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The California Department of Financial Protection and Innovation (DFPI) has mandated that organizations dealing with digital assets and aiming to serve state residents must secure their operational permits by July 1.
The DFPI referenced the digital financial assets law (DFAL) enacted in October 2023. Under this legislation, individuals and entities providing cryptocurrency services to California residents or on their behalf are required to apply for a DFAL license. The application process will commence on March 9 through the Nationwide Multistate Licensing System (NMLS).
The DFAL law necessitates a mandatory license for offering crypto services and establishes a daily withdrawal limit for transactions via cryptocurrency ATMs, as well as capping the fees that operators can charge.
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Joe Ciccolo, the executive director of the California Coalition for Blockchain Interests, noted that approximately a quarter of all U.S. crypto companies are based in California, and the tightening of regulations could lead to a significant exodus from the state. Ciccolo believes it would be preferable for services wishing to operate with California residents to comply with regulatory requirements at a national level, rather than needing to obtain separate licenses in each state. Typically, stringent regulations attract serious operators with substantial capital; however, smaller services may choose to leave California rather than adhere to the new standards, Ciccolo expressed concern.
The director of the blockchain association compared the situation to the strict regulations in New York, where since 2015, services aiming to legally exchange and trade crypto assets must obtain a special BitLicense from the New York State Department of Financial Services (NYDFS). This requirement previously compelled major exchanges like Kraken and Bitfinex to exit the state.
Last year, New York Mayor Eric Adams proposed the elimination of the BitLicense, citing that the requirements for obtaining it are excessively stringent for crypto companies.
