Hot Takes

Coin Center briefed four major DC organizations on open blockchains this week.

June has been a busy month for Coin Center. In addition to directly advocating for sound policy toward open blockchains, such as by responding to a recent anti-money laundering law in Congress, we are also a resource for policymakers that are seeking to learn more about these technologies.

Here’s a small snapshot of some of the educational outreach we’ve done over the last week:

We participated in a staff briefing for the House Committee On Agriculture, which oversees the CFTC. The briefing was a “blockchain 101” session that covered the technology, its capabilities, and differentiated between the different types of blockchains out there.

We were part of the American Bankers Association’s annual Payments Forum conference. During his panel, Coin Center executive director Jerry Brito helped the audience grasp what “blockchain” is and what it can realistically deliver in the context of payments:

Blockchain technology consists of three distinct parts, said Jerry Brito, executive director of Coin Center, a D.C.-based advocacy group. The blockchain itself, a series of containers enclosing time-ordered data in an unbreakable and distinct block, linked together; peer to peer networking; and a consensus mechanism, where all participants can agree on the rules of the road and monitor transactions as they happen.

Similarly, our research director Peter Van Valkenburgh presented at the National Governors Association’s National Summit on State Cybersecurity. His talk was one he’s given in Congress before, that answers the question, “What is ‘Blockchain’ Anyway?

And finally, Peter is at the World Bank’s Blockchain Lab this week to discuss opportunities to apply open blockchains in building a more inclusive financial system for the developing world.

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These members of Congress are applauding the CFTC and SEC’s light touch approach to cryptocurrencies.

Reps. Jared Polis and David Schweikert, co-chairs of the Congressional Blockchain Caucus, along with Rep. Tom Emmer, sent a letter to CFTC Chairman Christopher Giancarlo and SEC Chairman Jay Clayton praising both agencies’ measured response to rise of open cryptocurrency projects. They also tell the agencies not to overlook the massive potential of crypto beyond money and speculation:

As you develop your approach, we encourage you to think not only about the fluctuations of cryptocurrency prices today, but to focus on the future potential of this groundbreaking technology and its role in maintaining our leadership role in technological innovations. Any legislation or regulation should be simple, clear, and narrowly tailored to specific applications of the technology that raise policy concerns, thus allowing innovation in this space to be guided by consistent and predictable guard rails without imposing undue burdens.

We agree with the Representatives’ assessment and are pleased to see responsible approaches to innovation coming from federal policymakers and regulators.

Here's the full letter:

A downloadable PDF version of this letter is available here.

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Want to understand cryptocurrency policy? Try these podcasts.

The volume on Bitcoin in DC has recently been turned up to eleven. As we saw from this week’s hearing, Federal regulators have their eye on cryptocurrencies. Coin Center has been working with federal policymakers for a while now, helping them understand the value of protecting and fostering this technology. Here are some podcasts that will update you on our work:

On The Federalist Society’s Free Lunch podcast Coin Center director of research Peter Van Valkenburgh talked about our most recent policy proposal: a federal alternative to onerous state-by-state money transmission licensing. Revisiting this system is something the chairmen of the CFTC & SEC have mentioned, and Peter lays out how we think it could be done to help cryptocurrency innovation.

And on The American Enterprise Institute’s Political Economy podcast, Jerry lays out the nuances of what open blockchains are and why they are an important technology that is worthy of protection.

On the Cato Institute’s podcast Coin Center executive director Jerry Brito discusses what renewed regulatory interest in cryptocurrencies means for the technology and what Coin Center is doing to respond.

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Early bird tickets are now available for the Coin Center Annual Dinner.

Blockchain’s night out is back! Get your tickets to our annual dinner—a fundraising gala in support of our policy advocacy mission.

Get tickets now!

Coin Center Annual Dinner

May 14, 2018

The Plaza, New York City

Every year, some of the best and brightest of the cryptocurrency world gather after the first night of Consensus 2018 to meeting, mingle, eat, and drink. We’ll be announcing speakers soon but this is your chance to grab your tickets a little cheaper. Stay tuned for more information.

Here are some pictures from last year’s dinner.

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The ULC’s Model Virtual Currency regulation has been introduced in Hawaii & Nebraska.

Earlier this month, State Senator Mike Gabbard introduced the Uniform Regulation of Virtual Currency Businesses Act in the Hawaii legislature. We worked with the Senator on this initiative and are proud that he has taken the leadership on this issue. The model act was also recently introduced in Nebraska.

Last year the Uniform Law Commission, a private body of lawyers and legal academics from the several states, voted to approve a uniform model state law for the regulation of virtual currency businesses. We were highly involved in developing the model act’s language, which gives the states a clear path for updating their money transmission rules in a way that accounts for this technology’s unique characteristics such as shared custody over a multisignature wallet.

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The SEC and CFTC are taking the right approach to ICO scams.

The agencies clarified their strategies in a joint statement issued today:

"When market participants engage in fraud under the guise of offering digital instruments – whether characterized as virtual currencies, coins, tokens, or the like – the SEC and the CFTC will look beyond form, examine the substance of the activity and prosecute violations of the federal securities and commodities laws. The Divisions of Enforcement for the SEC and CFTC will continue to address violations and bring actions to stop and prevent fraud in the offer and sale of digital instruments."

We are glad both agencies will continue to target frauds and scams masquerading as initial coin offerings. As we’ve explained in our Framework for Securities Regulation of Cryptocurrencies, questionably marketed or designed cryptocurrencies may indeed be running afoul of securities law. This joint statement is important because the CFTC is the regulator with jurisdiction over digital commodities like Bitcoins and some other virtual currencies and the SEC is the regulator with jurisdiction over tokens that are securities. They'll need to continue to work together to draw distinctions between those fields of our technology, and are off to an excellent start.

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A new study finds less than 1% of Bitcoin transactions to exchanges are illicit.

Elliptic, a UK firm that provides blockchain analysis tools for law enforcement, has released an analysis of the global market for money laundering through Bitcoin. Based on available blockchain forensic data, their analysis found that only a tiny percentage of transactions to exchanges were from illicit sources:

According to our study, the total percentage of identified “dirty bitcoins” going into conversion services was relatively small. Only 0.61 percent of the money entering conversion services during the four years analyzed were verifiably from illicit sources, with the highest proportion (1.07 percent) seen in 2013.

Further, those transactions that were illicit tended to appear disproportionately in Europe:

Roughly a quarter of all incoming transactions went into Europe in 2015 and 2016, but 38 percent and 57 percent of all illicit transactions, respectively, went to European services during those years. Thus, Europe hosted a disproportionate amount of illicit activity.

One of the report’s recommendations for governments and cryptocurrency businesses to address this issue is through strengthening European AML practices and expanding them to include coin-to-coin exchanges, emulating the 2013 FinCEN guidance that applies in the United States. Read the full report here.

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We talked with the CFTC, Politico, and NPR about why cryptocurrency matters.

The CFTC has jurisdiction over the trading of futures on decentralized cryptocurrencies like Bitcoin and Ethereum . A critical part of Coin Center’s mission is to help regulators understand the nuances of these technologies. Our director of research Peter Van Valkenburgh did just that on the CFTC’s podcast by explaining in depth what decentralized consensus really means and what it takes for a cryptocurrency network to be truly open. Read the transcript here or listen here.

On the Politico Money podcast, Peter helped put the speculation driving cryptocurrency markets into perspective. It can be easy to forget that behind the excitement of cryptocurrency prices is the very real technology of decentralized networks. What is happening now may be a bubble, but like the dot-com bubble of the 1990s, some of its survivors will go on to be the next great internet platforms. Listen here.

Finally, on NPR’s 1A show, Peter went over the basics of cryptocurrency and answered questions from callers. Listen here.

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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 permissionless blockchain technologies.