On September 28, 2018, the US state of California passed two new bills into law defining and recognizing blockchain technology and encouraging its adoption.
The bills, known as SB 838 and AB 2658, are aimed at empowering businesses to adopt blockchain for creating and maintaining company records, as well as promoting blockchain research and public/private partnerships.
The bills, AB 2658 by Assemblyman Ian Calderon, and SB 838 by Senator Robert Hertzberg, will allow innovations backed by blockchain technology to have legal standing.
Bill 2658, tabled by Assemblyman Ian Calderon, defines blockchain technology, updates the Uniform Electronic Transactions Act and establishes a working group with industry representation to create a regulatory framework for blockchain within the state of California.
“As a complex, emerging technology, it is important to define ‘blockchain technology’ in the statute, as well as identify potential technical, regulatory, and governance hurdles, in order to provide greater certainty regarding the technology’s legal standing,” said Assemblyman Calderon.
“Throughout the legislative process, we had tremendous feedback from innovators and companies who are already working with blockchain about how important this measure is to their industry. I’m grateful that Governor Brown recognized the importance of maintaining California’s position as a global leader in technology and innovation by signing AB 2658,” he added.
Bill 838 also defines blockchain technology and enables companies to record stock issuance and transfers using this technology.
“California has always been a place for innovation and opportunity, and SB 838 shows how we can use technology to increase consumer protection and help prevent cases of fraud,” said Senator Hertzberg.
California’s pro-blockchain advocacy group, the Blockchain Advocacy Coalition played a significant role in the process through which the bills were eventually signed into law.
“Blockchain has the potential to revolutionize many industries in the near future. It is vital that California recognizes and supports this industry as an economic driver in our state,” said Ally Medina, Director of the Blockchain Advocacy Coalition.
Since 2012, the global number of blockchain businesses has grown steadily while the percentage of those businesses headquartered in California has fallen from nearly 20% to just over 11%.
One major factor driving where blockchain companies decide to headquarter – and as such, which economy benefits – is the existence of well-defined regulations.
A recent report by Morgan Stanley notes that “Regulatory certainty is part of the attractiveness for the companies so they can plan for the future as they know what to expect. Low taxes are a benefit.”
By creating a more clear regulatory framework for blockchain companies, California is positioning itself to capture and retain more of these innovative businesses going forward.