the applicant.
(T)If available, for any executive officer and responsible individual of the applicant, for the 10 years before the application is submitted, employment history and history of any investigation of the individual or legal proceeding to which the individual was a party.
(U)The plans through which the applicant will meet its obligations under Chapter 7 (commencing with Section 3701).
(V)The number of residents with whom, or on behalf of, the applicant engaged in digital financial asset business activity in the month preceding the month in which the applicant submits an application for a license under this division to the department.
(W)An estimate of the anticipated number of residents with whom, or on behalf of, the applicant will engage in digital financial asset business activity by October 1 of the year following the year in which the applicant submits an application for a license under this division to the department.
(X)Any other information the department reasonably requires by rule.
(3)The application shall be accompanied by a nonrefundable fee in the amount determined by the department department, not to exceed five thousand dollars ($5,000), to cover the reasonable costs of application review.
(b)(1)On receipt of a completed application, the department shall investigate whether each of the following criterion is satisfied:
(A)The applicant has the sound financial condition, competence, and responsibility to engage in digital financial business activity.
(B)The applicant has relevant financial and business experience, good character, and general fitness.
(C)Each executive officer, responsible individual, and person that has control of the applicant has competence, experience, good character, and general fitness.
(D)The applicant has complied with Chapter 5 (commencing with Section 3501) and Chapter 6 (commencing with Section 3601).
(E)The applicant has a reasonable promise of success in engaging in digital financial business activity.
(F)It is reasonable to believe that the applicant, if licensed, will engage in digital financial business activity in compliance with all applicable provisions of this division and any regulation or order issued pursuant to this division.
(2)On receipt of a completed application, the department may investigate the business premises of an applicant.
(c)After completing the investigation required by subdivision (b), the department shall send the applicant notice of its decision to approve, conditionally approve, or deny the application. If the department does not receive written notice from the applicant that the applicant accepts conditions specified by the department within 31 days following the departments notice of the conditions, or if the applicant does not request a hearing on the conditions specified by the department within 31 days after the departments notice of the conditions, the application shall be deemed withdrawn.
(d)A license issued pursuant to this division shall take effect on the later of the following:
(1)The date the department issues the license.
(2)The date the licensee provides the security required by Section 3207.
(e)In addition to the fee required by paragraph (3) of subdivision (a), an applicant shall pay the reasonable costs of the departments investigation under subdivision (b).
(f)Information provided pursuant to this section is covered by subdivision (a) of Section 7929.000 of the Government Code.
(g)For purposes of this section, completed application means an application that contains the nonrefundable fee required by paragraph (3) of subdivision (a), the information specified in paragraph (2) of subdivision (a), and any additional information required by any regulations of the commissioner.
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Date
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Status
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| Feb 2, 2026 | From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. |
| Jan 31, 2026 | Died pursuant to Art. IV, Sec. 10(c) of the Constitution. |
| May 23, 2025 | In committee: Held under submission. |
| Apr 9, 2025 | In committee: Set, first hearing. Referred to APPR. suspense file. |
| Mar 3, 2025 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 8. Noes 0.) (March 3). Re-referred to Com. on APPR. |
| Feb 10, 2025 | Referred to Com. on B.&F. |
| Jan 14, 2025 | From printer. May be heard in committee February 13. |
| Jan 13, 2025 | Read first time. To print. |
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Date
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Description
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Location
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Votes
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| Mar 3, 2025 | Do pass and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Banking and Finance |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
Date of Hearing: April 9, 2025
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Buffy Wicks, Chair
ABPCA Bill Id:AB 236
Author:(Chen) – As Introduced Ver:January 13, 2025
Policy Committee: | Banking and Finance | Vote: | 8 - 0 |
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Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill prohibits the Department of Financial Protection and Innovation (DFPI) from charging a license application fee of more than $5,000 under the Digital Financial Asset Law (DFAL).
FISCAL EFFECT:
Costs of an unknown, but potentially significant amount, in excess of $150,000, to DFPI to the extent this bill limits DFPI’s ability charge a fee to cover the reasonable costs of reviewing a digital financial asset (DFA) license application (Financial Protection Fund). For example, if the costs of reviewing a DFA applicant is $20,000, but DFPI’s application fee is limited to $5,000, DFPI would incur $15,000 in unrecoverable costs per application.
COMMENTS:
- Purpose. According to the author:
AB 236 will promote the attractiveness of California as a place to operate in the digital financial market while encouraging financial innovation at the same time. Removing unnecessary barriers to entry, the bill takes necessary action to ensure small to medium-sized businesses can continue operating in the [DFA] market.
This bill is supported by the Digital Asset Consumer Coalition.
- Background.
DFAL Implementation. A DFA, also referred to as “cryptocurrency” or “crypto,” is a digital representation of value that is not issued or backed by a government or central bank. AB 39 (Grayson), Chapter 792, Statutes of 2023, established a licensing program for DFA companies serving California customers. Under the DFAL, companies must apply for licensure by July 1, 2026, and adhere to new regulations governing operating procedures, customer service standards, and financial stability.
DFPI acknowledged the significant new workload likely to be generated by the DFAL in a 2024 budget change proposal:
The DFAL covers several distinct and complex crypto asset products, which are constantly evolving in the marketplace. The Department will therefore be required to assess a dynamic variety of financial companies and their safety and soundness status in a way that is unprecedented in financial regulation. Unlike banks or credit unions, there are no federal agencies that are regulating the same institutions and using their extensive resources to oversee these companies.
DFAL Application Process. The DFAL application process requires DFPI to conduct an upfront review of DFA companies wishing to do business with California consumers. DFPI must undertake a rigorous and complex process to: (a) review information provided by the applicant regarding its proposed DFA business plans, financial records, and recent litigation history and (b) evaluate the applicant using a range of criteria, including whether the applicant has sound financial condition, competence, and responsibility to engage in DFA business activity.
The DFAL allows DFPI to establish fees to cover the reasonable costs of regulation or reviewing applications. On October 2, 2024, DFPI requested public comment on proposed DFAL regulations, including a proposed $20,000 application fee. This bill caps the allowable application fee at $5,000. While such a fee cap would align the DFAL application fee with a similar fee for money transmitters, the DFAL application process is likely to be more complex and time-consuming. As noted in the Assembly Banking and Finance Committee’s analysis of this bill, a fee cap would give DFPI “fewer resources to hire staff and build out the DFAL licensure program, which could result in delays for application approval…[that] could be costly to a company hoping to enter the California market, and such costs would likely exceed $20,000.”
Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081
Date of Hearing: March 3, 2025
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Avelino Valencia, Chair
ABPCA Bill Id:AB 236 (
Author:Chen) – As Introduced Ver:January 13, 2025
SUBJECT: Digital financial asset businesses: regulatory fees
SUMMARY: This bill establishes a $5,000 cap on the Digital Finical Asset Law (DFAL) license application fee.
EXISTING LAW:
- Provides for the DFAL (Financial Code Section 3101 et. seq.), administered by the Department of Financial Protection and Innovation (DFPI), which prescribes rules, including a requirement to become licensed beginning on July 1, 2026, applicable to a person engaging in digital financial business activity, as defined.
- Requires an application for DFAL licensure to pay a nonrefundable fee in the amount determined by the department to cover the reasonable e costs of application review.
- Requires an applicant, in addition to the nonrefundable fee, to pay the reasonable costs of DFPI’s investigation into specified criterion related to their ability to conduct digital financial business activity.
FISCAL EFFECT: Unknown. This bill is keyed Fiscal by Legislative Counsel.
COMMENTS:
- Purpose.
According to the author:
AB 236 will promote the attractiveness of California as a place to operate in the digital financial market while encouraging financial innovation at the same time. Removing unnecessary barriers to entry, the bill takes necessary action to ensure small to medium-sized businesses can continue operating in the digital financial asset market.
Having pro-competitive effects on the market, AB 236 creates business opportunities in California’s digital financial asset market, while at the same time never compromising the ability to regulate it as an emerging market.
- Digital financial assets.
A digital financial asset (also referred to “cryptocurrency,” “crypto asset,” or “virtual currency,” terms used interchangeably in this analysis) is a digital representation of value that is not issued or backed by a government or central bank. Unlike the dollar, cryptocurrency is not considered legal tender, but private parties may agree to it to facilitate an economic exchange. Bitcoin, the most well-known virtual currency, and many other virtual currencies are created and tracked via a decentralized protocol, rather than the centralized issuance model that prevails in the world of fiat money.
Proponents of cryptocurrency believe that these products and systems offer viable alternatives to those found in the traditional financial system. They argue that cryptocurrency is beneficial because it is decentralized, allowing for peer-to-peer transactions, easy and fast transactions, portfolio diversification, acts as an inflation hedge, encourages cross-border payments, promotes financial inclusion, and provides transactional freedom.
However, these assets can pose risks to consumers due to the lack of regulatory clarity and established rules for companies operating in this space. In recent years, market turmoil has exposed a host of consumer and investor risks in the crypto market. These risks include fraud, hacks, scam products, extreme volatility, insider trading, information asymmetry, and a lack of clear federal and state legal protections. Such risks have exposed everyday investors and consumers to financial losses beyond their control.
- Digital Financial Asset Law (DFAL) and implementation thus far.
In response to reports of consumer harm caused by an under-regulated crypto market, the Legislature passed AB 39, Chapter 792, Statutes of 2023. This legislation established the DFAL and a licensing program for digital asset companies serving California customers. Under the DFAL, crypto companies must apply for a license by July 1, 2026, and adhere to new rules related to policies and procedures, customer service standards, and financial stability.
DFAL is an expansive and ambitious law that will require DFPI to develop new expertise in digital assets. Because of this, it is expected to generate significant new workload for the department. In a 2024 Budget Change Proposal (BCP), department staff acknowledge this with the following:
The DFAL requires the Department to develop regulations and exam procedures that no other state or federal agency has yet to fully develop. The Department’s exam activities will require sophisticated software and technological expertise. At this time, the only other state that issues licenses for virtual currency and examines at the level required by DFAL, is the New York Department of Financial Services (NYDFS). While NYDFS has recently developed some rules and issued guidance for licensees, its regulations and exam procedures are limited at this time.
The DFAL covers several distinct and complex crypto asset products, which are constantly evolving in the marketplace. The Department will therefore be required to assess a dynamic variety of financial companies and their safety and soundness status in a way that is unprecedented in financial regulation. Unlike banks or credit unions, there are no federal agencies that are regulating the same institutions and using their extensive resources to oversee these companies.
A key component of DFAL is the application process, which will require an upfront review of crypto companies wishing to do business with California customers. This process is expected to be rigorous and complex. In addition to reviewing the information provided by applicants regarding their proposed digital asset business plans, their financial records, and their recent litigation history, DFPI must also evaluate the applicant using a range of criterion, including whether the applicant has the sound financial condition, competence, and responsibility to engage in digital financial asset business activity.
To help pay for this work, DFAL grants DFPI the ability to establish fees meant to cover the reasonable costs of regulation or reviewing applications. While having industry pay for its own regulation is standard in financial services regulation, DFAL’s flexibility is relatively unique since many of DFPI’s other licensure programs have established fee amounts in the authorizing statute.
On October 2, 2024, DFPI requested public comment on proposed rules related to the DFAL license application and other topics. DFPI’s proposed regulations include a $20,000 application fee. [1]
- What this bill does.
AB 236 would modify DFAL to cap the application fee at $5,000, which is significantly lower than the $20,000 fee proposed by DFPI via regulation. This would align the DFAL application fee with a similar fee for money transmitters, even though the DFAL application process is likely to be more complex and time-consuming. Importantly, DFPI’s proposed $20,000 application fee is not final, and may be lowered after reviewing public input.
- Considering the trade-offs.
DFPI’s proposed $20,000 application fee, if finalized, would be significantly higher than other licensure programs. However, before lowering that fee to $5,000 through legislation, it is worth reviewing some of the previous discussions around DFAL and the competing pressures DFPI faces in rolling out the new licensure law.
When AB 39 went through the legislative process, industry representatives voiced concerns about a “bottleneck” of initial applications when the law went into effect. These concerns were based on experiences in New York, where the regulating department failed to process applications in a timely manner. Based on industry feedback, it appears the main challenge facing New York DFS was capacity: There simply were not enough people working on their program, and there was no cost recovery mechanism in their statute. As a result, applicants were caught in limbo as they waited months for a response, and DFS was limited in its ability to hire more staff to address the backlog of work.
To address these valid concerns, AB 39’s author allowed for some flexibility in how DFPI could implement the DFAL, including allowing for conditional licensure for New York-licensed companies and authorizing DFPI to set appropriate fee levels. These provisions were intended to empower DFPI to “hit the ground running” on July 1, 2026 with trained staff and other relevant infrastructure in order avoid New York’s early mistakes.
AB 236’s fee cap may result in trade-offs that work against the crypto industry’s interests. By lowering the application fee from $20,000 to $5,000, DFPI will have fewer resources to hire staff and build out the DFAL licensure program, which could result in delays for application approval. If “time is money,” then such long application delays could be costly to a company hoping to enter the California market, and such costs would likely exceed $20,000.
REGISTERED SUPPORT / OPPOSITION:
Support
None received.
Opposition
None received.
Analysis Prepared by: Luke Reidenbach / B. & F. / (916) 319-3081
https://dfpi.ca.gov/regulated-industries/digital-financial-assets/ ↑
Discussed in Hearing
4MIN
Assembly Standing Committee on Banking and Finance
Bill Author
Bill Co-Author(s):