SB97 - Digital financial assets: stablecoins.

Senate Bill No. 97 CHAPTER 52 An act to amend Sections 3102, 3103, 3201, 3205, 3211, 3307, 3501, 3505, and 3701 of, and to repeal Chapter 6 (commencing with Section 3601) of Division 1.25 of, the Financial Code, relating to financial regulation, and declaring the urgency thereof, to take effect immediately. [ Approved by Governor June 30, 2026. Filed with Secretary of State June 30, 2026. ] LEGISLATIVE COUNSEL'S DIGEST SB 97, Grayson. Digital financial assets: stablecoins. (1) Existing law, the Digital Financial Assets Law, prohibits a person, on or after July 1, 2026, 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 certain criteria are met, including that the person is licensed with the Department of Financial Protection and Innovation, as prescribed, or the person submits an application on or before July 1, 2026, and is awaiting approval or denial of that application. This bill would revise the above-described latter criterion to specify that the person submits a completed application, as provided. The Digital Financial Assets Law authorizes the Commissioner of Financial Protection and Innovation to issue a conditional license to an applicant who holds or maintains a license to conduct virtual currency business activity in the State of New York, as specified, provided the license was issued or approved no later than January 1, 2023. This bill would revise the above-described authorization to require that the license be issued or approved no later than January 1, 2025. (2) The Digital Financial Assets Law defines “digital financial asset business activity” to mean any of specified activities, including, among others, exchanging, transferring, or storing a digital financial asset, as specified, or exchanging one or more digital representations of value used within one or more online games, game platforms, or family of games, as provided. This bill would remove exchanging one or more digital representations of value used within one or more online games, game platforms, or family of games from the definition of “digital financial business activity.” The bill would specify that a “digital financial asset” does not include, among other things, a transaction in which a merchant grants digital representations of value that primarily relate to an affinity or rewards program, as provided, or a digital representation of value issued by or on behalf of a publisher and used primarily within online games or game platforms and that is not otherwise a digital financial asset. The Digital Financial Assets Law declares that its provisions do not apply to specified activity, including by a person who does not receive compensation for providing digital financial asset products or services or for conducting financial asset business activity or that is engaged in testing products or services with the person’s own funds. This bill would specify that the above-described exclusion includes a person who merely retains the ability to terminate, suspend, or interrupt a digital financial transaction solely to prevent unauthorized or fraudulent activity and who is not compensated for that service. The Digital Financial Assets Law prohibits a covered person from exchanging, transferring, or storing a digital financial asset that is a stablecoin or engaging in digital financial asset administration of a stablecoin, as specified, unless certain conditions are met. However, existing law authorizes a covered person to exchange, transfer, or store a stablecoin or engage in digital financial asset administration of that stablecoin, as specified, if the stablecoin is approved by the commissioner and complies with certain requirements, restrictions, or prohibitions established by the commissioner. This bill would repeal the above-described provisions related to stablecoins. (3) The Digital Financial Assets Law requires a licensee to submit an annual report, as provided, containing specified information, including a description of any data security breach or cybersecurity event of the licensee. Existing law requires a licensee to file with the department, as applicable, a report of, among other things, a change in the licensee’s business for the conduct of its digital financial asset business activity with, or on behalf of, a resident that meets one of specified criteria, including that the proposed change might raise safety and soundness or operational concerns. This bill would revise the above-described annual report to instead include a description of any material data security breach or cybersecurity event of the licensee. The bill would revise the specified criteria in the requirement to file the above-described report of a change in the licensee’s business to instead include that the proposed change might raise material safety and soundness or operational concerns. Before engaging in digital financial asset business activity with a resident, the Digital Financial Assets Law requires a covered person, defined as a person required to obtain a license pursuant to that law, to disclose, as provided, certain information, including the resident’s right to at least 14 days’ prior notice of specified changes that have a material impact on digital financial asset business activity with the resident, or the policies applicable to the resident’s account. Existing law requires a covered exchange, as provided, to certify on a form provided by the department that the covered exchange has taken specified actions, except for any digital financial asset approved for listing on or before January 1, 2023. In a transaction for or with a resident, existing law prohibits the covered exchange from interjecting a third party between the covered exchange and the best market for the digital financial asset in a manner inconsistent with specified requirements. This bill would prohibit the 14-day notice requirement from applying to changes in terms, conditions, or policies that are reasonably necessary to address a risk of loss to the resident or covered person, to the extent that the change does not relate to the fee schedule. The bill would instead exclude from the above-described certification requirement a digital financial asset approved for listing on or before January 1, 2025. The bill would require a covered person to provide and make available an up-to-date description of the order execution practices of the covered person, as specified. The bill would exempt a transaction in which a resident receives stablecoin, as defined, in exchange for legal tender or bank or credit union credit from the above-described prohibition against interjecting a third party. The Digital Financial Assets Law requires an applicant, as provided, to create, and during licensure, maintain in a record specified policies and procedures. Existing law requires these policies and procedures be disclosed separately from other disclosures made available to a resident, as specified, except for, among other things, an adopted information security program or an operational security program. This bill would instead exclude from the above-described requirement to disclose separately from other disclosures programs with information that is sensitive to potential security risks, as specified. This bill would declare that it is to take effect immediately as an urgency statute. Digest Key Vote: 2/3 Appropriation: NO Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Section 3102 of the Financial Code is amended to read: 3102. For purposes of this division: (a) “Applicant” means a person that applies for a license under this division. (b) “Bank” means a bank, savings bank, savings and loan association, savings association, or industrial loan company chartered under the laws of this state or any other state or under the laws of the United States. (c) “Control” means both of the following: (1) When used in reference to a transaction or relationship involving a digital financial asset, power to execute unilaterally or prevent indefinitely a digital financial asset transaction, unless the power to prevent indefinitely is limited to the ability to terminate, suspend, or interrupt a transaction solely in response to unauthorized or fraudulent activity. (2) When used in reference to a person, the direct or indirect power to do either of the following: (A) Vote 25 percent or more of any class of the voting securities issued by a person. (B) Direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, other than a commercial contract for goods or nonmanagement services, or otherwise, if no individual is deemed to control a person solely on account of being a director, officer, or employee of such person. (d) “Covered person” means a person required to obtain a license pursuant to this division. (e) “Credit union” means a credit union licensed under the laws of this state, or any other state, or a federal credit union chartered under the laws of the United States. (f) “Department” means the Department of Financial Protection and Innovation. (g) (1) “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. (2) “Digital financial asset” does not include any of the following: (A) A transaction in which a merchant grants, as part of an affinity or rewards program, digital representations of value that primarily relate to the affinity or rewards program and cannot be taken from or exchanged with the merchant for legal tender, bank or credit union credit, or a digital financial asset. (B) A digital representation of value issued by or on behalf of a publisher and used primarily within online games or game platforms and that is not otherwise a digital financial asset. (C) A security registered with or exempt from registration with the United States Securities and Exchange Commission or a security qualified with or exempt from qualifications with the department. (D) A digital record of ownership, or equivalent thereto, of tangible or intangible goods, including, but not limited to, any of the following: (i) Works of art, musical compositions, literary works, and similar intellectual property. (ii) Collectibles, merchandise, virtual land, and in-game assets. (iii) Digital affinity, loyalty, or rewards points granted by a merchant or a network of participating merchants if all of the following are true: (I) The points cannot be redeemed with a participating merchant in exchange for legal tender, bank or credit union credit, or a digital financial asset. (II) The points can only be redeemed by participating merchants as part of the purchase of goods or services, which does not include digital financial assets. (III) The points are granted or redeemed by participating merchants pursuant to a formal loyalty program intended to reward frequent customers. (iv) Licenses, tickets, and similar rights to attend events or participate in activities. (h) “Digital financial asset business activity” means either of the following: (1) Exchanging, transferring, or storing a digital financial asset. (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. (i) “Exchange,” when used as a verb, means to assume control of a digital financial asset from, or on behalf of, a resident, at least momentarily, to sell, trade, or convert either of the following: (1) A digital financial asset for legal tender, bank or credit union credit, or one or more forms of digital financial assets. (2) Legal tender or bank or credit union credit for one or more forms of digital financial assets. (j) “Executive officer” includes, but is not limited to, an individual who is a director, officer, manager, managing member, partner, or trustee of a person that is not an individual, or any other person who performs similar policymaking or policy implementation functions. (k) “Insolvent” means any of the following: (1) Having generally ceased to pay debts in the ordinary course of business other than as a result of a bona fide dispute. (2) Being unable to pay debts as they become due. (3) Being insolvent within the meaning of federal bankruptcy law. (l) “Legal tender” means a medium of exchange or unit of value, including the coin or paper money of the United States, issued by the United States or by another government. (m) “Licensee” means a person licensed or conditionally licensed under this division. (n) (1) “Person” means an individual, partnership, estate, business or nonprofit entity, or other legal entity. (2) “Person” does not include a government-sponsored enterprise, government, or governmental subdivision, agency, or instrumentality. (o) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form. (p) (1) “Resident” means any of the following: (A) A person who is domiciled in this state. (B) A person who is physically located in this state for more than 183 days of the previous 365 days. (C) A person who has a place of business in this state. (D) A legal representative of a person that is domiciled in this state. (2) Notwithstanding paragraph (1), “resident” does not include a licensee or an affiliate, as defined in subdivision (a) of Section 90005, of a licensee. (q) “Responsible individual” means an individual who has direct control over, or significant management policy and decisionmaking authority with respect to, a licensee’s digital financial asset business activity in this state. (r) “SAFE Act” means the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (Public Law 110-289). (s) “Sign” means, with present intent to authenticate or adopt a record, either of the following: (1) To execute or adopt a tangible symbol. (2) To attach to, or logically associate with, the record an electronic symbol, sound, or process. (t) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. (u) “Store,” except in the phrase “store of value,” means to maintain control of a digital financial asset on behalf of a resident by a person other than the resident. “Storage” and “storing” have corresponding meanings. (v) “Transfer” means to assume control of a digital financial asset from, or on behalf of, a resident and to subsequently do any of the following: (1) Credit the digital financial asset to the acc [Text truncated for display. Full text available on Congress.gov.]