Hot Takes

Save the Date: The 2018 Coin Center Annual Dinner with be on May 14, 2018.

The Blockchain community’s night out is coming back to New York City during Consensus 2018. We hope you will join us once again to rub shoulders with some of the best and brightest in the industry, all while supporting Coin Center’s critical policy advocacy mission.

Monday, May 14, 2018 - 7:00 PM

The Plaza Hotel

768 5th Avenue, New York, NY 10019

Tickets will be on sale in early 2018. For sponsorship information please contact antonie@coincenter.org.

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We demonstrated the Bitcoin Lightning Network in Congress.

Earlier today, Coin Center hosted a briefing in Congress in conjunction with the Congressional Blockchain Caucus. We covered the basics of cryptocurrency, why it’s exciting, and went through some the policy issues the technology raises, including questions of scaling, privacy, consumer protection, and tax.

One of the things made uniquely possible by cryptocurrency is microtransactions--tiny transactions without a middleman. To visualize this concept, we used a lightning enabled candy dispenser. We were able to show the process of sending tiny amounts of bitcoin from our phones to the vending machine and watch it dispense candy in real time. The network fees were 1 satoshi per transaction.

Real time demonstrations like these are always better than simply describing a process. We are grateful to Swiss developer David Knezić for generously donating the dispenser to Coin Center.

The well-attended briefing was the first of many that the Congressional Blockchain Caucus plans to hold in 2019. We are excited to continue helping them and their colleagues better understand and appreciate this technology.

Here are the slides from our presentation:

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New York is creating a cryptocurrency task force. We encourage them to reevaluate the BitLicense as part of their work.

As any cryptocurrency entrepreneur will tell you, getting a BitLicense is difficult and costly. Not only that, but as written the regulation has grey areas relating to custody, requires state approval before a company can add new products or services, and very few licenses have been issued.

The result of this is that many cryptocurrency businesses are choosing to simply forgo doing business with customers in New York.

We are glad to see the New York legislature taking the step of creating a task force to better evaluate the cryptocurrency landscape and its own regulatory stance toward the technology, which is well overdue. As Assemblyman Clyde Vanel noted, “It has been nearly four years since the implementation of the BitLicense. In the cryptocurrency space and technology in general, a few months is equivalent to years.”

We look forward engaging with the task force on this important mission.

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A bill that would clarify securities law for tokens and improve the tax treatment of cryptocurrencies was just introduced in Congress.

Today, Reps. Warren Davidson and Darren Soto introduced the Token Taxonomy Act, which includes several common-sense changes to federal law.

First, the bill would amend the definition of “security” in the Securities Act of 1933 and the Securities Exchange Act of 1934 to exclude decentralized cryptocurrencies such as Bitcoin, thereby making clear that such cryptocurrencies are not subject to the rules and regulations of the U.S. Securities and Exchange Commission. We have longargued that classifying decentralized cryptocurrencies as securities would be both impractical and harmful to innovation, a view that the SEC has, to its great credit, also recently taken. Although the SEC has put forth sensible guidance on this question, codifying that decentralized cryptocurrencies are not securities would mitigate any lingering uncertainty.

The bill would also make several changes to the tax treatment of cryptocurrencies. One such change that we have long argued for is a de minimis exemption for cryptocurrency transactions for goods and services. Today, if you buy a cup of coffee with bitcoins and the price of bitcoin has increased since you acquired it, you would have to calculate, report, and pay taxes on any capital gains that you realized as a result of the transaction, no matter how small they might be. The Token Taxonomy Act would create an exemption from this requirement for any gains under $600, similar to the de minimis exemption that foreign currency transactions enjoy today, which we think is a simple and fair way to avoid unfairly discouraging the use of cryptocurrency as a means of payment.

We are happy to see continued action from Congress to implement common-sense clarifications and adjustments to the regulatory treatment of cryptocurrencies. We are looking forward to continued engagement with policymakers on these issues to ensure that the fruits of cryptocurrency innovation are not lost to ill-considered policy.

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The next Coin Center Annual Dinner will be on May 13, 2019

Save the date! Blockchain’s night out is back. We will be returning the the magnificent ballroom of the Plaza Hotel in New York City after the first night of Consensus 2019.

Join us for a evening of food and drink with the best of the cryptocurrency industry, all while supporting Coin Center’s critical policy advocacy mission.

Monday, May 13, 2018 - 7:00 PM

The Plaza Hotel

768 5th Avenue, New York, NY 10019

Individual tickets will be available in early 2019.

You can see pictures from past dinners here.

For table sponsorship opportunities contact antonie@coincenter.org.

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Two new digital asset associations launch to advance cryptocurrency professionalization.

Over the last week, The Association for Digital Asset Markets and Mexican Blockchain Association both launched. Their goals are to develop industry standards, codes of conduct, and best practices among companies working with public blockchain networks.

You can read ADAM’s founding principles here and about the Mexican Blockchain Association (in Spanish) here.

It is great to see cryptocurrency industry participants increasingly work together to improve their standards and build an orderly cryptocurrency ecosystem. We are looking forward to working with both organizations.

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The SEC published much-needed guidance on tokens and trading.

It recently released a “Statement on Digital Asset Securities Issuance and Trading” that uses the example of recent enforcement actions and settlements to illustrate how the securities laws will be applied to token issuance and exchange. It’s well done, reasonable, and says much of what one would expect: That looking at the totality of an activity, doing something that would otherwise be regulated isn’t exempt just because one uses blockchain technology to do it.

That said, we’re a little concerned that the Statement suggests that “an entity that provides an algorithm, run on a computer program or on a smart contract using blockchain technology, as a means to bring together or execute orders could be providing a [regulated] trading facility.” As we’ve explained previously, writing and publishing code alone cannot be a crime.

We do not think the SEC intends to directly regulate the mere creation and publication of code. For one thing, this statement is focused on the current landscape of decentralized exchanges and, as of today, there is no code that, when published to a blockchain on its own, could result in a fully functional exchange. Additionally, the statement repeatedly focuses on “the totality of activities and technology used” to generate the exchange platform, not on any particular activity, such as software design. However, we encourage the SEC to make it clear that merely writing and publishing code for decentralized exchange by itself does not “provide a trading facility.”

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The Blockchain Alliance reaches 100 law enforcement, regulator, and cryptocurrency industry members.

The alliance, launched in 2015, is a forum for the law enforcement, regulators and cryptocurrency businesses to communicate with each other.

When we helped found the Blockchain Alliance, we wrote:

Law enforcement will pursue criminals no matter what technology they’re using, and how law enforcement does this can affect an open technology. As a result, it’s in everyone’s interest–law enforcement, industry, and those of us who want to keep the technology free and open–to make sure that law enforcement understands how the technology works, what can and can’t be done with it, and what are the opportunities and limits it presents for their investigations. To that end, today we announced the formation of the Blockchain Alliance, a forum for law enforcement and regulators to ask questions of each other and to share information, and for law enforcement and regulators to get technical assistance from industry on understanding the blockchain.

We’re excited to see the Blockchain Alliance grow so fast and are hopeful that collaboration between cryptocurrency innovators and government continues to flourish. Read the full announcement here.

(Image credit: /u/Chinxcore)

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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.