California (CA): Bitcoin and virtual-currency law

Bitcoin Research — Law, Regulation, Markets & Origins (2026)

Legislation

2026-10-09

Document text

Research, not advice. Part of the Bitcoin research archive (October 2026). Claims labelled unverified, contested or fringe are reported, not endorsed; statuses of bills and rules are as of the date checked. Government, court and patent records are public domain; the research notes are CC BY 4.0.

California (CA): Bitcoin and virtual-currency law

Field Value
Jurisdiction US state: California
Date checked 2026-10-09
Main regulator Department of Financial Protection and Innovation (DFPI)
Crypto licensing law Digital Financial Assets Law (DFAL), Fin. Code § 3101 et seq. Enacted by AB 39 (Stats. 2023, ch. 792) and SB 401 (Stats. 2023, ch. 871, kiosks). Licensing deadline delayed to 2026-07-01 by AB 1934 (Stats. 2024, ch. 945). Cleaned up by SB 97 (Stats. 2026, ch. 52), urgency statute signed 2026-06-30.
Money-transmitter law Money Transmission Act, Fin. Code § 2000 et seq. CSBS lists it as a Partial MTMA, effective 2024-01-01, Virtual Currency Title: No (CSBS).
UMSA? No
URVCBA? Not adopted by name. The DFAL's definitions closely track the URVCBA. For example, to "exchange" means to "assume control of a digital financial asset ... at least momentarily, to sell, trade, or convert", which is our comparison with the uniform act's wording.
Crypto ATM / kiosk law Yes. Fin. Code §§ 3901–3907 (SB 401, 2023): $1,000 per day; fees capped at the greater of $5 or 15% from 2025-01-01; kiosk operators need a DFAL licence from 2026-07-01.

Summary

California built a crypto-specific licensing regime, the DFAL, instead of folding crypto into its money-transmitter law. Since 2026-07-01, anyone exchanging, transferring or storing digital financial assets for California residents needs a DFPI licence or a completed pending application, unless exempt. Penalties for unlicensed activity reach $100,000 per day (secondary source).

Other 2025–2026 laws:

  • SB 97 (2026) repealed the DFAL's stablecoin chapter, deferring to the federal GENIUS Act.
  • SB 822 (2025) lets the State Controller take abandoned crypto in kind through a DFPI-licensed custodian.
  • AB 2409 (2026) bars public officials from issuing meme coins.
  • SB 1208 (2026), sponsored by the Attorney General, adds digital assets to the money-laundering law and creates a warrant-and-return process for seized crypto.

Kiosk rules have applied since 2024. The DFPI has enforced them against at least four operators, including Coinme, Coinhub and Hermes Bitcoin.

1. Money-transmitter licensing and virtual currency

  • The Money Transmission Act does not license crypto-only business. The DFPI has not historically licensed crypto-only firms under it; the DFAL was created instead (the agency's historical position is not re-verified here; the DFPI site returned HTTP 403).
  • The DFAL is the operative licence. Fin. Code § 3201, as amended by SB 97: "On or after July 1, 2026, a person shall not engage in digital financial asset business activity ... with or on behalf of a resident unless" the person:
  • (a) is licensed;
  • (b) "submits a completed application on or before July 1, 2026, and is awaiting approval or denial"; or
  • (c) is exempt under § 3103.
  • Definitions (§ 3102, as amended by SB 97):
  • "Digital financial asset" means "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". Bitcoin is squarely covered. Rewards points, in-game items and registered or exempt securities are excluded.
  • "Digital financial asset business activity" means "Exchanging, transferring, or storing a digital financial asset", or holding electronic precious metals.
  • These definitions are saved in CA-codes-DFAL-kiosk-unclaimed-sections-2026-10.html.
  • What SB 97 (2026) changed:
  • It repealed DFAL Chapter 6 on stablecoins in light of the federal GENIUS Act.
  • It required a completed application to qualify for the safe harbour.
  • It extended the conditional-licence path for New York BitLicense holders to licences issued by 2025-01-01.
  • It narrowed the reporting duties.
  • Sources: Legislative Counsel digest in the chaptered text (saved); Morrison & Foerster summary via JD Supra (law-firm summary).
  • DFAL regulations: the Office of Administrative Law approved them on 2026-06-29, after rejecting the first submission in May 2026. They create three exemptions from separate Money Transmission Act licensing for fiat movements linked to DFAL activity (MoFo via JD Supra; the regulation text itself was not retrieved).
  • Application details (secondary): NMLS began taking DFAL applications on 2026-03-09. The DFPI signalled a starting tangible net worth of $100,000 and a $500,000 surety bond (TechTimes, 2026-07-01).

2. Other virtual-currency-specific laws

Law What it does Status Source
SB 822 (Stats. 2025, ch. 660) Code Civ. Proc. § 1516.5: digital financial assets escheat after 3 years without owner activity. § 1568: the Controller may pick DFPI-licensed custodians to hold escheated crypto in kind. Chaptered 2025-10-11; effective 2026-01-01 Chaptered text and code sections (saved)
AB 1029 (Stats. 2025, ch. 85) Officials' statements of economic interests must cover digital financial assets (Gov. Code §§ 82034, 87206, 87302, 87350) Chaptered 2025-07-30; effective 2026-01-01 pubinfo law-section table
AB 2409 (Stats. 2026, ch. 473), Asm. Valencia Public officers and employees may not issue meme coins. Digital-asset service providers may not list for California residents a meme coin issued on or after 2027-01-01 by or with a federal, state or local official. Enforced by civil action from the AG, DAs, city attorneys or county counsel. New Gov. Code § 7599.210 et seq. Chaptered 2026-09-27 Chaptered text (saved); Governor's release, 2026-09-27
SB 1208 (Stats. 2026, ch. 483), Sen. Grayson, sponsored by AG Bonta Until 2032-01-01: money laundering covers digital-asset transactions. Police may get warrants to seize digital assets and petition to return them to victims even when no conviction is possible because the perpetrators are abroad. Chaptered 2026-09-27 Chaptered text (saved); AG statement via Sierra Sun Times, 2026-10-04
Executive Order N-9-22 (Gov. Newsom, May 2022) Directed agencies to develop a blockchain and crypto framework Issued 2022 (not retrieved; from memory, unverified)

3. Crypto ATM / kiosk law

Fin. Code §§ 3901–3907, added by SB 401 (Stats. 2023, ch. 871) and amended by AB 1934 (2024). Official text is saved in CA-codes-DFAL-kiosk-unclaimed-sections-2026-10.html.

  • § 3902: "An operator shall not accept or dispense more than one thousand dollars ($1,000) in a day from or to a customer via a digital financial asset transaction kiosk." Effective 2024-01-01.
  • § 3904: from 2025-01-01, charges per transaction may not exceed "the greater of" $5 or 15% of the dollar value at a licensed exchange's quoted price. "Charges" include the spread over market price (§ 3901(a)).
  • § 3905: from 2025-01-01, disclosures in English and the operator's advertising language. They must cover the amount, fees, and the price charged against a licensed exchange's price, plus a finality warning. Detailed receipts are also required.
  • § 3906: operators must give the DFPI a list of kiosk locations, which the DFPI publishes.
  • § 3907: from 2026-07-01, operators must hold a DFAL licence. An operator hosting someone else's activity must make sure that firm is licensed and within the § 3904 cap.
  • No refund mandate comparable to other states. AARP's tracker lists California with limits, receipts and licensing, but no refund provision (AARP).
  • Local rules: San Diego moved in September 2026 to require warning signs at crypto ATMs (Mercury News/SiliconValley.com, 2026-09-18; not retrieved in full).

4. Tax treatment

  • California personal income tax generally follows federal treatment, under which bitcoin is property and gains are taxed as ordinary income at California rates, since California has no capital-gains rate. (We did not retrieve FTB guidance; unverified.)
  • Sales and use tax: buying bitcoin itself is not a sale of tangible personal property (CDTFA guidance not retrieved; unverified).

5. Notable enforcement

The DFPI website refused automated access, so the actions below come from secondary sources:

Date Action Source
2025-06-25 Coinme Inc.: first DFAL enforcement action. $300,000 penalty, including $51,700 restitution to an elderly Californian, for exceeding the $1,000 daily limit and missing receipt disclosures. ABC7; TechTimes
2025 LSGT Services LLC (Coinhub): $675,000, including $105,000 restitution, for fees over the cap, cash above $1,000 a day, and missing disclosures. Actions also against Coin Time LLC (Wyoming) and Anh Management LLC (Hermes Bitcoin). Yahoo/Nexstar; Yahoo Finance
2026-01-14 Nexo Capital Inc.: $500,000 for unlicensed crypto-backed lending under the California Financing Law TechTimes
2026-05-18 Hermes Bitcoin: ordered to shut all 42 Southern California kiosks by 2026-05-20, with a suspended $9.9M penalty. The DFPI cited more than 14,120 receipt and disclosure failures and 3,006 transactions over the daily limit. TechTimes
2026-10-08 Coinme 34-state settlement ($2.5M; kiosks to close by 2027-01-01). California is not among the 34 participating agencies listed in Appendix A Coinme consent order, App. A–B (completeness check, 2026-10-09). CSBS

6. Bills, 2025–26 session

Statuses come from the Legislative Counsel's public data file (BILL_TBL and BILL_HISTORY_TBL in pubinfo_2025.zip, dated 2026-10-04), downloaded 2026-10-09 from downloads.leginfo.legislature.ca.gov. The session's final-passage deadline was 2026-08-31 and the governor's signing deadline 2026-09-30, so every bill not chaptered is dead.

Bill Subject Status
SB 97 DFAL clean-up; stablecoin chapter repealed Chaptered, ch. 52, 2026-06-30 (urgency)
SB 822 Unclaimed digital financial assets Chaptered, ch. 660, 2025-10-11
AB 1029 Officials' financial-interest statements include digital financial assets Chaptered, ch. 85, 2025-07-30
AB 2409 Meme coins Chaptered, ch. 473, 2026-09-27
SB 1208 Money laundering and seizure of digital assets Chaptered, ch. 483, 2026-09-27
AB 1052 (2025) "Digital assets / Money Transmission Act" Held under submission in Appropriations (2025-08-29); dead
AB 236 (2025) DFAL regulatory fees Died 2026-02-02
AB 2285 (2026) "Digital Financial Asset Banking Act" Author cancelled its Senate hearing (2026-06-29); dead
AB 2335 (2026) Unclaimed property: digital financial assets Held under submission in Senate Appropriations (2026-08-13); dead

Pending: none. The 2027–28 session begins in December 2026.

7. Contested and fringe claims

  • Meme-coin law and the President. The Governor's release frames AB 2409 against President Trump's own meme coin. It asserts that buyers "have lost more than $3 billion" while the President made "roughly $636 million", citing "recent reporting". These figures are the Governor's office's claims and were not independently checked. Industry critics, for example a "Stand With Crypto" response in 2025 to the Illinois governor's similar "crypto bro" remarks, call such framing anti-crypto politics.
  • "California is the de facto national crypto regulator." TechTimes argues the DFAL could make California a de facto national standard. That is commentary, not law.
  • Exodus fears. Some commentators predicted a "BitLicense-style exodus". The California Blockchain Advocacy Coalition's Joe Ciccolo told Decrypt that "marginal or under-resourced players may choose to exit California" (quoted in TechTimes). Whether firms actually left is unverified.

Saved sources (sources/states/ca/)

See sources/states/ca/INDEX.md.

Gaps

  • DFPI, leginfo and the State Controller's site returned HTTP 403 or Cloudflare challenges. As a result we could not retrieve:
  • DFPI press releases (enforcement dates come from secondary reports);
  • the DFAL regulation text;
  • the DFPI's kiosk location list;
  • the Controller's crypto custodian status.
  • FTB and CDTFA crypto guidance was not retrieved.
  • Executive Order N-9-22 was not retrieved.