California dives into blockchain

GettyImages/ Yuichiro Chino

A May 4 executive order positions the state as blockchain friendly and sets the stage for agency adoption of distributed ledger technology.

California is jockeying to get ahead of the blockchain economy.

Gov. Gavin Newsom issued an executive order May 4 that aims to create a business-friendly environment for companies working with distributed ledger technologies and financial instruments like cryptocurrency. It has seven priorities that include harmonizing federal and state regulatory approaches, balancing the risk to consumers and incorporating equity and environmental protection. 

The order also looks to apply the technology to state processes. It tasks the Government Operations Agency with assessing how blockchain can be leveraged for public-sector use cases and emerging needs. 

GovOps will issue a request for ideas for pilots, policies and solutions that show how blockchain can respond to state agency challenges identified by the California Blockchain Working Group. In its July 2020 report, the group cited blockchain’s potential in creating and verifying government-issued documents and health information, tracking food and drugs through the supply chain, monitoring water use, supporting financial services, enabling greater civic participation and supporting education and workforce records.

The order also lays out objectives for building up research and talent pipelines that expose students to new opportunities and power emerging industries. Additionally, any procurement for blockchain-based solutions considered by agencies should favor those that address energy consumption, the order said.

With this proactive approach, “California will not only maintain -- but bolster -- its status as a global innovation hub by accelerating responsible innovation, maximizing a net-positive benefit to the public, and generating equitable and inclusive growth,” the order 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,” Newsom said in the announcement. “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.”Newsome’s executive order builds on President Joe Biden’s order to establish a “whole-of-government” approach to regulating the growing cryptocurrency market.  It sets California on a path to harmonize with forthcoming federal rules and guidelines, create regulatory clarity for businesses and protect consumers, officials said. 

Timothy Massad, former chairman of the Commodity Futures Trading Commission, told CNBC that it’s important to get states and government agencies on the same page.

“What we would not want to see is a situation where states are competing with one another to attract businesses by either lowering standards or providing incentives,” he said.

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