On May 4, 2022, California Governor Gavin Newsom signed Executive Order N-9-22 to create a coordinated state regulatory method for cryptocurrency and blockchain, with the additional goal of harmonizing the state’s legal guidelines with these (doubtlessly) enacted at a federal stage. Another purpose of the Order is to find out the utilization of blockchain expertise for state and public establishments. Through the Order, California is aiming to proceed its innovation management by growing new and clear guidelines in help of the additional growth of rising cryptocurrency and associated blockchain applied sciences.
From the accompanying press launch:
California is a worldwide hub of innovation, and we’re organising the state for fulfillment with this rising expertise—spurring accountable innovation, defending shoppers, and leveraging this expertise for the public good,” stated Governor Newsom. “Too usually authorities lags behind technological developments, so we’re getting forward of the curve on this, laying the basis to permit for shoppers and enterprise to thrive.
The Order states that “responsible innovation has been encumbered by regulatory uncertainty, especially with regard to federal law.” Ambitiously, it provides: “State agencies should work with, and concurrently to, the federal government to make California the first state to establish a comprehensive, thoughtful, and harmonized regulatory and business environment for crypto assets.”
The press launch issued with the Order outlined seven priorities:
- Create a clear and constant enterprise atmosphere for corporations working in blockchain, together with crypto belongings and associated monetary applied sciences, that harmonizes federal and California legal guidelines, balances the advantages and dangers to shoppers, and incorporates California values similar to fairness, inclusivity, and environmental safety.
- Collect suggestions from a broad vary of stakeholders, create a regulatory method to crypto belongings harmonized between federal and state authorities, discover and set up public-serving use circumstances (similar to incorporating blockchain applied sciences into state operations), and construct analysis and workforce pipelines.
- Collect suggestions from a broad vary of stakeholders for potential blockchain functions and ventures, with specific consideration to crypto belongings and associated monetary applied sciences. Engagement ought to embrace technical consultants, stakeholders all in favour of addressing inequities and environmental affect, corporations based mostly each in and outdoors California, and extra.
- Engage in a public course of and train statutory authority to develop a complete regulatory method to crypto belongings harmonized with the path of federal rules and steerage, creating shopper protections and solidifying California’s standing as the premiere world location for accountable crypto asset corporations to start out and develop.
- Engage in and encourage regulatory readability by way of progress on the processes outlined in the federal executive order, with state businesses coordinating carefully with the Washington, DC, workplace of the California governor.
- Explore alternatives to deploy blockchain applied sciences to deal with public-serving and rising wants, working with the personal sector, academia and group to current pilots for modern insurance policies, applications and options that show and showcase the potential of adopting blockchain applied sciences to reply to particular challenges recognized by state businesses.
- Identify alternatives to create a analysis and workforce atmosphere to encourage innovation in blockchain expertise, together with crypto belongings. The objectives will likely be to show college students to rising alternatives, energy rising industries, and assist guarantee financial advantages are skilled equitably.
The Order duties varied state businesses, together with the Department of Financial Innovation and Protection (DFPI), with proposing and implementing new regulatory constructions for corporations and for the safety of shoppers. These state businesses are to additional act along side federal businesses similar to the CFPB, CFTC and SEC. California itself goals to doubtlessly foster blockchain innovation for tasks like implementing good contracts and encouraging sustainability by means of its state Blockchain Working Group and Go-BIZ financial growth initiatives. It can even encourage the use of varied blockchain applied sciences by state businesses by means of vendor procurements.
Similar to mandates in the Federal Executive Order, the Order requires DFPI and Go-BIZ to have interaction with and collect enter from stakeholders in the close to time period. It additionally instructs DFPI to extend enforcement actions below the California Consumer Financial Protection Law (CCFPL).
On June 1, 2022, California’s Department of Financial Protection and Innovation formally invited stakeholders and the public to supply enter on potential steerage and rules involving crypto asset-associated monetary merchandise and providers, following the above mentioned government order from Gov. Newsom.
The DFPI’s invitation for comments articulates varied matters and questions to supply readability to these doubtlessly offering enter, but in addition declared that stakeholders can touch upon “any potential area for rulemaking” regarding crypto asset-associated merchandise and providers. Comments to the DFPI are due by August 5, 2022.
California’s efforts on this area should not restricted to these at the government and company ranges. Legislators are additionally shifting ahead with proposals to enact change at the legislative stage. One invoice, launched by State Sen. Sydney Kamlager would enable state businesses to just accept cryptocurrency in fee for offering providers (SB 1275). Separately, former Majority Leader of the California State Assembly-turned-political marketing consultant Ian C. Calderon, working with Bitcoin advocate Dennis Porter, is pushing a proposal to make Bitcoin authorized tender in the state.
As with actions at the federal stage, together with the a lot mentioned however nonetheless to be launched Lummis-Gillibrand crypto regulation invoice, states similar to California are starting to slowly step towards offering the steerage this quickly evolving business must scale into the mainstream. As the Governor’s press launch said, “a burgeoning industry, crypto assets and blockchain technology surpassed a $3 trillion market cap last November, up from $14 billion just five years prior.”
Surely, the time has come for these transacting in the area to get readability on the guidelines (to be) enacted by the authorities, the uncertainty of which continues to hamstring this dynamic ecosystem.