On May 4, 2022, California Governor Gavin Newsom signed an executive order aimed at creating a frameworkfor both regulating and developing the quickly growing blockchainand cryptocurrency industry. The Order follows PresidentBiden's March 9, 2022, Executive Order on Ensuring responsibleDevelopment of digital Assets. In a press release announcing the Order, theGovernor's office cited the rapid growth of the crypto assetand blockchain technology business-from $14 billion five years agoto $3 trillion last November-as the impetus for issuing the Order.
The Order identified seven priorities for the state in how itintends to engage and regulate the blockchain and crypto assetindustry:
Not surprisingly, California's recently created Departmentof Financial Innovation and Protection (DFPI) will be tasked withtaking the lead in developing and implementing new regulationsalong with their federal counterparts at the CFPB, CFTC, and SEC.The Order also calls on the DFPI to (1) initiate enforcementactions to "stop violations of the California ConsumerFinancial Protection Law (CCFPL); (2) enhance collection and reviewof consumer complaints related to crypto asset-related financialproducts and services; (3) work with crypto asset-related financialproducts and services companies to remedy complaints; and (4)consult with law enforcement agencies regarding criminalactivity.
While the Order further serves to confirm that blockchain andcrypto asset companies are on their way to widespread usage andacceptance, it is also clear that these companies will soon have tocontend with similar regulatory schemes as traditional financialinstitutions and companies.
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