Breaking: California Governor Signs Executive Order to Promote Crypto
- California Governor Gavin Newsom signs an executive order to create a more transparent environment for crypto and Web 3.
- The plan is to promote crypto development while building in environmental and consumer protections.
Can California keep its position as a top crypto state?
California is taking the crypto bull by the horns as it looks for ways to promote blockchain and Web 3 innovation while also protecting consumers. California Governor Gavin Newsom has just signed an executive order that he hopes will put California ahead of the crypto curve.
"California is a global hub of innovation, and we’re setting up the state for success with this emerging technology -- spurring responsible innovation, protecting consumers, and leveraging this technology for the public good," he said.
According to a press release from Newsom's office, the idea is to build a transparent environment for Web 3 companies. However, the state is also aware of the industry's potential pitfalls. It wants the final rules to incorporate values of equity, inclusivity, and environmental protection.
Like President Biden's executive order earlier this year, today's announcement is only a beginning. California will now collect feedback and explore opportunities before eventually creating a state-wide regulatory framework for crypto.
Fierce competition to become America's crypto capital
Various states and cities are competing for the crypto crown. Miami mayor Francis Suarez has been outspoken in his crypto efforts. From the creation of MiamiCoin to taking his salary in Bitcoin (BTC), Suarez has shown that he wants Miami to be the center of digital finance.
New York may have some of the strictest crypto rules around, but it's also attracted a number of cryptocurrency companies. Its mayor, Eric Adams, took his first paychecks in Bitcoin and Ethereum (ETH). He recently spoke out against the Big Apple's BitLicense requirements for businesses, claiming they stifle economic growth.
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Wyoming has also thrown its hat into the crypto ring. It has passed a number of crypto-friendly laws, including a crypto banking charter. Two crypto banks, Avanti and Kraken Financial, are based in the state.
However, California leads the pack in a number of aspects. According to Bloomberg, San Francisco and Los Angeles saw some of the biggest numbers of crypto hires last year. It was named the most crypto-ready state by Crypto Head, in part due to its high number of crypto ATMs and overall interest in cryptocurrencies.
Pros and cons of crypto regulation
Governor Newsom's announcement was positioned as a pro-crypto move. However, some crypto diehards oppose any kind of regulatory framework. They feel it flies in the face of the freewheeling spirit of Bitcoin. The idea was to take the middleman out of financial transactions, and additional controls don't chime well with that ethos.
On the other side, people argue that without regulation, the crypto industry won't be able to develop further. Institutional money, which is dripping into digital assets, will stay on the sidelines, and retail investors won't fully embrace this new tech. Well thought-out regulation could increase investor confidence in the long term, and give the whole industry a firmer foundation.
Unfortunately, blockchain companies haven't done a great job of self-regulation so far. One issue is the high number of scams and hacks, especially in decentralized finance. Another is the lack of the consumer protections we benefit from in traditional finance. For example, if a crypto platform collapses, investors could lose their money. Money in a bank account is protected by FDIC insurance up to $250,000. Stablecoins are increasingly popular, but there are no clear rules to guarantee that issuers have enough cash in reserve to support the tokens they've issued.
Crypto regulation is inevitable
Like it or not, increased cryptocurrency regulation is coming, at both state and federal levels. Last year, the value of the crypto industry topped $3 trillion, though it has fallen in recent months. The number of people who want to invest in or trade crypto has increased so much that the industry is too big to ignore.
Indeed, as today's announcement from California shows, even crypto-friendly states want more structure and ways to promote responsible crypto activity. The challenge is to find a way to control this sprawling industry without stifling innovation. It will be interesting to see how California squares this circle, and whether it can hit upon a model that other states could follow.
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Emma Newbery owns Bitcoin and Ethereum.
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