California is set to cement its place as the center of technology’s intersection with finance after this week, as it becomes the first state in the nation to formally begin roadmapping the adoption of cryptocurrency and blockchain technology.
Gov. Gavin Newsom signed an executive order on Wednesday directing California’s agencies to follow suit with the Biden Administration’s plan, laid out in a March order, for the federal government to begin crafting regulations for crypto. Newsom’s order also states that agencies should begin the incorporation of blockchain coding into their operations.
The governor said on Wednesday that the order is meant to accelerate the state’s movement towards digital currency as other lawmakers across their country drag their feet on legislation around the fast-moving industry, which has ballooned over the past five years.
“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 said in a statement, adding that the order will help “establish a comprehensive, thoughtful, and harmonized regulatory and business environment for crypto assets.”
While opinions on cryptocurrency certainly vary, government regulation is largely celebrated by the crypto community. The logic here is that the more that crypto is regulated, the more it will be understood en masse, which will bring wider adoption. Currently, roughly 16% of Americans (and yes, they’re mostly younger men) have had some experience with crypto—be it through investment, trading, or use as a form of payment—according to a recent Pew study, which also says that 86 percent of Americans have at least heard of Bitcoin, Ethereum, Cardano, or the other major (and thousands of minor) cryptocurrencies.
This explosion in cryptocurrency’s popularity, coupled with a massive bull run for Bitcoin that led to the first decentralized coin price soaring above $68,000 in November, increased pressure on federal regulators to finally create concrete policy. In addition to promoting what Federal Reserve Chair Janet Yellen said she anticipates will be “a fairer, more inclusive, and more efficient financial system,” last week’s order from Biden encourages the Fed to create its own digital currency while looking at crypto’s impact on financial stability and national security.
While some embrace the moves from both California and the feds as forward-thinking, others who are crypto skeptics have highlighted a variety of reasons for concern. The volatility of price, with wild swings and FOMO bringing some heavy losses to novice investors, as well as Bitcoin’s early association with illicit dark web activities and its use in ransomware cyberattacks, have all spooked investors and lawmakers alike.
Recently, three U.S. senators indicated that Russians could use crypto to dodge sanctions imposed after the invasion of Ukraine; however, this was quickly shot down by Biden advisor Daleep Singh, who asserted that “crypto’s really not a workaround for our sanctions” on CNN in March. Meanwhile, that same month, over $100 million in cryptocurrency had been donated to Ukrainian defense forces.
Yet the path to wide adoption remains rocky in many respects on the state level. In contrast to Newsom’s order for California, New York state has been pushing through legislation to bring a two-year moratorium on new crypto mining operations that use proof-of-work authentication methods. Bitcoin is one of several coins that uses proof-of-work mining, which is an authentication process that gobbles up a great deal of electricity. Pushback from the crypto space on this New York bill has been harsh, with advocates saying it could be the first step to squash the growing industry.
But at this point, the mainstreaming of crypto may be inevitable. Multiple states like Arizona, Wyoming, Ohio, and others have already made moves to accept cryptocurrency for government services. These state bills have failed to pass—but with the Biden administration and California working on full, robust plans that lay down a clear path forward, adoption is likely to only accelerate.
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