Digital currencies have been causing law makers problems since they first appeared, oversight and control of a distributed system has been a challenge non have yet to conquer. However, some oversight of the industry will likely always be necessary, it is finding the balance between preventing fraudulent behavior and ensuring that cryptocurrencies can be used effectively. The latest attempt to strike that balance is in California, where a new Bill has been put forward to overhaul legislation pertaining to businesses involved in the digital currency industry.
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Almost since the first example appeared, digital currencies have presented a problem for legislators and regulators as they attempt to understand and evaluate the new technology. Of course, much of that is about control, and this is where the real problems have been seen, controlling a distributed ledger system proving to be beyond basic legislation in most cases.
However, we are seeing moves to regulate the digital currency industry across the world, with lawmakers trying new approaches to garner some level of control and oversight over the use of digital currencies, and the legislative system in California is the latest to put forward their ideas.
Assembly Bill 1326 has been reintroduced to the legislature this week after some amendments, and aims to overhaul regulation regarding the use of digital currency within the state. Central to the new approach is the creation of a new Digital Currency Business Enrollment Program, slated to last five years and aimed at assisting the state in better understanding the technology itself and how it is used.
Any business that exchange, issue, store or transmit digital currencies would qualify as a digital currency business, with payment for participation in the program being a non-refundable $5000 fee, with a $2,500 per annum additional charge on top. Without enrolling in the program, it would be prohibited to operate a digital currency business on penalty of a maximum $25,000 fine, so in effect, the program membership is a license in all but name.
There are numerous problems with the wording of this new document, the vague descriptors of who it actually may apply to are the main one, and likely to stagnate cryptocurrency investment in the state should it move forward, but it could be worse. Is a small business who accepts bitcoin payments a ‘Bitcoin Business’? It would appear that it could be, so with such comparatively large fees to operate within the law, sales per year from the currency may not reach the initial fee, let alone profit, the likely outcome is they simply don’t bother accepting Bitcoin any more. That is, of course, significant and bad for the wider industry at a time where it needs to be expanding a user base not shrinking.
The industry really needs to put pressure on the legislature here, not because oversight and legislation is inherently bad, but because this legislation is bad. It is too vaguely worded to be effective and is not even clear what exactly those signing up to the program stand to gain.