Digitally progressive California has achieved another tech first, bringing blockchain to California’s Department of Motor Vehicles in a quest for a better, faster and cheaper administrative process for the state’s motor vehicle record-keeping.

California’s DMV, which has the highest number of car registrations in the United States, is teaming with Oxhead Alpha, a crypto infrastructure and software development company, to use Tezos blockchain technology to verify car titles and registrations. Paper car titles will become digital assets on a private DMV-run blockchain, making streamlined title transfers possible.

A proof-of-concept testnet was established in late January, running DMV validator nodes. A testnet allows the blockchain to be tested without risk of real funds or the main chain. The DMV expects to create a shadow ledger that reflects the current database of drivers’ licenses within three months, a first step to full deployment and consumer-facing applications, such as digital wallets.

Andrew Smith, president of Oxhead Alpha, said Tezos blockchain technology was selected because of its institutional grade security, sophisticated governance model, and energy-efficient consensus algorithm.

“Tezos solves some of the really hard problems in blockchain in an elegant way,” he said. “The combination of responsible consensus, on-chain governance, and institutional grade security makes Tezos a great platform for delivering production ready solutions.”

If You Blockchain It, Will They Come?

California has a long history of establishing meaningful legal and statutory sea change nationwide, and the adoption of blockchain record-keeping at an institution as relevant as the DMV therefore has the potential to jumpstart a nationwide shift in governmental blockchain adoption. California created a working group back in 2018 to study how state government and the state’s businesses might use the technology: among the recommendations in the group’s 2020 report to the California legislature was a DMV pilot.

The state has also instructed county record offices to allow for the use of blockchain technology with birth, death and marriage records.

Last May, California Governor Gavin Newsom issued an Executive Order establishing it as the first state in the nation to begin creating a “comprehensive and harmonized” framework for blockchain technology and cryptocurrency, with a goal to “solidify California’s status as the premier global location for responsible crypto asset companies to start and grow.”

California, in particular Silicon Valley, has been a hotspot for blockchain and cryptocurrency since the early days of the industries. At one point, almost 23% of the nearly 800 blockchain companies based in North America were headquartered in California—by far the most of any jurisdiction.

The state’s cutting-edge ways, including a proliferation of cryptocurrency ATMs, led to review site Crypto Head naming it the most crypto-ready jurisdiction in the United States in 2021.

We are keeping abreast of the anticipated spread of blockchain use. Harris Beach’s Blockchain and Digital Assets Industry Team is monitoring developments in the state with an eye towards New York and other states following suit. Our attorneys will keep clients informed with analysis and guidance.

If you have questions about this subject or related blockchain and cryptocurrency matters, please reach out to attorney Jack M. Martins at (516) 880-8399 and jmartins@harrisbeach.com, or to the Harris Beach attorney with whom you most frequently work.

This alert is not a substitute for advice of counsel on specific legal issues.

Harris Beach has offices throughout New York state, including Albany, Buffalo, Ithaca, Long Island, New York City, Rochester, Saratoga Springs, Syracuse and White Plains, as well as Washington D.C., New Haven, Connecticut and Newark, New Jersey.