At Coin Center, we do three things: educate policymakers and the media about cryptocurrency technology; engage in policy research to develop smart regulatory approaches to questions raised by the technology; and advocate for those solutions in order to keep cryptocurrency networks open, decentralized, and permissionless.
Through our engagement with policymakers at all levels of government, we have found that the top issues facing cryptocurrencies are questions about consumer protection, securities and commodities regulation, financial surveillance, and privacy. Here you'll find short briefs on the issues and links to our related resources where you can take a deeper dive.
There’s no centralized ledger keeper in a cryptocurrency, but just because there’s no 'Bank of Bitcoin' doesn’t mean that bitcoin holders are always safe from fraud or theft. Some companies may help their users buy or sell bitcoin, and they may also secure the cryptographic keys to their cryptocurrency balances. Possession of sufficient cryptographic keys to spend someone else’s cryptocurrency is functionally similar to keeping custody of someone else’s valuables, and if a business walks and quacks like a financial-custodial duck, it will be regulated as such.
The tricky part for policymakers is how to describe that duck in law and regulation: how to differentiate between the set of activities that are custodial (generating risks for consumers) and therefore regulated, and the set of non-custodial activities (activities essential to the technology but free from consumer risk) that should remain unregulated. If that distinction is not clear, the law could be over- or under- inclusive, and some consumers could be left unprotected and innovation could be chilled by burdensome but unnecessary requirements.
Cryptocurrencies like Bitcoin can be held as investments, and distributed computing networks like Ethereum can be the platforms that help people build digital investment vehicles. Securities and commodities law may implicate the creation and trading of these crypto-assets. As with consumer protection policy, the primary question in this space is not how do we regulate these new things, but instead which technical activities fit into which existing regulatory structures?
Below are links to plain-language explainers that describe the various technologies that might be subject to securities or commodities laws, and a model regulatory framework that advocates for specific application of those laws to a limited subset of activities:
The Bank Secrecy Act and the Patriot Act mandate that money services businesses record and report certain data about their users to law enforcement. Dealing with bitcoins rather than dollars doesn’t save a company or its customers from the need to comply with these surveillance regimes. Below are plain-language explainers describing the consequences of non-compliance, how the transparency of blockchains can aid law enforcement, and a primer on how sanctions law (OFAC) applies to users of these new technologies.
Financial privacy is an umbrella term for both data security and privacy. We can think of security as the ability to hide information from all comers and privacy as the ability to shape how we selectively reveal information and how it is used after revelation. Poor security and poor privacy have costs: identity theft, merchant compliance costs, chilling effects on speech, and cloaking costs from user self-help. Cryptocurrencies, such as Bitcoin, can be used to improve security and grant users more granular control over when and how they choose to identify themselves.
Below are links to plain language explainers dealing with the supposed anonymity of Bitcoin, and the privacy protections inherent in push-payment systems like cryptocurrencies. Additionally, we’ve published a report dealing with these questions in depth and highlighting future applications of these technologies in identity systems.
Perhaps the most exciting aspect of cryptocurrencies and distributed computing networks is that they are entirely open for experimentation. There’s no patent or copyright to license, no university or corporation from which to seek a job, no exclusive membership fee to pay. Anyone with a computer and an Internet connection can develop and share her own currency, her own financial contracts and strategies, her own vision of the future. These technologies are platforms, not products. They are software standards and shared networks whose purpose is to enable group computing. Like the PC and the Internet, they are not useful in isolation, but rather as a means for consumers to access applications and a means for developers to design and share new applications (just as word processing applications make the PC platform useful and websites make the Internet useful).
Below are a series of plain language explainers detailing some of the many innovative uses of these technologies, and reports on how policymakers can promote these new innovations.