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Volume XII, Number 183

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Governor Newsom Signs Blockchain Executive Order

In an apparent follow up to President Biden’s March Executive Order on Digital Assets (which we previously discussed here), this week, California Governor Gavin Newsom signed a similar executive order aiming to foster responsible innovation, bolster California’s innovation economy, and strengthen consumer protection through creating a transparent regulatory and business environment for Web3 companies.  Newsom’s executive order credits Biden’s executive order as paving the way for the assessment of key issues raised by crypto-assets and sets California on a path to harmonize its nascent crypto regulatory framework with forthcoming federal rules and guidelines and, hopefully, create regulatory clarity for businesses and consumers.

With the Executive Order, Governor Newsom mandated the state legislature to begin the process of creating a regulatory approach to spur responsible innovation, ensure and enshrine fundamental principles of consumer protection, assess how to effectively deploy blockchain technology to work for state and public institutions, and build research and workforce development pathways to prepare Californians for success in the blockchain industry.  Specifically, the executive order lays out seven goals:

  1. Create a transparent and consistent environment for blockchain technology companies by harmonizing federal and California laws while incorporating California values such as equity, inclusivity, and environmental protection.

  2. Collect feedback from stakeholders and create a regulatory approach by aiming to 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 stakeholders for potential blockchain applications and ventures by engaging technical experts and other stakeholders interested in addressing inequities and the environmental impact of blockchain technology.

  4. Engage in a public process and develop a comprehensive regulatory approachby creating consumer protections and solidifying California’s status as the premier global location for responsible crypto asset companies to startup and grow.

  5. Encourage regulatory clarity by coordinating closely with the federal agencies that were ordered to outline their plans in Biden’s executive order.

  6. Explore opportunities to deploy public-serving blockchain technologies by working with the private sector, academia, and community organizers and representatives to present pilots for innovative policies, programs, and solutions that demonstrate and showcase the potential of adopting blockchain technologies to respond to specific challenges.

  7. Identify research opportunities by exposing students to emerging opportunities to power innovation in blockchain technology, including crypto assets, power emerging industries, and help ensure economic benefits are experienced equitably.

Putting It Into Practice: As the fifth-largest economy in the world, Newsom’s executive order potentially tees up California to become a hub for blockchain technology innovation.  But it also means that the California rules will likely track those of other jurisdictions that have grappled with the issue and result in a more stringent application process.  To date, California has generally held that money transmission licenses are not necessary for many crypto-related activities. But California crypto companies should take note of the increasing likelihood that the state may adopt a registration and licensing regime similar to New York State’s Bitlicense (which we blogged about here).  Stay tuned for updates.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 126
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About this Author

James Mattinson Blockchain Technology and Digital Currency Lawyer Sheppard Mullin Washington DC
Partner

Jim Gatto is a partner in the Intellectual Property Practice Group in the firm's Washington, D.C. office. He is also Co-Team Leader of the firm's Digital Media Industry and Social Media and Games Industry Teams, Blockchain Technology and Digital Currency team, and Team Leader of the firm's Open Source Team. 

Areas of Practice

Mr. Gatto leverages his unique combination of nearly 30 years of IP experience, business insights and attention to technology trends to help companies develop IP and other legal...

202.747.1945
Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

213-617-4171
Sarah Aberg Government Contracts Attorney Sheppard Mullin Law Firm New York
Special Counsel

Sarah Aberg is special counsel in the White Collar Defense and Corporate Investigations Group in the firm's New York office.

Areas of Practice

Sarah's practice encompasses litigation, internal investigations and white collar defense, with a focus on financial services and securities. She has conducted multiple criminal trials and numerous internal investigations into a wide variety of allegations, including mail and wire fraud, mortgage fraud, insider trading, market manipulation, money laundering,...

212-634-3091
A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...

202-747-2323
Associate

Gabriel is an Associate on the Telecom team and the Co-Lead Associate on the Blockchain and Digital Assets team in the firm’s Washington, D.C. office. He is a Blockchain Law Professional as Certified by the Blockchain Council.

At Sheppard Mullin, Gabriel assists the Telecom team in all aspects of communications law and regulation including, satellites, spectrum, 5G implementation, media companies, and new technologies. He assists the Blockchain and Digital Assets team in legal issues relating to the use of blockchain technology, social media, internet, video games, online gambling,...

202-747-2194
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