Digital financial assets: stablecoins.

The entire stablecoin regulatory framework (Chapter 6, Sections 3601-3605) is repealed. This removes the commissioner's authority to approve or prohibit specific stablecoins and the associated compliance requirements for covered persons dealing in stablecoins.

The 14-day prior notice requirement for changes to terms, conditions, or policies now has an exception for changes reasonably necessary to address a risk of loss to the resident or covered person, as long as the change does not relate to the fee schedule.

A transaction in which a resident receives stablecoin in exchange for legal tender or bank or credit union credit is exempted from the prohibition against interjecting a third party between the covered exchange and the best market.

The definition of 'digital financial asset business activity' no longer includes 'engaging in digital financial asset administration, whether directly or through an agreement with a digital financial asset control services vendor.' The separate definitions of 'digital financial asset administration' and 'digital financial asset control services vendor' are removed entirely, narrowing the scope of regulated activity.

The definition of 'control' (as applied to transactions) now includes an exception: a person does not have control solely because they retain the ability to terminate, suspend, or interrupt a transaction solely in response to unauthorized or fraudulent activity. This prevents entities with basic fraud-prevention capabilities from being deemed to 'control' a digital financial asset.

The safe harbor for unlicensed persons now requires submission of a 'completed application' by July 1, 2026, rather than simply an 'application.' This raises the bar for qualifying for the transition period.

The deadline for New York virtual currency licenses that qualify for a conditional California license was moved from January 1, 2023 to January 1, 2025, expanding the pool of eligible applicants.

Annual report requirements now only require disclosure of 'material' data security breaches or cybersecurity events, rather than any breach. Similarly, the threshold for filing a business change report was raised from any safety and soundness concern to 'material' safety and soundness or operational concerns.

A new requirement obligates covered persons to provide and make available an up-to-date description of their order execution practices to residents.

The certification requirement for covered exchanges now excludes digital financial assets approved for listing on or before January 1, 2025 (previously January 1, 2023).

The separate disclosure requirement for policies and procedures now exempts programs containing information that is sensitive to potential security risks, rather than only specifically naming information security programs and operational security programs.

Header changed from Senate/Assembly passage signature blocks to 'STATE OF CALIFORNIA AUTHENTICATED ELECTRONIC LEGAL MATERIAL' with 'CHAPTER 52' designation and the Governor's approval date of June 30, 2026.

Removed the Private Secretary of the Governor receipt line and blank signature/date fields that appear in enrolled bills before gubernatorial action.

Page headers and footers changed from 'SB 97' format to 'Ch. 52' format, reflecting the bill's new status as a chaptered law.

New Section 3103 establishes the scope of the Digital Financial Assets Law and lists 17 categories of exempt persons, including banks, credit unions, trust companies, government entities, CFTC-registered entities, securities broker-dealers, merchants accepting digital assets as payment, personal users, small businesses with $50,000 or less in annual activity, attorneys and title insurers providing escrow services, and uncompensated persons (including those who merely retain the ability to terminate transactions to prevent fraud).

The bill's list of amended Financial Code sections expanded from just Sections 3102 and 3603 to include Sections 3102, 3103, 3201, 3205, 3211, 3307, 3501, 3505, 3603, and 3701.

The licensing safe harbor in Section 3201 was changed from allowing a person who 'submits an application' by July 1, 2026 to requiring a 'completed application,' raising the bar for those relying on the pending-application exception.

The conditional license provision in Section 3205 now requires that a New York virtual currency license or limited purpose trust company charter was issued or approved no later than January 1, 2025 (previously January 1, 2023), expanding the pool of eligible applicants.

Section 3211 now requires detailed annual reports including financial statements (audited if revenue exceeds $2 million), descriptions of material data security breaches or cybersecurity events, transaction counts, dollar-equivalent holdings, compliance evidence, and location lists. A pro rata cost-share assessment mechanism was also added, with suspension or revocation for noncompliance by March 31.

Section 3307 change-reporting thresholds were raised: licensees must now report only changes that 'might raise material safety and soundness or operational concerns' (previously just 'safety and soundness') and changes that are 'materially different' from previously listed activity.

Section 3501 adds extensive consumer disclosure requirements for covered persons, including fee schedules, insurance coverage details, error resolution rights, stop-payment procedures, receipt rights, and a 14-day prior notice requirement for changes to terms or policies (with an exception for risk-mitigation changes that do not relate to the fee schedule).

The definition of 'digital financial asset' was narrowed in two ways: (1) affinity/rewards program tokens are now excluded if they 'primarily relate to' the program rather than only if they cannot be exchanged for legal tender, and (2) game tokens are excluded if used 'primarily within' a platform (rather than 'solely within') and that is not otherwise a digital financial asset.

The definition of 'digital financial asset business activity' no longer includes exchanging digital representations of value used within online games, game platforms, or families of games, effectively removing in-game currency exchanges from the regulated activities.

The separate-disclosure requirement for policies and procedures was changed to exclude programs containing information 'sensitive to potential security risks' rather than specifically naming information security or operational security programs, giving the department more flexibility in what can be kept confidential.

Repeals Chapter 6 (Sections 3601 et seq.) of Division 1.25 of the Financial Code, which contained the separate stablecoin approval and restriction framework. Stablecoins will no longer have a distinct regulatory track under this law.

Exempts transactions in which a resident receives stablecoin in exchange for legal tender or bank or credit union credit from the prohibition against interjecting a third party between the covered exchange and the best market.

Adds a new exclusion from the 'digital financial asset' definition for digital records of ownership of tangible or intangible goods, including works of art, intellectual property, collectibles, virtual land, in-game assets, loyalty/rewards points meeting specific conditions, and event tickets or licenses.

Broadens the game token exclusion from tokens 'used solely within an online game, games or game platform, or family of games sold by the same publisher or offered on the same game platform' to tokens 'used primarily within online games or game platforms and that is not otherwise a digital financial asset.'

Narrows the definition of 'control' over a digital financial asset transaction by adding that the power to prevent indefinitely is limited to the ability to terminate, suspend, or interrupt solely in response to unauthorized or fraudulent activity.

Changes the deadline for New York virtual currency licenses qualifying for conditional California licensure from January 1, 2023 to January 1, 2025.

Changes the date for digital financial assets approved for listing that are excluded from the certification requirement from January 1, 2023 to January 1, 2025.

Clarifies that a person must submit a 'completed application' (not just an application) by July 1, 2026 to qualify for the pending-approval exception to the licensing requirement.

Requires a covered person to provide and make available an up-to-date description of its order execution practices.

Exempts changes in terms, conditions, or policies that are reasonably necessary to address a risk of loss to the resident or covered person (not relating to fee schedule) from the 14-day prior notice requirement.

Raises the threshold in annual reports and business change reports from 'any data security breach or cybersecurity event' to 'any material data security breach or cybersecurity event,' and from 'safety and soundness or operational concerns' to 'material safety and soundness or operational concerns.'

Declares the bill an urgency statute to take effect immediately and changes the required vote from majority to two-thirds.

Sections were reordered: Section 3102 (definitions) is now Section 1 of the bill, and Section 3603 (stablecoin approval) is now Section 2. Previously the stablecoin section came first.

The legislative counsel's digest was substantially rewritten to more accurately describe the bill's two main components: removing game-related digital representations from the 'digital financial asset business activity' definition and adding factors for stablecoin approval determinations.

In Section 3102(i), the phrase 'any of the following' was changed to 'any either of the following,' which appears to be a drafting error rather than an intentional substantive change.

Fiscal committee review designation changed from 'no' to 'yes,' meaning the bill now requires fiscal committee analysis before proceeding.

Removed item (3) from the definition of 'digital financial asset business activity,' which had covered exchanging digital representations of value used within online games, game platforms, or families of games for either a digital financial asset from the same publisher or legal tender/bank credit outside the game. This narrows the scope of regulated activity by excluding certain in-game currency exchanges.

Expanded Section 3603(b)(2)(F) on collateralization review factors. Previously it only asked whether collateralization requirements include digital assets as eligible collateral and address algorithmic stablecoins. The new language requires the commissioner to consider: whether the issuer is subject to legally enforceable collateralization requirements, the required collateralization level, the type and quality of assets held as collateral, whether any collateral is digital financial assets (and if so their amount, nature, and quality), and any other issues relevant to algorithmic stablecoins and how the issuer addresses or mitigates those risks.

The amendment date was updated from March 24, 2025 to April 10, 2025, with the prior date retained. Page header bill numbers changed from 97 to 96, likely reflecting a renumbering during the legislative process.

New Section 3603 of the Financial Code is added, creating a stablecoin approval regime that allows covered persons to exchange, transfer, or store approved stablecoins even under the general licensing requirements of the Digital Financial Assets Law.

The commissioner must consider nine specific factors when approving a stablecoin, including: legally enforceable redemption rights for holders; amount and quality of issuer assets backing redemptions; risks in how those assets are held; issuer representations about uses and risks; collateralization requirements addressing algorithmic stablecoins; programmable liquidation/redemption/settlement mechanisms; code security audit requirements; and any other material factors.

The commissioner must post all stablecoin approvals on the department's internet website, creating a public transparency requirement.

The commissioner may require a stablecoin issuer to obtain a license under Section 3203 as a condition of approval, and may impose additional requirements, restrictions, or prohibitions on both issuers and covered persons handling approved stablecoins.

Mandatory revocation if the stablecoin is marketed in a way that creates a reasonable public expectation it poses no more risk than bank credit or stored value products. Discretionary revocation for changes in activities, market conditions, or violations of imposed requirements.

Minor grammatical fix to the definition of 'digital financial asset' in Section 3102(g)(1), removing a duplicated word ('value and that is not legal tender' becomes 'and that is not legal tender').

The fiscal committee answer in the digest changed from 'no' to 'yes,' indicating the bill now has a fiscal impact requiring committee review.