Economic Impact of Blockchain in CA
One of the key goals of the Blockchain Advocacy Coalition is to better inform policymakers about how regulation impacts the blockchain/cryptocurrency/ distributed ledger industry. For brevity’s sake we’ll us BCDL as a catch-all from here on out. We used Crunchbase to source data about the industry size and trends. Here’s what we found out about the BCDL industry in California:
California is losing ground…rapidly
Since 2012 the global number of BCDL businesses has grown steadily. As shown on the chart, 2017 was a bit of breakaway year but the number of businesses tracked by Crunchbase using this tech has been consistently on the rise during the last six years. At the same time, the percentage of the those businesses headquartered in California has fallen from nearly 20% to just over 11%.
While this is a strong indicator that CA is losing out on this quickly growing market, we needed to establish what range of market share is typical for the state’s technology industry. We compared the percentage of businesses headquarted in the Golden State across a variety of subsections of the technology industry and confirmed that 11.8% is an alarmingly small market share for the state. The second lowest was for SAAS businesses, and CA is still home to over 18% of them.
For the rest of the tech sectors we looked at CA was typically home to 18–25% of marketshare while the U.S. enjoyed 40–50%. For BCDL they clock in at only 11.8% and 27%, respectively. This indicates an unwelcoming environment for BCDL businesses and suppresses the ability of other companies to experiment with this technology. For a state that prides itself on innovation and leading the global tech industry- this is a major blind spot.
Why the U.S. and California are losing the BCDL Market
A research team led by Sheena Shah of Morgan Stanley concluded that well-defined regulations are a key factor in where cryptocurrency businesses choose to headquarter. Shah notes “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.”
The U.S. has the oft-cited compliance problem of 4 different definitions of virtually currency by 4 different regulatory agencies: security, commodity, currency, property. California has passed no major regulation regarding the BCDL industry but has twice considered legislation similar to New York’s industry-quashing BitLicense. The states’ lack of leadership coupled with confusion over federal jursidiction creates the atmosphere of ‘uncertainty’ that Morgan Stanley found to drive away businesses.
Solutions
California needs to pass regulation that welcomes and strengthens the BCDL economy. In my next post I’ll go over some of the policies that are working globally and how this election cycle impacts what we can achieve next year. In the meantime, if you are interested in getting involved in educating policymakers and supporting positive regulation please email ally@blockcadvocacy.org .