California Governor Issues Executive Order Fostering Use and Regulation of Blockchain and Crypto

On Could 4, 2022, California Gov. Gavin Newsom signed Government Order N-9-22 (EO) to create a regulatory method for cryptocurrency firms and to find out the way to use blockchain know-how for state and public establishments. Via the EO, California is changing into a pacesetter in creating new guidelines of the highway for rising digital currencies and associated crypto applied sciences. 

The EO observes that “accountable innovation has been encumbered by regulatory uncertainty, particularly with regard to federal legislation,” and, as such, “state businesses ought to work with, and concurrently to, the federal authorities to make California the primary state to ascertain a complete, considerate, and harmonized regulatory and enterprise surroundings for crypto belongings.”

Beneath the EO, the state has seven priorities:

1. Create a clear and constant enterprise surroundings for firms 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 customers, and incorporates California values corresponding to fairness, inclusivity, and environmental safety.

2. Accumulate 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 (corresponding to incorporating blockchain applied sciences into state operations), and construct analysis and workforce pipelines.

3. Accumulate 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 embody technical specialists, stakeholders concerned about addressing inequities and environmental influence, firms based mostly each in and outdoors California, and extra.

4. Have interaction in a public course of and train statutory authority to develop a complete regulatory method to crypto belongings harmonized with the route of federal rules and steering, creating client protections and solidifying California’s standing because the premiere international location for accountable crypto asset firms to start out and develop.

5. Have interaction in and encourage regulatory readability by way of progress on the processes outlined within the federal govt order, with state businesses coordinating carefully with the Washington, D.C. workplace of the California governor.

6. Discover alternatives to deploy blockchain applied sciences to handle public-serving and rising wants, working with the personal sector, academia, and neighborhood to current pilots for progressive insurance policies, packages, and options that display and showcase the potential of adopting blockchain applied sciences to reply to particular challenges recognized by state businesses.

7. Establish alternatives to create a analysis and workforce surroundings to encourage innovation in blockchain know-how, together with crypto belongings. The objectives shall be to show college students to rising alternatives, energy rising industries, and assist guarantee financial advantages are skilled equitably.

California state businesses, together with the Division of Monetary Innovation and Safety (DFPI) as specified within the EO, will possible be on the forefront of proposing and implementing new regulatory constructions for firms and customers, at the side of federal businesses such because the CFPB, CFTC, and SEC. Pursuant to the phrases of the governor’s EO, California may search to foster additional blockchain innovation for tasks like implementing good contracts and inspiring sustainability via its state Blockchain Working Group and Go-BIZ financial growth initiatives. The state may facilitate and encourage using numerous blockchain applied sciences by state businesses by way of procurements with vendor firms.

Particularly, the EO requires DFPI and Go-BIZ to have interaction with and collect enter from stakeholders inside 30 days (within the case of DFPI) and instructs DFPI to ramp up its enforcement actions pursuant to the California Client Monetary Safety Legislation (CCFPL). The mandate for elevated enforcement signifies that regulation by enforcement of crypto-asset-related monetary services will stay a key technique because the EO’s mandate for cautious examine and considerate crypto-asset-related regulation develops.

As well as, a pair of payments within the California State Legislature would make cryptocurrency authorized tender for presidency providers. Each payments have been met with resistance and will not go this session, however they do sign the altering views on integrating cryptocurrency and blockchain know-how into California society.