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California Governor Issues Executive Order Fostering Use and Regulation of Blockchain and Crypto

On May 4, 2022, California Gov. Gavin Newsom signed Executive Order N-9-22 (EO) to create a regulatory approach for cryptocurrency companies and to determine how to use blockchain technology for state and public institutions. Through the EO, California is becoming a leader in developing new rules of the road for emerging digital currencies and related crypto technologies. 

The EO observes that “responsible innovation has been encumbered by regulatory uncertainty, especially with regard to federal law,” and, as such, “state agencies should work with, and concurrently to, the federal government to make California the first state to establish a comprehensive, thoughtful, and harmonized regulatory and business environment for crypto assets.”

Under the EO, the state has seven priorities:

  1. Create a transparent and consistent business environment for companies operating in blockchain, including crypto assets and related financial technologies, that harmonizes federal and California laws, balances the benefits and risks to consumers, and incorporates California values such as equity, inclusivity, and environmental protection.

  2. Collect feedback from a broad range of stakeholders, create a regulatory approach to crypto assets harmonized between federal and state authorities, explore and establish public-serving use cases (such as incorporating blockchain technologies into state operations), and build research and workforce pipelines.

  3. Collect feedback from a broad range of stakeholders for potential blockchain applications and ventures, with particular attention to crypto assets and related financial technologies. Engagement should include technical experts, stakeholders interested in addressing inequities and environmental impact, companies based both in and outside California, and more.

  4. Engage in a public process and exercise statutory authority to develop a comprehensive regulatory approach to crypto assets harmonized with the direction of federal regulations and guidance, creating consumer protections and solidifying California’s status as the premiere global location for responsible crypto asset companies to start and grow.

  5. Engage in and encourage regulatory clarity via progress on the processes outlined in the federal executive order, with state agencies coordinating closely with the Washington, D.C. office of the California governor.

  6. Explore opportunities to deploy blockchain technologies to address public-serving and emerging needs, working with 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.

  7. Identify opportunities to create a research and workforce environment to encourage innovation in blockchain technology, including crypto assets. The goals will be to expose students to emerging opportunities, power emerging industries, and help ensure economic benefits are experienced equitably.

California state agencies, including the Department of Financial Innovation and Protection (DFPI) as specified in the EO, will likely be at the forefront of proposing and implementing new regulatory structures for companies and consumers, in conjunction with federal agencies such as the CFPB, CFTC, and SEC. Pursuant to the terms of the governor’s EO, California may also seek to foster further blockchain innovation for projects like implementing smart contracts and encouraging sustainability through its state Blockchain Working Group and Go-BIZ economic development initiatives. The state may also facilitate and encourage the use of various blockchain technologies by state agencies via procurements with vendor companies.

In particular, the EO requires DFPI and Go-BIZ to engage with and gather input from interested stakeholders within 30 days (in the case of DFPI) and instructs DFPI to ramp up its enforcement activities pursuant to the California Consumer Financial Protection Law (CCFPL). The mandate for increased enforcement indicates that regulation by enforcement of crypto-asset-related financial products and services will remain a key strategy as the EO’s mandate for careful study and thoughtful crypto-asset-related regulation develops.

In addition, a pair of bills in the California State Legislature would make cryptocurrency legal tender for government services. Both bills have been met with resistance and may not pass this session, but they do signal the changing views on integrating cryptocurrency and blockchain technology into California society.

©2023 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XII, Number 131

About this Author

Barbara Jones, Greenberg Traurig Law Firm, Los Angeles, Private Equity, Corporate and Energy Law Attorney

Barbara A. Jones is a member of the firm’s Global Securities practice group and co-chairs the firm's Blockchain Task Force. She is also co-coordinator of the firm’s interdisciplinary Conflict Minerals Compliance Initiative. Barbara maintains a diverse corporate and securities law practice across industry groups, emphasizing complex international and domestic transactions, including blockchain/cryptocurrency transactions, private and public financings (including ICOs), dual listings, mergers and acquisitions, strategic collaborations and joint ventures, and licensing...

Alice L. Kessler Government Policy Attorney Greenberg Traurig Sacramento

Alice Kessler is the Co-Leader of the California Government Law & Policy Group in the firm’s Sacramento office. She is an accomplished legislative strategist and leader with a track record of rapid advancement grounded in proven strategic and communication talents, collaborative skills, and trusted integrity. Alice has deep relationships with California policymakers, thought leaders, and community-based organizations. She leverages her well-honed skills to build consensus, gain buy-in, and motivate team members and partners.

Alice helped to...

Jeremy Meier, Greenbergerg Traurig Law Firm, Sacramento, Finance Law Litigation Attorney

Mr. Meier has extensive experience in regulatory affairs and government litigation representing corporations and individuals doing business in California. He primarily represents national companies in technology, health care, energy, telecommunications, wireless and transportation and infrastructure industries. His practice focuses on government contracts, public utilities and regulatory matters, involving government action, state and local procurement, bid protests, writ actions, commercial litigation, contract negotiations, performance audits, government investigations...

Benjamin Saul Financial Compliance Attorney Greenberg Traurig Law Firm DC

Benjamin Saul is a shareholder in the firm’s Financial Regulatory and Compliance Practice. For two decades, Ben has handled high-stakes regulatory, enforcement, and litigation matters for corporate and individual clients in the consumer finance, specialty finance, fintech, and banking sectors. 

Ben has helped clients navigate dozens of contentious supervisory, enforcement, and litigation matters involving the Consumer Financial Protection Bureau (CFPB), and has been a leader in the private bar on CFPB matters since the Bureau’s inception in 2011...

Patrick Shannon Government Relations Attorney Greenberg Traurig Sacramento

Patrick Shannon is the Co-Leader of the California Government Law & Policy Group in the firm’s Sacramento office. Patrick focuses his practice on government relations and administrative law before the California legislature and state regulatory and enforcement agencies. He has deep experience on matters relating to financial services, health care, transportation, insurance, environmental regulation, tax, and government contracts.

He has served as outside government relations legal counsel and a top policy strategist in California,...