SACRAMENTO, CALIFORNIA (AP) – California, which has a economy larger than all but four countries and where much of the world’s technological innovation is born, on Wednesday became the first state to formally begin examining how to broadly adapt to cryptocurrency and related innovations.
Following a path laid out by United States (US) President Joe Biden in March, California Governor Gavin Newsom signed an executive order for state agencies to move in tandem with the federal government to craft regulations for digital currencies. It also calls for officials to explore incorporating broader blockchain computer coding into the government operations.
Newsom’s order said the state – home to Silicon Valley and financial innovators like PayPal and Square – should be out front in figuring out how to adapt to new technologies.
California has about 39 million residents and its economy is more than USD3.1 trillion, larger than the United Kingdom and India. Newsom said his order is a step toward making it the nation’s first state “to establish a comprehensive, thoughtful, and harmonised regulatory and business environment for crypto assets”.
Cryptocurrencies, which are built on blockchain database technology, have exploded in popularity in recent years.
About 16 per cent of US adults have invested in, traded, or used cryptocurrencies and the percentage is much higher among younger men.
Biden’s executive order in part asks the Federal Reserve to consider whether it should create its own digital currency.
Blockchain creates the underlying transparency of a decentralised but publicly viewable ledger.
The technology can also be used to record other types of information, such as property records. The records are held on many computers that form a global network so that no one and no institution can control them.
There is heavy disagreement about the legitimacy of cryptocurrency, even among some of the world’s richest people. Elon Musk is an avid supporter while Warren Buffet recently said he wouldn’t pay USD25 for all of the world’s bitcoin, the most popular cryptocurrency. Each bitcoin is currently valued at about USD38,000 but fluctuates wildly.
California’s approach will help to legitimise the technology and bring it into the mainstream, said cryptocurrency skeptic Hilary Allen, a financial regulation professor at American University in Washington DC. But she doesn’t think it’s the best approach for the state and its residents.
She said private investors are most likely to benefit, while state government should seek simpler technological solutions rather than turning to technology that “is by its very nature complex and inefficient”.
California may be first to try to develop a comprehensive approach, but Ohio was the first to attempt to accept virtual currency for government services in 2018, though the programme was soon discontinued because few people used it.
