Hot Takes

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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The Federal Trade Commission held a workshop on ransomware yesterday.

The three-panel event focused on cybersecurity issues, including how to protect oneself from infection and what to do if your data is encrypted. Coin Center was there and we were happy to see that when Bitcoin came up it was generally regarded as a legitimate technology that has sadly been coopted by criminals, much like Tor. As we have explained before, Bitcoin is certainly not the cause of ransomware, it’s cybersecurity that needs to be improved. Video of the event is available online.

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European regulators are under the impression that “open” blockchains may be inappropriate for financial services.

That was one of the conclusions of the European Securities and Markets Authority in a discussion paper on its Consultation on the Distributed Ledger Technology Applied to Securities Markets on which it sought comment. We filed a detailed comment letter with ESMA explaining that “the presumption that only permissioned-based systems are ‘likely’ to be used in financial markets is premature.” We explain that there is nothing inherent in open blockchain networks that makes them inappropriate for use in financial markets or inferior to permissioned systems on the margins of efficiency, security, or privacy. The whole thing is worth reading.

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Law enforcement is learning about the benefits of open networks.

Last week I spoke at the National Cyber Investigative Joint Task Force's Digital Currency Symposium in Orlando. The NCIJTF is a multi-agency task force whose members include the FBI, NSA, CIA, Secret Service, and other law enforcement and technology-focused groups in the US government. The Symposium included talks from blockchain forensic firms Eliptic and Chainalysis, panels with compliance directors at leading exchanges as well as banks, and a talk from co-founding member of the Ethereum Foundation, Taylor Gerring.  My presentation offered a review of open consensus mechanisms, specifically, and an explanation of why open networks are critical for certain applications: electronic cash, identity, and the Internet of Things. The response was overwhelmingly positive; it's good to know that law enforcement understands the tremendous benefits these technologies promise given they typically spend their days mostly focused on the risks. 

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Why do we get up each morning to work at a cryptocurrency nonprofit?

It’s for the same reasons that Zooko Wilcox works on Zcash, which he articulated in a great interview with Bitcoin Magazine today. It’s worth quoting in full:

The Internet is an unfinished revolution. I remember what the world was like before the Internet. You didn’t talk to people from other countries! National boundaries were communication boundaries. And you couldn’t talk to or share information with almost all of the people in your own country, either. You were dependent on a small number of personal acquaintances and information gatekeepers.

The Internet changed all that, and it changed the world, and it changed all of our lives for the better. The myriad ways that the Internet has remade and improved our lives is impossible to even measure.

But it is an unfinished revolution, because although it allows you to share information with potentially billions of people, it doesn’t provide a way for you to organize with them. You can’t cooperate with them to allocate resources. You can’t pool your resources with them, you can’t help them pay their bills or make sure they get food, such as by hiring them, buying something from them, or donating to them. And they can’t do that for you. You can’t enter into an enforceable agreement (a contract) with a group of people, unless your group fits into a product from the small number of gatekeepers that control such possibilities.

What is our role in history? I want to be able to look back and say that we played even a small part in reigniting the unfinished revolution. I want to be able to say we were there, pushing for that great transformation that began to wash away the suffocating mass of inefficiency, corruption, and isolation — the transformation that unlocked the potential of billions of humans who had been trapped behind walls — cooperation boundaries! If we can help that happen, and help it happen sooner, before it is too late for so many people, then it will have been worth it, whatever else happens.

If Coin Center can remove just a few regulatory rocks from the stream of innovation, allowing that stream to become a raging river of opportunity and freedom sooner rather than later, then we’ve spent our time well.

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