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If It’s New, Government Must Get Involved: California’s Approach to Blockchain. State government’s trying to get a handle on blockchain, how it works, how it affects consumers, and how it might lead to more jobs in California.
According to an executive order recently signed by Governor Gavin Newsom, California will:
- Create a regulatory and business environment for companies working with “web3” technologies (using the internet and blockchain) which will blend state and federal approaches
- Consider consumers’ interests
- Consider related equity, inclusivity, and environmental protection issues
Other states that have issued similar executive orders or legislation include New Hampshire, Washington, New Jersey, Arizona, and Hawaii.
What is Blockchain, and Why Should I Care?
Blockchain is a ledger shared among a computer network that facilitates recording transactions and tracking assets, according to IBM. An asset can be tangible (like a car or cash) or intangible (such as patents or copyrights). Nearly anything with value can be tracked and traded on a blockchain network. The technology reduces risk and cuts costs.
Businesses run on information, and the faster it’s received and the more accurate it is, the better. Blockchain delivers information immediately, in a shared and transparent way, stored on an unchangeable ledger that authorized network members may access.
A blockchain network may track orders, deliveries, payments, and production information. All network members share a single view of what’s going on. You can see transaction details from start to finish, so you have greater confidence in it, and it creates new efficiencies and opportunities.
What Does this Executive Order Say?
With this executive order and the California Consumer Financial Protection Law, which passed two years ago, the state will start creating regulations to encourage innovation while protecting consumers and deciding how government and nonprofit institutions should use blockchain technology.
The regulations have yet to be created. The executive order is like a starter’s gun before a race.
Another focus is to set the stage for economic and job growth in California by researching how to develop the state’s workforce to compete against other states and countries looking at blockchain as “the next big thing.” In the late 1960’s it was plastics.
“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,” according to a press release. Newsom’s executive order follows President Biden’s recent actions concerning regulating blockchain.
Crypto assets (which rely on using blockchain) and blockchain technology have an estimated $3 trillion market cap as of last November.
What Does the Governor Hope to Achieve?
The executive order spells out other priorities for the state, including:
- Collect feedback from stakeholders about possible blockchain applications and ventures, with a focus on crypto assets and related financial technologies
- Start a public process to create laws to develop a regulatory approach to crypto-assets that doesn’t conflict with federal regulations and guidance
- Creating consumer protections
- Strengthening California’s status as the “premiere global location for responsible crypto asset companies to start and grow.”
Rely on a Business Attorney You Can Trust
If you have questions about blockchain or legal issues that may come up with its use, give us a call. We are an established and growing law firm helping clients with a wide range of needs. We’re available at (714) 415-2007, or reach us by clicking here.