California Governor Gavin Newsom Signs Executive Order to Begin Establishing Regulatory Framework for Blockchain Technology

Last Wednesday, California Governor Gavin Newsom signed an executive order that his office said “would foster responsible innovation, bolster California’s innovation economy, and protect consumers.” It aims to do this by creating a transparent regulatory and business environment for web3 companies. Web3 is an idea for a new internet ecosystem built on concepts like blockchain and decentralization.

“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 public good,” Newsom said in a press release. “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 businesses to thrive.”

As the press release notes, crypto assets and blockchain technology has grown from a $14 billion market cap five years ago to more than $3 trillion last November, with approximately 16 percent of adults investing in, trading, or using cryptocurrency.

The executive order lists seven priorities for California:

• Create a transparent and consistent business environment for companies operating in blockchain 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 stakeholders, create a regulatory approach to crypto assets harmonized between federal and state authorities, explore and establish public-serving use cases, 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.
• 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 Governor’s Washington, D.C. Office.
• Explore opportunities to deploy blockchain technologies to address public-serving and emerging needs.
• Identify opportunities to create a research and workforce environment to power innovation in blockchain technology, including crypto assets.