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Executive Order to Strengthen California Blockchain Efforts

Gov. Gavin Newsom's executive order places the state among the first to create “a comprehensive and harmonized framework” for assessing how state and public institutions can use blockchain technology.

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With an executive order this week, Gov. Gavin Newsom has placed California first among the states in efforts to create “a comprehensive and harmonized framework” for assessing how state and public institutions can use blockchain technology and build research and workforce development pathways for state residents.

Newsom’s order, according to a news release from his office, “aims to create a transparent regulatory and business environment for web3 companies which harmonizes federal and California approaches, balances the benefits and risks to consumers, and incorporates California values such as equity, inclusivity and environmental protection.”

His order spells out roles for state government entities including the Government Operations Agency (GovOps), the Department of Financial Protection and Innovation (DFPI), the Governor’s Office of Business and Economic Development (GO-Biz) and the Business, Consumer Services and Housing Agency (BCSH).

The initiative also has a role for the technology industry: Newsom directs GovOps to “issue a Request for Innovative Ideas … to the private sector, academia and community, to present pilots for innovative policies, programs and solutions that demonstrate and showcase the potential of adopting blockchain technologies to respond to specific challenges identified by state agencies” through GovOps’ Blockchain Working Group.

And he also directs GovOps to “add blockchain to the list of technologies considered under applicable future solicitations made pursuant to the (RFI2) process, and any successor or similar processes that enable the state to work with vendors to procure innovative technological solutions.”

“When procuring work from blockchain vendors,” Newsom’s order says, “all executive departments and agencies subject to my authority shall first assess the fitness of blockchain technology for the specific purpose and consider factors for appropriate applications as identified by the California Blockchain Working Group, including, but not limited to, sustainability, favoring procurement of technologies with low energy consumption when possible and appropriate.”

Citing the California Consumer Financial Protection Law passed by the Legislature in 2020, Newsom directs that the state “will begin the process of creating a regulatory approach to spur responsible innovation while protecting California consumers, assess how to deploy blockchain technology for state and public institutions, and build research and workforce development pathways to prepare Californians for success in this industry.”

In a statement, Newsom said: “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. 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.”

Newsom’s executive order follows President Biden’s recent actions to clarify regulation of these technologies “and sets California on a path to harmonize with forthcoming federal rules and guidelines, to create regulatory clarity for businesses and protect consumers,” the statement said.

The executive order also instructs that:

  • GO-Biz will, in collaboration with BCSH and DFPI, collect input from a broad range of stakeholders for potential blockchain applications and ventures, with particular attention to crypto assets and related financial technologies.
  • DFPI will engage in a public process to develop a comprehensive regulatory approach to crypto assets harmonized with the direction of federal regulations and guidance.
  • GovOps will explore opportunities to deploy blockchain technologies to address public-serving and emerging needs, including through the use of RFI2.
  • The Governor’s Council for Postsecondary Education is to identify opportunities to create a research and workforce environment to power innovation in blockchain technology, including crypto assets.
  • DFPI will solicit public comments regarding the regulation of crypto asset-related financial products and services and solicit voluntary information from companies and licensees about their crypto asset-related financial products and services.

A copy of the executive order can be found here.
Dennis Noone is the managing editor of Techwire.