Exactly one year ago today, I wrote that Governor Newsom had signed a bill, AB 39, that will prohibit a person from engaging in digital financial asset business activity without a license from Department of Financial Protection & Innovation. AB 39 and SB 401 together constitute what is known as the Digital Financial Assets Law or DFAL. At that time, I prognosticated a lengthy rulemaking process in light of the complexity of the subject and the scope of regulatory authority bestowed upon the DFPI.

Last November, the DFPI published an invitation for comments in anticipation of formal rulemaking under AB 39. The DFPI received 18 comments in response to its invitation, which are available here. On October 1 of this year, the DFPI published a second invitation for comments with respect to both AB 39 and SB 401. At the same time, the DFPI published the text of proposed rules. The comment period for this second invitation expires on November 18, 2024.

On September 29, Governor Newsom proved my earlier prediction to be correct by signing AB 1934. This bill postpone's the operative licensing date of the DFAL by one year, from July 1, 2025, to July 1, 2026.

AB 1934 also adds requirements for licensees, such as maintaining customer financial records and compliance records. The bill also requires a licensee to maintain a monthly report that shows a stablecoin issuer has complied with stablecoin reserve requirements under DFAL.