State moves to embrace cryptocurrency, regulate it

SACRAMENTO » California, which has an 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 President Joe Biden in March, Gov. 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.

Evolving blockchain and cryptocurrency technology “is potentially an explosive creator of new companies and new jobs and new opportunities,” said Dee Dee Myers, a senior adviser to Newsom and director of the Governor’s Office of Business and Economic Development.

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

Newsom’s order says 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.

“Too often government lags behind technological advancements, so we’re getting ahead of the curve on this, laying the foundation to allow for consumers and business to thrive,” Newsom, a Democrat, said in a statement.

California has about 39 million residents, and its economy is more than $3.1 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 harmonized regulatory and business environment for crypto assets.”

Cryptocurrencies, which are built on blockchain database technology, have exploded in popularity in recent years. About 16% of U.S. 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 decentralized 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 together form a global network so that no one and no institution can control them.