- U.S. state does not give up trying to be first
- U.S. surge in interest in cryptocurrency
- What about other states?
- What aspects need to be worked out?
If California were a separate country, its economy would be the fifth-largest one in the world. On May 4, the giant state announced that cryptocurrency in the U.S. is a fait accompli that cannot be ignored. And it is California that claims to be the first U.S. state to officially begin exploring how to get adapted to cryptocurrencies and crypto-related innovations, following the direction identified by U.S. President Joe Biden in March.
Gavin Newsom, Governor of California, signed an order to have state agencies work in cooperation with the federal government to develop rules for e-currencies. He is also urging officials to explore the possibility of including greater use of blockchain in state government operations, as much of the world’s technological innovation is developed in the state of California.
According to his senior adviser and director of the Office of Business and Economic Development Dee Dee Myers, emerging blockchain and crypto technology “is potentially an explosive creator of new companies, new jobs and new opportunities.” She also said the industry has just begun to grow and they have a chance to become the trendsetters.
The state of California is home to Silicon Valley, as well as PayPal and Square and other financial innovators. Newsom’s order says that California needs to be ahead of the curve to figure out how to implement new technology.
“Too often government lags behind technological advances, so we are ahead of the curve on this, laying the groundwork for consumers and businesses to thrive,” Gavin Newsom said in a statement.
The population of California is around 39 million people. The state’s economy is worth more than $3.1 trillion and is larger than that of the United Kingdom and India. According to Newsom, the executive order will bring California closer to becoming America’s first state “to create a comprehensive, thoughtful and consistent regulatory and business environment for crypto assets.”
Cryptocurrency is gaining popularity in the country. Around 16% of American adults have traded in, invested in, or used crypto. This percentage is significantly higher among young men. According to Biden’s executive order, the Federal Reserve is supposed to consider launching its own e-currency.
Blockchain implements the basic transparency of a decentralized yet public ledger. It can also be used to record the information of other types, including property information. The data is stored on many computers: together they form a global network, so that no individual or institution can control it.
The legitimacy of cryptocurrency has caused a lot of disagreement, even among the wealthiest people in the world. Elon Musk is known as an avid supporter of dogecoin, while Warren Buffett recently stated he would not pay $25 for all the bitcoin in the world.
While it is true that California may become the first state to give cryptocurrency in the U.S. a truly elaborate legislative framework and develop a comprehensive approach, Ohio was actually the first state to try and adopt an e-currency for government services in 2018 even though the program was soon abandoned because very few people used it.
In February, Colorado Governor Jared Polis said that his state would begin accepting crypto for government services later this year.
California lawmakers are among many in the U.S. who have proposed legislation to that effect. However, Democratic Senator Sidney Kamlager’s bill to allow crypto assets to be accepted in California to pay for public services failed in its first hearing this year. A similar bill by Republican Assemblyman Jordan Cunningham has stalled.
Such measures have also been introduced in other states, including Arizona and Wyoming.
In spite of the potential drawbacks of cryptocurrency, Newsom’s order states California should be the first to figure out how to adapt to technological changes.
His order is based on a report published by the California Blockchain Working Group in July 2020. It examined the use of blockchain with its risks and benefits.
In 2020, California established a new Department of Financial Protection and Innovation, based on the structure of the defunct Department of Business Oversight, to assess the new risks and opportunities in protecting consumers.
Newsom has asked the department to prepare disclosure guidelines for companies that offer crypto-related financial products and services. The department should also develop guidelines for state banks and credit unions regarding products related to crypto.
The Department of Financial Protection and Innovation will also respond to consumer complaints, cooperate with crypto companies to resolve them, and enforce decisions when necessary. Moreover, it will publish consumer education materials, such as tips for preventing crypto-related fraud and scams.
“It is critical that we engage early with industry and begin to learn the pros and cons of innovative technology,” said Amy Tong, secretary of the California Government Operations Agency. “We can take the next steps to get ahead of the curve and use the potential of these tools to make government better.”