AB2285 - Digital Financial Asset Banking Act.

Amended IN Assembly June 10, 2026 Amended IN Assembly June 03, 2026 Amended IN Assembly May 22, 2026 Amended IN Assembly March 16, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 2285 Introduced by Assembly Member Valencia February 19, 2026 An act to amend Section 25019 of, and to add Part 9 (commencing with Section 25710) to Division 1 of Title 4 of, the Corporations Code, and to add Division 1.26 (commencing with Section 3910) to the Financial Code, relating to financial regulation. LEGISLATIVE COUNSEL'S DIGEST AB 2285, as amended, Valencia. Digital Financial Asset Banking Act. The Digital Financial Assets Law, on or after July 1, 2026, prohibits a person from engaging in digital financial asset business activity or holding itself out as being able to engage in digital financial asset business activity, with or on behalf of a resident unless any of specified conditions is true. The law defines “digital financial asset” to mean 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, whether or not denominated in legal tender and defines “digital financial asset business activity” to mean, among other similar things, exchanging, transferring, or storing a digital financial asset or engaging in digital financial asset administration, whether directly or through an agreement with a digital financial asset control services vendor. This bill, the Digital Financial Asset Banking Act, would generally regulate a bank or a credit union under the examination authority of the Department of Financial Protection and Innovation with respect to its provision of digital asset custody services, staking services, and digital asset transaction services, as those terms are defined, including by requiring certain disclosures to costumers and requiring certain financial safety measures. The bill would require a financial institution engaged in digital financial asset custody services to conduct an annual audit of its custodial activities and holdings that is either an independent audit or a review by the financial institution’s board of directors for accuracy and signed be each board member under penalty of perjury. By expanding the scope of the crime of perjury, this bill would impose a state-mandated local program. This bill would authorize the department to enforce its provisions with administrative and civil remedies, as specified. The Corporate Securities Law of 1968 generally regulates the offering and selling in this state of a security, as defined. This bill would define “security” to not include a staking reward, as defined. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YES Bill Text The people of the State of California do enact as follows: SECTION 1. Section 25019 of the Corporations Code is amended to read: 25019. (a) “Security” means any note; stock; treasury stock; membership in an incorporated or unincorporated association; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral trust certificate; preorganization certificate or subscription; transferable share; investment contract; viatical settlement contract or a fractionalized or pooled interest therein; life settlement contract or a fractionalized or pooled interest therein; voting trust certificate; certificate of deposit for a security; interest in a limited liability company and any class or series of those interests (including any fractional or other interest in that interest), except a membership interest in a limited liability company in which the person claiming this exception can prove that all of the members are actively engaged in the management of the limited liability company; provided that evidence that members vote or have the right to vote, or the right to information concerning the business and affairs of the limited liability company, or the right to participate in management, shall not establish, without more, that all members are actively engaged in the management of the limited liability company; certificate of interest or participation in an oil, gas or mining title or lease or in payments out of production under that title or lease; put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof); or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency; any beneficial interest or other security issued in connection with a funded employees’ pension, profit sharing, stock bonus, or similar benefit plan; or, in general, any interest or instrument commonly known as a “security”; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. All of the foregoing are securities whether or not evidenced by a written document. (b) “Security” does not include any of the following: (1) A beneficial interest in any voluntary inter vivos trust that is not created for the purpose of carrying on any business or solely for the purpose of voting. (2) A beneficial interest in any testamentary trust. (3) An insurance or endowment policy or annuity contract under which an insurance company admitted in this state promises to pay a sum of money, whether or not based upon the investment performance of a segregated fund, either in a lump sum or periodically for life or some other specified period. (4) A franchise subject to registration under the Franchise Investment Law (Division 5 (commencing with Section 31000)) or exempted from registration by Section 31100 or 31101. (5) A staking reward, as defined in Section 3910 of the Financial Code, including through a staking service provider. SEC. 2. Part 9 (commencing with Section 25710) is added to Division 1 of Title 4 of the Corporations Code, to read: PART 9. Digital Financial Assets 25710. The distribution of staking rewards, as defined in Section 3910 of the Financial Code, is not subject to Sections 25110, 25120, and 25130. SEC. 3. Division 1.26 (commencing with Section 3910) is added to the Financial Code, to read: DIVISION 1.26. Digital Financial Asset Banking Act CHAPTER 1. General provisions Provisions 3910. As used in this chapter: (a) “Active staking” means intentional participation in staking services resulting in inaccessibility to one’s digital financial asset for an agreed-upon time in exchange for a staking reward minus a fee that is in a fixed amount or a percentage of the staking reward. (b) “Customer” means a person for whom a financial institution provides digital asset services, including a digital asset account holder or a person on whose behalf the financial institution acts in a fiduciary capacity. (c) “Department” means the Department of Financial Protection and Innovation. (d) “Digital asset” means a digital representation of value recorded on a cryptographically secured, distributed ledger or similar technology, including, but not limited to, a digital financial asset. (e) “Digital asset custody services” means the safekeeping or custody of a digital financial asset on behalf of a customer by a financial institution, including maintaining control over the digital financial asset and any associated key. (f) “Digital asset transaction services” means to facilitate the execution of a digital asset purchase or sale on behalf of a customer for compensation. (g) “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, whether or not denominated in legal tender. (h) “Digital financial asset business activity” means any of the following: (1) Exchanging, transferring, or storing a digital financial asset or engaging in digital financial asset administration, whether directly or through an agreement with a digital financial asset control services vendor. (2) Holding electronic precious metals or electronic certificates representing interests in precious metals on behalf of another person or issuing shares or electronic certificates representing interests in precious metals. (3) Exchanging one or more digital representations of value used within one or more online games, game platforms, or family of games for either of the following: (A) A digital financial asset offered by, or on behalf of, the same publisher from which the original digital representation of value was received. (B) Legal tender or bank or credit union credit outside of the online game, game platform, or family of games offered by, or on behalf of, the same publisher from which the original digital representation of value was received. (i) “Digital wallet” means a digital interface or physical device that stores a digital asset or a private key in a manner that enables the owner to securely manage, transfer, and maintain independent control over the owner’s digital asset. (j) “Fiduciary capacity” means a capacity in which a financial institution possesses investment, management, or administration discretion of a digital financial asset on behalf of a customer that creates for the financial institution a strict duty to act in the best financial interest of the customer, including against its own interest. (k) “Financial institution” means a bank or credit union operating under the examination authority of the department. (l) “Key” means a pair of cryptographic codes associated with a digital asset wallet that consists of a public key and a private key that meets both of the following criteria: (1) The public key of the pair enables the receipt of a digital financial asset and the verification of a digital signature. (2) The private key of the pair enables the control, transfer, or management of a digital asset within the digital asset wallet. (m) “Material cybersecurity incident” means a cybersecurity breach or event that materially compromises the security, confidentiality, or integrity of a financial institution’s information system or a digital asset under the financial institution’s control. (n) “Nonfiduciary capacity” means providing digital asset custody services solely for safekeeping without discretionary authority to manage or transfer a digital financial asset and with respect to which legal title and control of the assets remain with the customer. (o) “Passive staking” means staking pooled assets by, or on behalf of, the financial institution wherein the customer may receive the customer’s digital financial asset upon demand in exchange for a staking reward minus an agreed-upon fee, in a fixed amount or a percentage of the staking reward, from the financial institution staking service provider. (p) “Pooled custody” means the collective holding of fungible digital financial assets of like kind belonging to different customers in a shared account or digital asset wallet. (q) “Segregated custody” means the holding separately from the digital financial assets of other customers of the fungible digital financial assets of an individual customer in an account or digital asset wallet. (r) “Slashing” means a penalty imposed by a blockchain protocol that results in the forfeiture or reduction of staked digital assets or staking rewards due to validator misconduct or failure. (s) “Staking” means committing fungible digital financial assets to a blockchain network to participate in the network’s operations by validating transactions, proposing and attesting to blocks, and securing the network. (t) “Staking reward” means any interest, yield, or other compensation earned from staking a digital financial asset on a blockchain network. (u) “Subcustodian” means a third party that a financial institution uses to hold a digital financial asset on the financial institution’s behalf as part of providing digital asset custody services to a customer. CHAPTER 2. Digital Asset Custody Services 3915. (a) A financial institution that provides digital asset custody services in a nonfiduciary capacity shall act only upon the explicit instructions of the customer and shall not independently manage, transfer, or dispose of the digital financial assets. (b) A financial institution shall enter into a written custodial agreement with each customer before undertaking digital asset custody services that meets all of the following conditions: (1) The custodial agreement clearly specifies whether the financial institution is acting in a fiduciary capacity or a nonfiduciary capacity for that customer. (2) The custodial agreement includes both of the following prominent, written disclosures: (A) Whether or not a digital financial asset held in custody by the financial institution is insured by the Federal Deposit Insurance Corporation, the National Credit Union Administration, or any other federal or state deposit insurance or share insurance program. (B) Whether or not a digital financial asset held in custody by the financial institution is a deposit, obligation, or other liability of the financial institution. (3) The custodial agreement contains the terms of service for digital asset management, investment, or otherwise control and inconspicuously describes thresholds or other triggering events that may cause the financial institution to take action on the customer’s behalf. (4) Any change or update to the custodial agreement shall be provided to the customer no less than 45 days before it becomes effective. 3916. A financial institution shall not hold less than a one-to-one full reserve of each digital asset owed or attributable to its passive staking customers, and the financial institution’s aggregate holdings of each such digital asset shall, at all times, be greater than the total amount of deposited assets. 3917. (a) A financial institution shall not hold digital financial assets in a pooled custody arrangement or segregate digital financial assets by individual customer pursuant to a custodial agreement unless the financial institution maintains accurate records identifying each customer’s specific interest in the digital financial assets. (b) Pooled custody of assets, as described in subdivision (a), shall not relieve the financial institution of the requirement to individually account for and fully reserve each type of digital asset for the benefit of customers under Section 3916. 3918. (a) A financial institution engaged in digital financial asset custody services shall conduct an annual audit of its custodial activities and hold [Text truncated for display. Full text available on Congress.gov.]