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The California Department of Financial Protection and Innovation, or DFPI, has stepped up the process of implementing regulatory standards for companies working with digital assets. According to the official announcement, all companies and individual entrepreneurs providing crypto services to residents of the state must obtain an appropriate license by July 1 of this year. This requirement stems from the Digital Financial Assets Act (DFAL), signed by the Governor in October 2023.

Submission of documents will begin on March 9 through the National Interstate Licensing System (NMLS). This system is already being used to regulate the traditional financial sector, such as mortgage brokers.

DFAL provides not just registration, but the establishment of clear rules of the game for all market participants, from large exchanges to operators of cryptomats. The law introduces restrictions on the daily volume of withdrawals through cryptocurrencies and sets limits on the fees charged by operators.

The new rules present companies with a difficult choice. Large players with the resources to comply with the law are likely to be able to obtain a license, despite the costs. However, for small startups and medium-sized companies, bureaucratic procedures can become an insurmountable obstacle. It is expected that some of them may stop working in California and reorient to other states or jurisdictions with more lenient regulation.

Whether the situation will become clearer by the end of the year – whether the California crypto market will be able to adapt to new realities or repeat the fate of its New York colleagues - will be known in the second half of the year.