California Governor Gavin Newsom signed the Digital Asset Act into law in an effort to make blockchain technology more accessible to small businesses and start-ups.
The law provides a legal framework for blockchain companies to operate in California. The law also brings clarity to how existing laws apply to the new technology and rules out barriers that have prevented small businesses and start-ups from getting involved.
It says that while digital assets, which are used with blockchain technology, can’t be classified as legal tenders like dollars or euros, they do deserve special status under the law. This helps bring clarity to how other laws apply to digital assets—like contracts, banking regulations, and consumer protections—while also helping remove barriers that prevent small businesses and startups from using this technology.
California is the first US state to pass a law that recognizes blockchain technology as an alternative to traditional software systems.
California is the first US state to pass a law that recognizes blockchain technology as an alternative to traditional software systems. However, many other governments have also passed laws to recognize blockchain technology, such as the European Union. The law was supported by Blockchain Advocacy Coalition and other tech companies.
It’s also the first to prohibit local governments from taxing crypto transactions.
Perhaps the most significant aspect of AB-2658 is that it prohibits local governments from imposing taxes, fees, or charges on blockchain or cryptocurrency transactions. AB-2658 also seeks to clarify existing tax laws that are sometimes misapplied to cryptocurrency use or mining.
The bill aims to smooth the way for blockchain innovation and attract more companies to California by offering a clearer legal framework in which they can operate. It’s an interesting approach for the state legislature, some of whose members have been critical of cryptocurrency in the past.
AB-2658 also amends current labor and employment law to protect consumers engaged in crypto transactions from unfair practices by their employers, including restricting access to generated digital currency amounts.”
The new bill aims to foster innovation in the blockchain industry.
Blockchain technology is broadly applicable. It can be used to improve the efficiency of businesses and increase the security of individuals, specifically in terms of their personal information. In fact, you might be surprised by how many industries it can help, from real estate to healthcare.
The technology is best known for its use in cryptocurrencies like Bitcoin or Ethereum, but blockchain also has applications beyond currencies. You can think of blockchain as a way for any type of information—like money or contracts—to be exchanged securely between two parties without going through a third party like a bank or government entity.
The “chain” describes how encrypted blocks containing the transaction and some other information are made at the time of an exchange and linked together with previous transactions in a secure digital ledger that’s accessible by all parties involved. As more transactions are added, they’re given their own unique timestamp and connected to each other in a linear fashion. This means that no one block can be altered without changing every other block after it as well.
This blockchain structure makes it nearly impossible for someone to falsify ownership of funds or assets recorded on the chain because they’d also have to control each computer on the network (there could be hundreds or thousands), which would require an incredibly powerful amount of computing power. So basically, you’d need supercomputer-level power just to change your account balance by $5—not likely!
Blockchain allows individuals and businesses to make transactions outside the traditional financial system using software that anyone can download onto their computer. And because these cryptocurrency exchanges don’t rely on third parties like banks nor involve physical bills changing hands, there are lowered transaction costs compared with traditional currency exchanges.
Blockchain also has the ability to transform many other industries beyond finance. For example, it can play a major role in healthcare for managing patient records and claims. It can lead to transparency and efficiency in supply chain management and logistics. Blockchain systems can help conserve energy by allowing consumers to identify the real cost of electricity produced from fossil fuels, which is often hidden by subsidies, and incentivize renewable energy such as solar power.
As a Californian yourself, you may be interested to learn more about how blockchain technology could impact our democracy, economy, environment, or healthcare system. Luckily for you, California will be hosting its first-ever blockchain week in San Francisco on October 10-17th. The goal is to bring together policymakers with leading researchers, academics, and entrepreneurs in the blockchain space who are at the forefront of developing this technology into meaningful applications for society.
