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Governor Gavin Newsom signed an executive order to foster responsible innovation, bolster California’s innovation economy, and protect consumers. It aims to create a transparent regulatory and business environment for web3 companies which harmonizes federal and California approaches, balances the benefits and risks to consumers, and incorporates California values such as equity, inclusivity, and environmental protection.
Under this executive order, and pursuant to the California Consumer Financial Protection Law passed by the Legislature in 2020, California will begin the process of creating a regulatory approach to spur responsible innovation while protecting California consumers, assess how to deploy blockchain technology for state and public institutions, and build research and workforce development pathways to prepare Californians for success in this industry.
“California is a global hub of innovation, and we’re setting up the state for success with this emerging technology – spurring responsible innovation, protecting consumers, and leveraging this technology for the public good,” said Governor Newsom. “Too often government lags behind technological advancements, so we’re getting ahead of the curve on this, laying the foundation to allow for consumers and business to thrive.”
The executive order builds on President Biden’s recent actions to bring regulatory clarity to these emerging products and services – and sets California on a path to harmonize with forthcoming federal rules and guidelines, to create regulatory clarity for businesses and protect consumers.
A burgeoning industry, crypto assets and blockchain technology surpassed a $3 trillion market cap last November, up from $14 billion just five years prior. According to research, roughly 16 percent of adults have invested in, traded, or used cryptocurrencies. As of April 22, late-stage post-money valuations for venture capital-backed blockchain and crypto asset companies have increased on average 91 percent, to $3.95 billion, according to PitchBook data.
Under the executive order, the state has seven priorities:
- Create a transparent and consistent business environment for companies operating in blockchain, including crypto assets and related financial technologies, that harmonizes federal and California laws, balances the benefits and risks to consumers, and incorporates California values such as equity, inclusivity, and environmental protection.
- Collect feedback from a broad range of stakeholders, create a regulatory approach to crypto assets harmonized between federal and state authorities, explore and establish public-serving use cases (such as incorporating blockchain technologies into state operations), and build research and workforce pipelines.
- Collect feedback from a broad range of stakeholders for potential blockchain applications and ventures, with particular attention to crypto assets and related financial technologies. Engagement should include technical experts, stakeholders interested in addressing inequities and environmental impact, companies both based in and outside California, and more.
- Engage in a public process and exercise statutory authority to develop a comprehensive regulatory approach to crypto assets harmonized with the direction of federal regulations and guidance, creating consumer protections and solidifying California’s status as the premiere global location for responsible crypto asset companies to start and grow.
- Engage in and encourage regulatory clarity via progress on the processes outlined in the federal executive order, with state agencies coordinating closely with the Washington, D.C. Office of the California Governor.
- Explore opportunities to deploy blockchain technologies to address public-serving and emerging needs, working with the private sector, academia, and community to present pilots for innovative policies, programs, and solutions that demonstrate and showcase the potential of adopting blockchain technologies to respond to specific challenges identified by state agencies.
- Identify opportunities to create a research and workforce environment to power innovation in blockchain technology, including crypto assets. The goals will be to expose students to emerging opportunities, power emerging industries, and help ensure economic benefits are experienced equitably.
A copy of the executive order can be found here.
