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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

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

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

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

  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

  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

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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