Governor Gavin Newsom signed an Executive Order on Wednesday around cryptocurrency and blockchain technology by both creating a more transparent environment for companies employing blockchain technology and creating a path for more a regulatory and consumer protection-focused environment for those operating with the technology.
According to Executive Order N-9-22, companies using blockchain technology, which uses a digital ledger of transactions over a network of computers to complete transactions instead of using a centralized banking system with added third party verification, would, along with laws such as the 2020 California Consumer Financial Protection Law, have a transparent and consistent business environment created for them in the state. This would include cryptocurrency assets and related financial technologies.
Blockchain technology would also be more heavily regulated. According to the Executive Order as well as a press release issued by the Governor, California would create a regulatory approach by collecting feedback from stakeholders and look into how blockchain technologies could possibly be used in state operations, as well as the role of what crypto assets and related technologies could play in future applications and ventures. California would also look into a regulatory approach on par with the federal governments approach and try to reinvigorate crypto and blockchain company growth in California.
As a result, the Executive Order will look into opportunities to put in blockchain technology to help the public and manage future state needs, along with weighing the pros and cons of the technology for future use by state agencies and create economic benefits for emerging companies using blockchain technology, such as cryptocurrency companies.
“If this makes your head spin, pretty much the state wants to have cryptocurrency and blockchain-related companies to set-up shop in California and retain them, but wants to find the right path to do it, wants to work with the federal government to keep it all on the level, and wants to make sure the technology, as well as cryptocurrency, can work for them,” explained William Kirilenko, an investment advisor in the Bay Area, to the Globe on Wednesday. “Blockchain technology has a lot of exciting applications, but it is also a major polluter due to all the computer usage it sees, so it could hurt there. Cryptocurrency itself also has a lot of problems, like volatility, with major financial players like Warren Buffett comparing it to famous bubble investments of the past like the tulip investment bubble of the 1630s or most of the faltering tech companies during the dotcom bust a few decades ago.”
“This is just the state saying ‘The technology looks pretty good, but we need to look into this more and put protections in place before jumping in.’”
State researching blockchain usage, regulations
Newsom noted on Wednesday that California needed to catch up on the technology now to better regulate it and to help consumers and businesses to grow in the state in the future.
“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,” the Governor said in a statement. “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.”
Representatives from the Governor’s office backed up what the Governor said, with Newsom senior advisor and director of the Governor’s Office of Business and Economic Development Dee Dee Myers saying, “Of the 800 blockchain businesses in North America, about a quarter of them are in California, dramatically more than any other state. We’ve heard from so many that they want to be here, and we want to help them do that responsibly.”
“The opportunities are almost endless. We can do things like remove middlemen from transactions involving real estate or even automobiles. We can use it to protect people’s identity and provide benefits to people through government services. If we’re selling carbon offsets, we can make sure the same forest isn’t being sold twice and that there’s some record that’s transparent.”
While the Order has been praised by many on Wednesday, others remain skeptical of how far the Order can really go and if it will truly benefit the state.
“Blockchain technology is finally seeing applications, so that’s good,” added Kirilenko. “But it’s also tied heavily, again, to cryptocurrency, and that’s where a lot of people against this get antsy. Cryptocurrencies like Bitcoin are extremely volatile, so to many, they make the technology look weak as a result. Huge price changes, both up and down, scare them. And this is a big part of both the federal and now California plan. Looking into this more closely to see how viable it all is and regulating it so it doesn’t jump the track. Can crypto and blockchain technology be beneficial? And how safe is it, especially with the SEC now doubling the staff looking into the growing number of security issues and breaches in the technology. At the very least, California now has a way to move forward on this now.”
Newsom’s Executive Order will be seen to by multiple state agencies, including the California Business, Consumer Services and Housing Agency and the Department of Financial Protection and Innovation.