Congress should create a blockchain technology safe harbor. Luckily they already figured it out in the '90s.

The Communications Decency Act, which protected the internet's early innovators, is a perfect model for protecting the people and companies building it's next level infrastructure. 

As we wrote last January,

We got lucky with the Internet. The net we’ve come to know, love, and rely upon owes much of its existence to two laws passed by Congress in the late 1990s: the Communications Decency Act (CDA) and the Digital Millennium Copyright Act (DMCA). The Internet would probably still exist today if it wasn’t for these laws, but it would be a very different, and likely less useful, tool.

Today we are in a similar position with respect to blockchain technologies. People building the infrastructure that powers these innovative networks are operating in a grey area with few protections. Innovators may be may be wrongly found to be money transmitters under state money transmission law (even if they don’t take custody of consumer funds), just as people running servers for message boards, blogs, and web pages could have wrongly been liable for defamation and copyright infringement in the 1990s (even though they were merely relaying other people’s content without editorial control). These problems are the same, and blockchain technologies deserve the same solution and policy approach that the early Internet enjoyed.

Coin Center first proposed a federal safe harbor for non-custodial uses of cryptocurrency last September and we have been doing a lot of thinking about the best way to implement a safe harbor. Fortunately, we have the perfect model: CDA Section 230, the law that saved online intermediaries from state defamation liability. We suggest taking language from CDA 230 and changing the subjects: instead of non-editorial online intermediaries we’ll describe non-custodial blockchain services, and instead of insulation from defamation liability it’ll be insulation from unlicensed money transmission liability.

Here’s that plan, again, in greater detail.

CDA 230 defined two types of Internet persons:

(f)(2) Interactive computer service. The term “interactive computer service” means any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions.

And

(f)(4) Access software provider. The term “access software provider” means a provider of software (including client or server software), or enabling tools that do any one or more of the following:

(A) filter, screen, allow, or disallow content;

(B) pick, choose, analyze, or digest content; or

(C) transmit, receive, display, forward, cache, search, subset, organize, reorganize, or translate content.

The Blockchain Technology Safe Harbor should define Blockchain Service and Blockchain Developer similarly:

Blockchain Service The term "blockchain service" means any information, transaction, or computing service or system that provides or enables access to a blockchain network by multiple users, including specifically a service or system that enables users to send, receive, exchange, or store digital currencies described by blockchain networks.

Blockchain Developer The term “blockchain developer” means any person that creates, maintains, or disseminates software facilitating the creation or maintenance of a blockchain network or a blockchain service.

CDA 230 narrowly specified in which situations an interactive computer service got protection from liability, only those cases where the provider is relaying other people’s content (not publishing their own self-authored content):

(C)(1) Treatment of publisher or speaker No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.

The Blockchain Technology Safe Harbor will make a similar narrow specification with respect to control over consumer funds and provide protection from liability for those who do not have control:

Treatment of Blockchain Service or Developer. No blockchain developer or provider of a blockchain service shall be treated as a money transmitter or any other state or federal legal designation requiring licensing or registration as a condition to providing the service or software, unless the provider or developer has, in the regular course of business, control over digital currency to which a user of the service or software is entitled.

And finally we’ll need to define control as we have suggested for virtual currency licensing laws in the past:

Control. The term “control” means power to execute unilaterally or prevent indefinitely a transaction on a blockchain network.

There are no doubt some drafting issues to resolve, and we look forward to working with our friends in Congress to make such a safe harbor a reality. Yet we believe CDA 230 provides a perfect scaffold for new legislation.

Just like CDA 230 and the Internet, blockchain technology is a bipartisan issue that has strong advocates on both sides of the aisle. Everyone should want to see these technologies flourish and grow here in the U.S. because blockchain technologies will improve our cybersecurity, they will provide increased access to financial services and trustworthy online identity, and they will grow our economy with well-paying and meaningful technology jobs.

CDA 230 was a simple and elegant legislative solution that enabled Internet businesses to flourish in the US and guaranteed that Internet users would always have a platform from which to share their diverse and expressive content. It’s no wonder that the EFF has called CDA 230 “The most important law protecting Internet speech.” Why mess with success? It’s now time for blockchain technology to get the 230-treatment as well.

Based in Washington, D.C., Coin Center is the leading non-profit research and advocacy center focused on the public policy issues facing cryptocurrency and decentralized computing technologies like Bitcoin and Ethereum. Our mission is to build a better understanding of these technologies and to promote a regulatory climate that preserves the freedom to innovate using permisionless blockchain technologies.