California Governor Newsom Signs Blockchain And Crypto Assets Executive Order: Familiar Agencies To Lead Efforts To Regulate New Technology – Fin Tech

On May 4, 2022, California Governor Gavin Newsom signed an executive order aimed at creating a framework
for both regulating and developing the quickly growing blockchain
and cryptocurrency industry. The Order follows President
Biden’s March 9, 2022, Executive Order on Ensuring responsible
Development of digital Assets. In a press release announcing the Order, the
Governor’s office cited the rapid growth of the crypto asset
and blockchain technology business-from $14 billion five years ago
to $3 trillion last November-as the impetus for issuing the Order.

The Order identified seven priorities for the state in how it
intends to engage and regulate the blockchain and crypto asset
industry:

1. Create a transparent and consistent business
   environment for companies operating in blockchain.
   This includes crypto assets and related financial
   technologies.




2. Collect feedback from a broad range of stakeholders and
   create a regulatory approach to crypto
   assets.




3. Collect feedback from a broad range of stakeholders for
   potential blockchain applications and ventures,
   with particular attention to crypto assets and related financial
   technologies.




4. Engage in a public process and exercise statutory
   authority to develop a comprehensive regulatory approach
   to crypto assets.




5. 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.




6. Explore opportunities to deploy blockchain technologies
   to address public-serving and emerging
   needs.




7. Identify opportunities to create a research and
   workforce environment to power innovation in
   blockchain technology, including crypto assets.

Not surprisingly, California’s recently created Department
of Financial Innovation and Protection (DFPI) will be tasked with
taking the lead in developing and implementing new regulations
along with their federal counterparts at the CFPB, CFTC, and SEC.
The Order also calls on the DFPI to (1) initiate enforcement
actions to “stop violations of the California Consumer
Financial Protection Law (CCFPL); (2) enhance collection and review
of consumer complaints related to crypto asset-related financial
products and services; (3) work with crypto asset-related financial
products and services companies to remedy complaints; and (4)
consult with law enforcement agencies regarding criminal
activity.

While the Order further serves to confirm that blockchain and
crypto asset companies are on their way to widespread usage and
acceptance, it is also clear that these companies will soon have to
contend with similar regulatory schemes as traditional financial
institutions and companies.

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