California moves to embrace cryptocurrency and regulate it

California Moves to Adopt and Regulate Cryptocurrency<br />

Sacramento, CA, May 5 (BUS): California, which has the largest economy of all but four countries and where much of the world’s technological innovation has been born, has become the first state to officially begin examining how to scale-up cryptocurrency and related innovations.

Following the path set by President Joe Biden in March, Governor Gavin Newsom signed an executive order for state agencies to move along with the federal government to draft regulations for digital currencies.

It also calls on officials to explore incorporating blockchain computer coding more broadly into government operations, the AP reports.

The development of blockchain technology and cryptocurrency “has the potential to be an explosive generator for new businesses, new jobs, and new opportunities,” said Dee De Myers, Newsom’s senior advisor and director of the Portfolio’s Office of Business and Economic Development.

“There are a lot of opportunities,” she said. “There are also a lot of unknowns in the industry and that’s another reason we want to get involved early.”

Newsom’s order says the state – home to Silicon Valley and financial innovators like PayPal and Square – should be at the forefront of figuring out how to adapt to new technologies.

“Often times government lags behind in technological progress, so we’re moving along that curve, laying the groundwork to allow consumers and businesses to thrive,” Newsom, a Democrat, said in a statement.

California has a population of about 39 million, and an economy of over $3.1 trillion, larger than the United Kingdom and India. Newsom said his request is a step towards making it the first in the country to “create a comprehensive, considered and harmonized regulatory and trading environment for crypto assets.”

Cryptocurrencies, which are built on blockchain database technology, have spread widely in recent years. About 16% of adults in the US have invested, traded or used cryptocurrency, and the percentage is much higher among younger men. Biden’s executive order is in part asking the Federal Reserve to consider whether it should create its own digital currency.

Blockchain technology creates the basic transparency of a decentralized but publicly viewable ledger. The technology can also be used to record other types of information, such as property records. Logs are kept on so many computers that together make up a global network that no person or organization can control them.

There is a great deal of disagreement over the legality of cryptocurrency, even among some of the world’s richest people. Elon Musk is a staunch supporter of dogecoin while Warren Buffet recently said he would not pay $25 for every bitcoin in the world, the most popular cryptocurrency. Each bitcoin is currently valued at around $38,000 but fluctuates greatly.

Crypto skeptic Hilary Allen, professor of financial regulation at American University in Washington, DC, said California’s approach would help legitimize the technology and bring it into the mainstream, but she doesn’t think it’s the best approach for the state and its residents.

Private investors are likely to benefit, she said, while state governments should seek simpler technological solutions rather than resort to technology “which is inherently complex and inefficient.”

“While this approach will create more of the cryptocurrency market…it is unlikely to produce the best results for California public service users,” Allen said.

California may have been the first to try to develop a comprehensive approach, but Ohio was the first to try to accept virtual currency for government services in 2018, although the program was soon discontinued because few people used it.

Colorado Governor Jared Polis, also a Democrat, said in February that his state would begin accepting cryptocurrencies for government services later this year.

California legislators are among many across the United States who have introduced relevant legislation. But Democratic Senator Sidney Camlager’s bill to allow California to accept crypto assets for state services failed on its first committee this year and a similar bill was stalled by Republican Representative Jordan Cunningham.

Similar measures have been introduced in Arizona, Wyoming, and other states.

Despite the potential pitfalls of cryptocurrency, Newsom’s request states that California should take the lead in figuring out how to adapt to technological development.

His request is based on a July 2020 report from the California Blockchain Working Group, which examined the use of blockchain along with its risks and benefits.

That same year California created a new Department of Financial Protection and Innovation from what was known as the Department of Business Oversight, with the goal of assessing emerging risks and opportunities while protecting consumers.

Newsom’s request calls for management to establish guidelines for disclosures by companies when they offer crypto-related financial products and services. It will also provide guidance to state-chartered banks and credit unions regarding crypto-related products.

The department will respond to consumer complaints, work with crypto companies to resolve consumer complaints and take enforcement action when needed. It will also publish consumer awareness materials, including tips on avoiding cryptocurrency-related scams and scams.

Newsom’s order directs a separate agency to solicit proposals on how best to use the blockchain to help the state and the public.

“It is critical that we engage the industry early and start learning the advantages and disadvantages of innovative technology early on,” said Amy Tong, secretary of the California Government Operations Agency. “We can take the following steps to move the curve forward and harness the potential of these tools to improve government.”

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