Pursuant to the Executive Order’s mandate, the DFPI issued the Invitation to seek input from stakeholders and the public. The CCFPL expanded the DFPI’s ability to regulate California’s financial system, including investigating and researching markets for consumer financial products and services, and developing initiatives to promote innovation. California’s Consumer Financial Protection Law (the “CCFPL”), enacted in September 2020, authorizes the DFPI to regulate the offering and provision of consumer financial products and services. The DFPI, previously known as the Department of Business Oversight, was established in 2020 to monitor and manage emerging risks and opportunities in the burgeoning intersection of finance and technology. The DFPI will also be responsible for developing and publishing consumer protection principles, promulgating consumer education materials, and undertaking monitoring and enforcement. The DFPI is specifically charged with coordinating with federal agencies and state financial regulators and with soliciting comments from the public and industry stakeholders. The Executive Order tasks various state agencies, including the DFPI, with undertaking public engagement to develop the state’s regulatory framework.
California’s initiative sets the state on a path to develop a framework that is aligned with any approach taken by forthcoming federal rules and guidelines. In a press release accompanying the Executive Order, Governor Newsom stated that “oo 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.” The Executive Order builds on President Biden’s Maproposal to examine the risks and benefits of, and provide regulatory clarity on, these emerging products and services.
The request for comments follows California Governor Gavin Newsom’s Executive Order N-9-22 (the “Executive Order”), which aims to develop a comprehensive, coordinated state regulatory framework for digital asset technologies that will strengthen California’s innovation economy and propel its leadership in the blockchain and cryptocurrency industry. On May 31, 2022, the California Department of Financial Protection and Innovation (the “DFPI”) published an Invitation for Comments on Crypto Asset-Related Financial Products and Services Under the California Consumer Financial Protection Law (the “Invitation”).