California Governor Orders Agencies to Create Transparent Regulatory Framework for Blockchain and Digital Assets | Jones Day

On Might 4, 2022, California’s governor issued Executive Order N-9-22 (“California EO”), requiring California’s Division of Monetary Safety and Innovation (“DFPI”) “to develop a complete regulatory method to crypto property harmonized with the path of federal laws and steerage.” The order frames California’s aim for this regulatory framework as “creat[ing] a clear and constant enterprise surroundings for corporations working in blockchain … that harmonizes federal and California legal guidelines, balances the advantages and dangers of customers, and incorporates California’s values, corresponding to fairness, inclusivity, and environmental safety.” The order additionally acknowledges California’s aim of “remaining the premiere international location for accountable crypto asset corporations to begin and develop” as a precedence. On the similar time, the order’s emphasis on shopper safety demonstrates California’s concern that digital property pose distinctive dangers to customers and require cautious examination. 

The California EO contemplates collaboration and session with federal regulators, in line with the federal technique articulated within the White House’s executive order on ensuring responsible development of digital assets. To that finish, the California EO requires varied state businesses to collaborate on a report that makes suggestions for “[c]reating a regulatory method to crypto property harmonized between federal and state authorities, led by DFPI,” and contains enter from a broad vary of stakeholders, in addition to “related state businesses concerning … the connection of crypto property to priorities in vitality, local weather, and stopping felony exercise.”

The California EO particularly directs the DFPI to, amongst different issues: 

Interact with federal businesses and different state monetary regulators to advertise a standard method that will increase the attain of DFPI’s shopper safety efforts and reduces pointless burdens, if any, on corporations looking for to function nationwide;

Train its authority underneath the California Consumer Financial Protection Law (“CCFPL”) to develop steerage and, as applicable, regulatory readability and supervision of personal entities providing crypto asset-related monetary services at the side of California stakeholders; and

Provoke enforcement actions for violations of the CCFPL, improve its assortment and overview of shopper complaints concerning crypto asset-related monetary services, work with corporations providing such services to treatment complaints, and seek the advice of with applicable legislation enforcement businesses concerning felony exercise. 

Additionally related, in 2018, California handed laws directed at shopper privateness and cybersecurity, creating a brand new regulatory framework, which can have distinctive state-level implications. 

We are going to proceed to watch developments and counsel with purchasers as extra concrete steps are taken on this course of.