In November 2022, the California Department of Financial Protection and Innovation (DFPI):

On November 3, 2022, DFPI issued a redacted letter concluding that an unnamed crypto exchange is not required to obtain a license under the MTA to offer crypto trading services or to issue tokenized versions of the US dollar or tokenized securities.

The letter responds to a redacted company's request for an interpretive opinion from DFPI as to whether the company must obtain a license under the MTA for its proposed business activities in California. According to the letter, the company stated that it plans to offer the purchase, sale, and trading of various cryptocurrencies using a platform provided by its affiliate in conjunction with another affiliate that is a registered broker-dealer.

The transactions contemplated by the requester involve the use of a tokenized version of the US dollar, each of which is valued at $1.00. Once a customer deposits funds into the company's account, an equivalent amount of the company's digital token is created and used to facilitate a trade for cryptocurrency. After the transaction or upon request, the token can be exchanged for US dollars, or customers can hold the tokens in their digital wallets. The company does not take custody of its client's currencies or offer digital wallets; rather, the client's digital wallet will be directly linked to the platform clients and transact on a peer-to-peer basis with other clients.

According to the letter, DFPI has not determined whether the issuance of tokenized versions of the US dollar or tokenized securities, or their use in trading cryptocurrency, is a money transmission. Consequently, DFPI does not currently require the company to obtain a license under the MTA to perform its described platform trading services or to issue tokenized versions of the US dollar or tokenized securities. The letter, however, advises that DFPI's conclusions are subject to change because the opinion stated is based solely on the facts presented in the company's correspondence with DFPI, and any changes in the facts or circumstances could result in a different conclusion. The letter further states that it does not address whether the company's proposed activities require licensure or registration under other laws, such as the California Corporate Securities Law of 1968.

The MTA prohibits a person from engaging in the business of money transmissions in California unless the person is licensed, exempt from licensure, or is an agent of a person licensed or exempt from licensure. Under the MTA, money transmission includes receiving money for transmission and issuing a stored value. A "stored value" is defined as a monetary value representing a claim against the issuer that is stored on an electronic or digital medium and evidenced by an electronic or digital record, and that is intended and accepted for use as a means of redemption for money or monetary value or payment for goods or services, but does not include value that is only redeemable by the issuer for goods or services provided by the issuer.

The letter states that DFPI recently invited public comment on developing guidance and regulation of crypto-asset-related financial products and services in California and provided a link to sign up to receive notices of future rulemaking and invitations for comment.

On November 11, 2022, DFPI filed a notice of intent to issue an order suspending CFL license pending investigation (BlockFi notice) against BlockFi Lending LLC (BlockFi), a Delaware limited liability company and a wholly owned subsidiary of BlockFi Inc. According to the BlockFi Notice, BlockFi's Twitter account declared that it was limiting platform activity, including pausing client withdrawals as allowed under its terms. This caused DFPI to file the BlockFi notice stating its intent is to issue an order suspending BlockFi's CFL license for 30 days, pending DFPI's investigation into BlockFi, effective three days after service of the BlockFi notice.

On November 15, 2022, DFPI filed a notice of intent to issue an order suspending CFL license pending investigation (SALT notice) against SALT Lending LLC (SALT), a privately held financing company that specializes in consumer and commercial-purpose loans collateralized by digital assets (see Securities and Exchange Commission, Salt Blockchain Inc. Form 10). According to the SALT notice, SALT sent a communication to customers signed by its CEO Shawn Owen stating that the collapse of major crypto exchange FTX impacted its business also noting that it would be pausing deposits and withdrawals on the SALT platform effective immediately. DFPI filed the SALT notice declaring its intent to issue an order suspending SALT's CFL license for 30 days, pending the DFPU's investigation into the extent to which SALT has been affected by the bankruptcy of FTX and related companies, effective three days after service of the SALT Notice.