On June 1, the California Department of Financial Protection and Innovation (DFPI) released an invitation for comment on the DFPI’s regulatory approach to crypto asset-related financial products and services, as well as the potential regulation of such products and services under the California Consumer Financial Protection Law (CCFPL).
On May 4, Governor Gavin Newsom issued an executive order on blockchain, crypto assets, and the creation of a consistent federal and state regulatory approach (please see our blog post summarizing the order here). Among other things, the order empowered the DFPI to “exercise its authority under the [CCFPL] to develop guidance and, as appropriate, regulatory clarity and supervision of private entities offering crypto asset-related financial products and services[.]” Specifically, the order asked the DFPI to:
- Within 30 days of the order, solicit public comments regarding the regulation of crypto asset-related financial products and services under the CCFPL; and
- Commence a market-monitoring inquiry to solicit voluntary information from companies and licensees about their crypto asset-related financial products and services to assist the DFPI in undertaking any future efforts, including formal rulemaking under the CCFPL.
The invitation for comment splits its topics for comment into two parts: (1) regulatory priorities and (2) CCFPL regulation and supervision. The topics can be summarized at a high level as follows:
- Consumer protection from scams and frauds;
- Consumer education and outreach;
- Consumer and investor protection in the offering and provision of crypto asset-related financial products and services;
- Financial market stability;
- Climate risks;
- Harmonization and cooperation with federal and other state regulatory approaches; and
- Regulatory guidance and clarity.
CCFPL Regulation and Supervision
- Potential for regulations;
- Potential for registration;
- Inclusion of “crypto asset-related financial products and services” in definition of “financial product or service” under the CCFPL;
- Potential for UDAAP regulations;
- Potential for disclosure requirements;
- Potential for reporting requirements; and
- Market monitoring inquiry scope and procedure.
Comments may be submitted electronically or by mail by August 5, 2022.