SACRAMENTO, Calif. (AP) — California, which would have the world’s fifth-largest economy if it were a country, on Wednesday became the first U.S. state to officially begin examining how to broadly adapt to cryptocurrency and related innovations, following a path set by President Joe Biden in March.
Governor Gavin Newsom has signed an executive order for state agencies to act in tandem with the federal government to develop regulations for digital currencies. It also calls on officials to explore the integration of broader blockchain computer coding into state government operations where much of the world’s technological innovation is born.
The evolution of blockchain and cryptocurrency technology “is potentially an explosive creator of new businesses, new jobs and new opportunities,” said Dee Dee Myers, Newsom’s senior adviser and director of the Governor’s Office. for business and economic development.
“So there are a lot of opportunities,” she said. “There are also a lot of unknowns in the industry and so that’s another reason why we want to engage early.”
Newsom’s order says the state — home to Silicon Valley and financial innovators like PayPal and Square — should be at the forefront of determining how to adapt to new technologies.
“Too often government lags behind technological advancements, so we’re getting a head start on this, laying the foundation for consumers and businesses to thrive,” Newsom, a Democrat, said in a statement. .
California has a population of around 39 million and its economy is over $3.1 trillion, larger on its own as a US state than the UK and India. Newsom said his order is a step toward making it the first state in the nation “to establish a comprehensive, thoughtful, and harmonized regulatory and business environment for crypto assets.”
Cryptocurrencies, which are based on blockchain database technology, have exploded in popularity in recent years. Around 16% of American adults have invested, traded or used cryptocurrencies and the percentage is much higher among younger men. Biden’s executive order in part asks the Federal Reserve to consider whether it should create its own digital currency.
Blockchain creates the underlying transparency of a decentralized but publicly visible ledger. The technology can also be used to record other types of information, such as property records. The recordings are kept on many computers which together form a global network so that no one or any institution can control them.
There is deep disagreement about the legitimacy of cryptocurrency, even among some of the wealthiest people in the world. Elon Musk is a strong supporter of dogecoin while Warren Buffet recently said he wouldn’t pay $25 for all bitcoin in the world, the most popular cryptocurrency. Each bitcoin is currently valued at around $38,000.
While California may be the first to try to develop a comprehensive approach, Ohio was the first to attempt to accept virtual currency for government services in 2018, although the program was quickly discontinued as few people used it.
Colorado Governor Jared Polis, also a Democrat, said in February that his state would begin accepting cryptocurrency for government services later this year.
California lawmakers are among many in the United States to have proposed related legislation. But a bill by Democratic Senator Sydney Kamlager allowing California to accept crypto assets for state services failed its first committee this year and a similar bill by Republican Congressman Jordan Cunningham is stalled.
Similar measures have been introduced in Arizona, Wyoming and other states.
Despite the potential pitfalls of cryptocurrency, Newsom’s order says California should take the lead in determining how to adapt to changing technology.
His order is based on a July 2020 report from the California Blockchain Working Group, which examined the use of blockchain and its risks and benefits.
That same year, California created a new Department of Financial Protection and Innovation from what was previously the Department of Corporate Oversight, with the goal of assessing emerging risks and opportunities while protecting consumers.
Newsom’s order directs the department to develop guidelines for disclosures by companies when they offer financial products and services related to cryptocurrencies. It will also provide guidance to state-chartered banks and credit unions regarding crypto-related products.
The department will respond to consumer complaints, work with crypto companies to resolve consumer complaints, and take enforcement action if necessary. It will also publish consumer education materials, including tips for avoiding crypto-related scams and fraud.
Newsom’s order directs a separate agency to solicit proposals on how best to use blockchain to help the state and the public.
“It’s critical that we engage with industry early and start learning the pros and cons of innovative technologies early,” said Amy Tong, secretary of the California Agency for Government Operations. “We can take the next steps to get ahead and harness the potential of these tools to improve government.”
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