On May 4, 2022, California Governor Gavin Newsom signed Executive Order N-9-22 (EO) to create a regulatory approach for cryptocurrency companies and to determine how to use blockchain technology for in state and public institutions. Through EO, California has become a leader in developing new rules of the road for emerging digital currencies and related crypto technologies.
The EO observes that “responsible innovation is embedded in regulatory uncertainty, particularly with respect to federal law,” and, as such, “state agencies must work with, and simultaneously with, the federal government to make California the first state to establish a comprehensive, thoughtful, and consistent regulatory and business environment for crypto assets.
Under the EO, the state has seven priorities:
Creating a transparent and sustainable business environment for companies operating the blockchain, including crypto assets and related financial technologies, consistent with federal and California laws, balances benefits and risk to consumers, and included California values such as equity, inclusivity, and environmental protection.
Collect feedback from a wide range of stakeholders, develop a regulatory approach to crypto assets that is harmonized between federal and state authorities, investigate and establish public-serving use cases (such as involvement in blockchain technologies) to state operations), and construction of research and workforce pipelines.
Collect feedback from a wide range of stakeholders for potential blockchain applications and businesses, with particular attention to crypto assets and related financial technologies. Participation should include technical experts, stakeholders interested in addressing inequities and environmental impacts, companies based in and out of California, and more.
Participate in a public process and exercise the authority of the law to develop a comprehensive approach to the regulation of crypto assets consistent with the direction of federal regulations and guidance, create consumer protections and strengthen- on the status of California as the premier location in the world for responsible crypto asset companies to start and grow.
Participate in and encourage regulatory clarification by advancing the processes outlined in the federal executive order, with state agencies working closely with the Washington, DC office of the California governor.
Explore opportunities to deploy blockchain technologies to meet public service and evolving needs, working with the private sector, academia, and community to present pilots for new policies, programs, and solutions that demonstrate and demonstrate the potential to adopt blockchain technologies to address the specific. challenges identified by state agencies.
Identify opportunities to create a research and workforce environment to encourage innovation in blockchain technology, including crypto assets. The objectives are to expose students to evolving opportunities, power emerging industries, and help ensure that economic benefits are experienced equitably.
California state agencies, including the Department of Financial Innovation and Protection (DFPI) specified in the EO, are likely to take the lead in proposing and implementing new regulatory structures for companies and consumers, along with federal agencies such as CFPB, CFTC. , and SEC. In line with the terms of the governor’s EO, California may also seek to promote more blockchain innovation for projects such as implementing smart contracts and encouraging sustainability through its state Blockchain Working Group and Go-BIZ economic development initiatives. The state can also facilitate and encourage the use of various blockchain technologies in state agencies by procuring vendor companies.
Specifically, the EO requires DFPI and Go-BIZ to engage and gather input from interested stakeholders within 30 days (in the case of DFPI) and direct DFPI to intensify its implementation activities in accordance with California Consumer Financial Protection Law (CCFPL). The mandate for further enforcement indicates that regulation through the implementation of crypto-asset-related financial products and services will remain an important strategy while the EO mandate for prudent study and thoughtful crypto-assets. -related regulations will improve.
In addition, a couple of fees by the California State Legislature would make cryptocurrency legal for government services. Both bills have met with resistance and may not pass this session, but it signals changing perspectives on integrating cryptocurrency and blockchain technology into California society.
© 2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XII, Number 131