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Coin Center Annual Dinner 2017

Hot Takes

How does Coin Center advocate for sound Bitcoin policy?

That was the question columnist Laura Shin sought to answer when she invited Coin Center executive director Jerry Brito and director of research Peter Van Valkenburgh onto the most recent episode of her Forbes podcast, “Unchained.” She starts by explaining Coin Center’s policy philosophy:

When it comes to blockchain technology and cryptocurrencies, many people compare their stage of development to the internet in the early 1990s. Admiring how the internet flourished under light-touch regulation, Jerry Brito, in 2014, launched Coin Center, an independent non-profit research and advocacy center focused on the public policy issues facing cryptocurrencies. Brito says the organization represents the technology, and so is not a trade association representing the industry. His and Coin Center’s goal is to get the same mostly hands-off regulatory attitude the U.S. had toward the internet applied to cryptocurrencies and blockchains.

The conversation is wide ranging, covering the early history of Coin Center up through our most recent policy achievements, both defensive and proactive. The candid discussion looks inside the tactics we use in the service our education and advocacy mission, and offers a peek into the types of relationships we have built with policymakers around the country over the last two years. In her write up, Laura pulled out a quote that particularly captures our approach: 

When that happens, he says, Coin Center will say to regulators, “Here’s a gap, here’s an issue, here are the alternative ways you might fill that gap, and here are our preferred routes. It’s a route that allows you, the regulator, to meet your ends, but in doing so we don’t do any inadvertent harm and you do it in the most light-touch possible way that preserves the freedom to innovate.”

The full episode is available on Forbes.

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Coin Center gear is now available on OpenBazaar.

For the first time you can donate to Coin Center through the decentralized network for peer to peer commerce powered by Bitcoin. Find us with our Onename ID @coincenter, or navigate to our store directly with 211fc791cfe7f050b06a65164f1a470b4adb9fad.

Along with our classic “Bitcoin: Est 2009” t-shirt, we are celebrating the launch of this store by bringing back the limited edition designs “Moon Mission” and “Alpaca.”

Don’t have OpenBazaar? Get it here. And you can take a peek at our store with BazaarBay.

Coin Center is dependent on donations from the cryptocurrency community to support its important mission of promoting sound policy that allows these technologies to flourish. These shirts are a “Thank You” gift for your donation of .1 BTC, which will go toward our work.

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A new bill in Congress would create a “regulatory sandbox” for fintech innovators and folks have been asking us about it.

So here are our thoughts. H.R. 6118, introduced by Rep. Patrick McHenry seems to emulate the sandbox approach taken by governments like the UK and Singapore.

A sandbox allows a firm with an innovative product or service to petition a regulator to be exempt from the standard set of rules that would apply and instead enter into an enforceable compliance agreement tailored to the specific firm and product. This provides some real benefits to companies: for one, they can find more flexible paths toward financial regulatory compliance. Also, they get a single point of contact; not just a single agency to deal with but a dedicated contact person in that agency to focus on their particular regulatory issues.

Sandboxing is an approach that we’ve applauded in the UK and we’re happy to see Congress looking to replicate in the U.S. The McHenry Bill goes as far as it can to create a regulatory sandbox within the constraints of the U.S.’s federal system of government. The challenge it faces is that unlike the UK, the U.S. does not have a unitary government with a single financial conduct regulator. Instead, fintech firms are potentially regulated by 50 different state regulators and by a dozen federal agencies. The question is whether entering into a sandboxing agreement with one federal agency would clearly preempt all the other federal agencies and state regulators that may have a claim of jurisdiction over the firm.

We’re happy to see this approach being considered in the U.S. and impressed by Rep. McHenry’s leadership in pursuing it. And while we’re very optimistic about the approach, we recognize the challenges the approach will face in the U.S.

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New CFPB prepaid rules leave out Bitcoin, and that’s mostly a good thing.

Two years ago this December, the Consumer Financial Protection Bureau began working on a new regulation of prepaid products. The CFPB said at the time that some of the new requirements might apply to virtual currency products. Coin Center filed a comment in that rulemaking process arguing that: 

  1. The CFPB had not conducted adequate study of the virtual currency industry to determine whether and how to apply existing rules to digital currency products.  
  2. The small scale of the digital currency industry relative to the legacy prepaid industry made the application of these rules less urgent. 
  3. That certain specific technical aspects of virtual currency technologies made the application of these rules fraught and worthy of further study and consideration. 

We concluded by asking the CFPB to include a formal exemption of virtual currency products within the final rulemaking.  A number of legacy prepaid industry groups asked for the opposite: for virtual currency products to be explicitly added to the definition of prepaid access, thereby making these products explicitly covered by the rule.  

Today the CFPB has released the final rule [PDF]. Coin Center’s comments and concerns were cited by the CFPB in opposition to the demands of the legacy prepaid industry groups: 

On the other hand, a diverse group of industry commenters and a non-governmental virtual currency policy organization commenter urged the Bureau to expressly provide in the final rule that it does not apply to virtual currency products and services. Commenters expressed concern that regulation would be premature, thus potentially stifling innovation. Several commenters highlighted the low rate of consumer adoption of virtual currency products and services. Commenters also asserted that the Bureau has not adequately studied the virtual currency industry, and that regulations developed for GPR cards are unsuitable to apply to virtual currency products and services because of the differences between such products and services and GPR cards.

And, to our satisfaction, the final rule does not explicitly include digital currency products within the definition of prepaid access, as legacy industry commenters had requested and we had opposed: 

the Bureau reiterates that application of Regulation E and this final rule to [virtual currency] products and services is outside of the scope of this rulemaking.

However, if you parse that language carefully, you'll note that this doesn't say that digital currency products are outside the scope of these regulations. It only says that the question, "are virtual currency products regulated under Regulation E or this final rule?" is outside the scope of this particular rulemaking. So the result is that we still don't know. That's better than an explicit statement that these ill-fitting regulations definitely apply right now to digital currency products, and it allows the CFPB to take more time studying the question (as we asked them to do), but it doesn't provide any certainty for innovators wondering whether their products are covered today, either. We'll have to keep waiting.

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What are the regulatory issues facing cryptocurrency developers?

Jerry Brito and Peter Van Valkenburgh gave a talk last week to the San Francisco Bitcoin Devs meetup group outlining Coin Center’s work, our policy agenda for the next six to nine months, and fielding a wide range of questions from some of the smartest devs working on the tech that will power our decentralized future. Topics covered include a path forward on state money transmission licensing, as well as securities regulation of cryptocurrencies and appcoin tokens. The full video is available now. 

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Congressional letter to OCC: Will you support open blockchain networks?

That’s the gist of a new letter from Rep. David Schweikert to Comptroller of the Currency Thomas J. Curry. Citing work by Coin Center, the letter asks the OCC several important questions about its approach to cryptocurrencies, including:

Several open blockchain advocates and firms have contrasted the regulatory framework here in the U.S. with the approach taken in other countries. We are particularly concerned with the suggestion that the U.S. may lose its competitive edge in these technologies because of two areas where international approaches differ from the approach in the U.S.: (1) the standards-based rather than rules-based approach to regulation found in the U.K. and Singapore and (2) the unified regulatory landscape afforded non-bank money services businesses across the EU member nations thanks to license passporting. What steps has the OCC taken to investigate its potential role in providing a more flexible and uniform approach to the regulation of non-bank financial services as well as open blockchain firms here in the U.S.? What steps has the OCC taken or does the OCC intend to take to coordinate with AML/CTF authorities (e.g. FinCEN, OFAC, and FATF) as well as State banking regulators to develop these flexible and uniform approaches?

The whole letter is worth reading. We’re very heartened by the interest that members of Congress are showing in making sure that the greatest impediments to cryptocurrency innovation are addressed and that we get it right. And we’re just as heartened that so far the OCC seems to be taking on the challenge seriously and earnestly.

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On Wednesday, 9/28, Coin Center will be in San Francisco to answer all your Bitcoin policy questions.

Are you interested in the policy factors affecting open blockchain networks? Or just want to understand what it is Coin Center actually does? Now is your opportunity to ask. We have have teamed up with the SF Bitcoin Devs Meetup group for an informal Q&A session in the bay area on Wednesday, Sep 28. Come by to meet executive director Jerry Brito and research director Peter Van Valkenburgh for a quick overview on our work followed by an open mic for questions. See you there! 

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The OCC just took a big step toward creating a national fintech charter.

Such a charter is something we’ve been advocating for some time. In a speech on Tuesday, Comptroller of the Currency Thomas J. Curry didn’t say let on what the OCC was thinking about limited-purpose charters (say, for digital currency exchanges), but he did say that the agency would finalize an innovation framework this fall. More importantly, that same day the OCC issued a proposed regulation “setting forth a framework for placing uninsured national banks into receivership.” From the release:

While the OCC has not appointed a receiver for an uninsured national bank in many years, clarifying the framework, process, and authority promotes the orderly resolution of such institutions if required and contributes to the broader stability of the federal banking system.

“The OCC has a long history of working successfully to restore strength and viability to institutions that face difficulty,” Comptroller of the Currency Thomas J. Curry said. “In the event those efforts fail and receivership becomes necessary, a clear and efficient process of resolving failing uninsured national banks is in everyone’s best interest.”

The proposed rule would apply to all uninsured national banks regulated by the OCC. While the National Bank Act and Federal Deposit Insurance Act specify the Federal Deposit Insurance Corporation as receiver for insured banks and savings associations, the law grants the Comptroller broad authority to choose a receiver for uninsured national banks.

What’s notable about this is that any limited-purpose charter that would be granted to digital currency firms would not be federally insured. In the notice, the OCC specifically asked for comment on “the utility of the receivership structure in the proposed rule for receivership of a special purpose bank.” It’s a bit wonky, but with this proposed rulemaking the OCC may be setting the stage for creating the kind fintech charter that would benefit digital currency firms. It’s a great sign, and you can bet Coin Center will be filing comments in this proceeding.

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Today Congress looks at a resolution calling for a pro-Bitcoin national policy.

The bipartisan H. Res. 835, which was introduced in July by Rep. Adam Kinzinger and co-sponsored by Rep. Tony Cardenas, will be before the House today. Coin Center supports this resolution. We believe that this type of formal articulation of a pro-innovation policy is essential to guaranteeing America’s long term competitiveness in the open blockchain industry. 

Last week we sent a letter of support to Reps. Kinzinger and Cardenas, applauding their forward-thinking leadership in encouraging the development of open blockchain networks, and strongly supporting the resolution. In the letter we outline the challenging regulatory landscape that companies seeking to innovate with these technologies face in the U.S. today:

In recent years, various nations, and the United Kingdom in particular, have taken significant steps to provide a more welcoming home for technologists and fintech firms. Many in the press have identified this growing gap and have warned of a coming exodus of innovative companies. This is a particularly dire state of affairs for American fintech competitiveness given two troublesome structural features of US financial regulation not present in the UK and other nations: our federalist patchwork of incongruous and overlapping state money transmission regulation, and the rules-based rather than principles-based approach pursued by most regulators in this space. These two structural issues are not a product of mistakes or miscalibration by any particular legislature, agency, or governmental body specifically; they are features of the larger historical landscape of financial regulation in the US. A landscape now overdue for pruning.

If passed, this resolution sets forth a sense of commitment from the House of Representatives to develop policies that will alleviate these burdens and position the United States as an attractive place for the next generation of digital currency businesses to thrive. 
 

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Coin Center has been named to this year's POLITICO 50 list of top DC influencers.

Our executive director Jerry Brito, along with advisory board members Marc Andreessen and Fred Wilson all made the list as the “money men of the future.” 

The POLITICO 50 list highlights those people and groups in the policy sphere who have the most influence in the most important areas. Coin Center’s inclusion in this year’s list signals a recognition of the growing attention to Bitcoin and other open blockchains in the halls of power, as well as Coin Center’s influence over policy. And as policymakers increasingly seek to learn about this technology, we will be there to ensure that it is fairly represented and that any policies being considered are sound. 

Of course, our work is only just getting started. Politico lays it out nicely: 

Coin Center has its work cut out. Consumer protection advocates worry the blockchain will let companies exploit consumers, while some in the tech industry simply don’t think Americans are going to trust blockchain finance. Still, the number of Bitcoin transactions has approximately tripled over the past two years, and even mainstream financial firms are dipping into some blockchain investments. If Andreessen, Brito, Wilson and their ilk can keep the government at bay, the money revolution might yet be at hand.

You can see the full list here. And if you want to support our fight for sane Bitcoin policy, consider donating toward our mission

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