Detailed Plan
Support the Blockchain Advocacy Coalition's mission to sponsor a safe harbor framework for California and introduce it in early 2022.
Why: Companies in the United States have been asking for greater transparency around how the rules apply to crypto assets from the federal government for years. Neither Congress nor the SEC has stepped up to offer this clarity. California is the fifth largest economy in the world and is proud to be the birthplace of Silicon Valley.
Legislative Specifics: We have drafted a bill that pulls language from SEC Comm. Hestor Peirce's Safe Harbor 2.0. The bill would direct the Department of Financial Protection and Innovation to implement a Safe Harbor using these standards by 2023, using SEC rule 147 that allows an INTRASTATE safe harbor. The state then becomes the regulatory body- not the SEC. Once enacted, companies would register with the DFPI and be able to offer digital assets under those guidelines. The SEC would not have jurisdiction over these intrastate offerings. The legislation would allow projects built on Cardano to operate under a clearly defined regulatory framework that would enable them to headquarter in the US if they so choose. This would reduce legal fees/regulatory uncertainty for all entrepreneurs in the space. As Charles Hoskinson states around minute 30 (https://www.youtube.com/watch?v=7WjQbY1nnsc&ab_channel=CharlesHoskinson) regulatory conditions create a "demand to figure out how to do defi differently" including consumer protections, compliance and governance. This proposal meets that challenge head-on. In addition to protecting entrepreneurs building on Cardano, this proposal would open up the California market for consumers.
California is a deeply progressive state that values consumer protections. In order to craft a bill with a realistic chance of democratic support we have included consumer protection provisions including: disclosures, consumer complaint response times, and receipts. By opting-in to the safe harbor companies will be held to similar standards as other financial service providers in the state. Since California currently does not require an MTL license for virtual currency this would set up a regulatory framework that is clear to the industry and familiar to regulators.
California is the 5th largest economy in the world and home to a disproportionate amount of the United State's crypto businesses and users. Legislation passed in this state is often replicated in other states and influences federal action. While is is highly unlikely that any positive regulation will move forward for the crypto industry federally, this is an actionable way to shift the momentum for crypto regulation in the United States.
Background: The California Blockchain Working Group Report, mandated via the Legislature, Recommends that CA "consider establishing a Blockchain Innovation Zone to incentivize and provide safe harbor to blockchain companies working to solve California's most pressing problems." They go on to suggest the state consider certain regulatory exemptions.
The Blockchain Advocacy Coalition already introduced this idea in AB 2150- a bill that was going to die- as a way to start the conversation with the regulatory agencies.
Budget:
Lobbyist- 120k for a legislative cycle
Organizing/Advocacy/Coalition Building Costs- 100k
Political Donations- 50k
Public Relations/Media support- 80k
Total: 350k
Funds are not being wholly requested from Project Catalyst- this is a large advocacy endeavor that would bring many industry players together. Our organization runs as a coalition so that members can contribute their collective expertise to projects that support the crypto ecosystem without having to foot the entire bill. Project Catalyst's $35,000 would represent 10% of our projected budget for the bill campaign. If chosen for funding, we would allocate a seat on our policy committee for Project Catalyst to engage the community in the legislative process. IOG has already joined as a member and is represented by Tony Rose. I am seeking funding from a diverse group of businesses and felt having an ecosystem with Project Catalyst represented would deepen our knowledge of the regulatory needs of entrepreneurs building on this blockchain facing an uncertain landscape.
Timeline:
Draft Bill and begin talking with authors (done)
Confirm Author(s) by January 2022
Introduce bill mid feb 2022
Pass 1st House May 2022
Pass 2nd House September 2022
Governor Signature October 2022
What is success?
3 months- have the bill introduced
6 months- get the bill through committee hearings
12 months- have a law in place
- How far the bill gets through the legislative process ultimately determines success. Can be broken down into committee hearings passed, votes received from each house, and ultimately being signed into law. Other metrics may include: amount of elected officials and regulatory agencies engaged and coalition partners added. I will report out progress monthly to the Project Catalyst if selected.
- All legislative drafts and advocacy materials will be published for use by the community in other jurisdictions.
