The Chamber of Digital Commerce’s Smart Contracts Symposium this week included a panel that focused its attention on blockchain smart contracts and the difficulties regulators could face as they try to exercise their oversight power. The panel included two representatives from U.S. regulatory agencies: the Financial Industry Regulatory Authority (FINRA) and the Commodity Futures Trading Commission (CFTC). The representatives acknowledged that both agencies have been closely monitoring the rise of distributed ledger technology.
Many people paint a mental picture in their heads of crony capitalism as a room full of old rich guys, smoking cigars, watching the ticker, and counting piles of money freshly squeezed from peasant folk. In reality, crony capitalism is more about the government wielding their monopoly of unquestionable force to choose which private businesses are winners, and which ones are losers. Some might compare crony capitalism to fascist style control over the private sector. Mega corporations and unions have very deep pockets and can buy favors such as subsidies or favorable regulation that can give them an almost monopolistic advantage over small businesses. Governments should instead be championing small businesses and all the real economic benefits they bring to the country, because without a fair and level playing field, many of these small enterprises will fail.
Cryptocurrency can play a role in ending this cycle, helping free markets thrive once again.
The United States Department of Commerce’s Internet Policy Task Force (IPTF) will be hosting a public meeting on December 9, 2016, to explore and promote options for improving the online marketplace. That meeting is scheduled to be held in the Madison Auditorium at the United States Patent and Trademark Office from 8:30 AM to 4:00 PM, and will focus on digital rights for copyrighted works, digital registry interoperability, and new technologies like the blockchain. Interested parties can view a live webcast online.
The state government in Illinois this week announced that its Digital Currency Regulatory Guidance proposal had been released for public comment. The guidance provides an overview of the Illinois Department of Financial and Professional Regulation’s (IDFPR) policy on cryptocurrency, as well as its interpretation of how the state’s Transmitters of Money Act apply to various digital currency activities. The IDFPR release is part of a broader effort to incorporate blockchain technology into the state’s official government operations.
Russia’s federal tax service weighed in on the subject of cryptocurrency legality this week when it released a document confirming that digital currencies are indeed legal to own and use inside the Russian Federation. In its assessment, the tax services declared that cryptocurrencies are viewed as foreign currencies, and that transactions using those currencies are monetary transactions. Under Russia’s current monetary control system, that also means that digital currency transactions are not subject to financial reporting requirements.
On Thursday, BitLendingClub confirmed that it will be terminating its P2P Bitcoin lending platform in 2017. The announcement was made in a blog post confirming the details of an earlier email that had sparked a flurry of rumors throughout the day. BitLendingClub cited regulatory pressure as the reason for the planned shutdown, but assured its users that the platform will continue to provide “minimal functionality” for existing users so that current loans can be repaid and funds can be withdrawn. Restrictions on functionality are expected to begin as early as next week.
After nearly a year of development, the Australian Digital Currency & Commerce Association (ADCCA) has launched its Australian Digital Currency Industry Code of Conduct. The association’s CEO, Nicholas Giurietto, has indicated that the Code of Conduct was developed to provide best practice standards that can help to guide digital currency companies as they try to comply with Anti-Money Laundering and Counter-Terrorism Financing regulations. In addition, it will provide consumers with the confidence that comes from knowing that companies are using best industry practices.
A federal judge in the Northern District of California issued a ruling today that granted the Internal Revenue Service (IRS) the authority to demand digital currency user information from the Coinbase exchange. The IRS request for court approval of the so-called “John Doe” summons was presented to the court earlier in November by the Department of Justice to meet statutory guidelines that require court approval for any summons that fails to identify that targeted person or persons by name. The summons seeks information about Coinbase’s US customers who executed digital currency transactions between 2013 and 2015.
Campaign funding is always a hot topic in the usual election cycle, although this year it has been somewhat overshadowed by events in the election itself. However, that has not stopped the US Federal Election Commission deciding to take another look at Bitcoin and other digital currencies and the place they have in campaign contributions. Currently classed as assets, the campaign in receipt can hold the digital currency until they wish to sell. But then must place the funds from any sale within their campaign accounts within 10 days. This can create logistical issues, and if the FEC reassess and classify digital currency donations as cash payments, it could make things much easier to manage.
Despite a hotly contested presidential race, a new consensus among US congress members shows that they need to learn more about bitcoin and blockchain technology before any action is taken.
It is well documented that many lawmakers around the world are unsure of both bitcoin and the blockchain technology that supports it. Even the legitimacy earned in Japan was done so after the Mt. Gox scandal. The result of legal guidelines has been an upsurge in trade for bitcoin in the Japanese market.
One of the biggest fears of the digital currency industry is legislation. The concern of strict controls and heavy handed bureaucracy being imposed not just on the businesses involved in the digital currency industry itself, but of use of digital currencies themselves, has long been a contentious issue around the world. With the introduction of new legislation that refines the registration requirements of digital currency exchanges, as well as defining digital currencies as ‘money’ when applied to money laundering laws, the British Crown dependency Jersey has taken a path that offers protection for users without the restrictions of some alternatives.
Defining the legal status of digital currencies has become something of an issue, with contrary rulings coming one of after the other, no sooner has one judge ruled bitcoin is not money, another judge in New York, Judge Alison Nathan, rules that it is money and should be treated as such in the case she is presiding over. This illustrates a clear need for legal ruling, especially in the US, to enable the industry to move forward. A final decision is important to the broader digital currency industry and will be needed for new initiatives to succeed.
With many different businesses and initiatives all working on endless adaptations of blockchain technology to enhance and sometimes radically change existing systems and processes, there is a danger of ending up with a mess of incompatible, bespoke blockchain solutions rather than a cohesive, interoperable network of blockchain based infrastructure. The International Organization for Standardization has recently approved a proposal by Australian Standards, the national standards agency, for a framework for Blockchain standards. Australia will now take the lead as a committee of ISO members seek to define standards for various aspects of blockchain technology.
The idea of a digital currency has spread across every continent and almost every country since the launch of Bitcoin in 2009, but it has met resistance throughout that journey from law makers and regimes right across the world. One of the most hostile regimes towards digital currencies has been that of Russia, who were even going as far as criminalizing the use of a digital currency, with a penalty of a fine of up to $40,000 or even prison sentences. However, last week that proposal was scrapped, and with a slightly less aggressive stance towards cryptocurrency in the country, just days later Moscow saw the opening of its first Bitcoin exchange.
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.
The latest cryptocurrency-related news out of Australia really shouldn’t come as a shock at this point, since it is based in part on one of the most enduring arguments relied on by governments around the world as they attempt to come to terms with digital currencies. That argument has been made, called into question, refuted, and made again so many times now that most of us know it by heart: Terrorists need funding. Terrorists might use cryptocurrency to fund their operations. The only way to stop that is for government to regulate and monitor cryptocurrency transactions. You know the rest, of course. War is peace. Freedom is slavery. Ignorance is strength. Did I miss anything? Terror is, after all, the best excuse any government can use to seize more control over our lives.
With the recent changes to their licensee code of practice, the UK Gambling Commission, who oversee the gambling industry within the UK, has noted that it now considers digital currencies a cash equivalent payment system for gambling purposes. This move could be significant as it opens up a huge opportunity for the cryptocurrency industry, with UK gambling with around £4 Billion a year. Digital currencies themselves are ideal for such applications, and could begin to make inroads with a new user base when the advantages over existing fiat payment systems become clearer.
Zcash Launch Delayed for Code Audit
Scottish Think Tank Identifies Nine Potential Currency Options for Independent Scotland
Classic Ether Climbs in Value
FSB Still Evaluating Risks for Digital Currency Adoption
One of the notable things that has happened regarding both digital currencies and blockchain over the last two years is an increase in interest in both by major financial institutions, including several central banks. This interest has resulted in several working reports and ideas that would mean a significant change in within the industry in terms of public awareness and viability, and a new report from the Central Bank of England has furthered this. With the detailed look at central bank backed digital currencies, they show where the benefits could be.
How the digital currency industry continues its expansion is one of the most difficult challenges facing cryptocurrency today. While it is clear that vendors are going to have to lead the way in some aspects of adoption, the industry also needs to have those championing the technology in areas of influence too. This is why a new resolution put forward to the U.S. Senate that calls for a unified government program to promote the adoption of new technology to enable consumers to take advantage of all the benefits they bring is so important. Focusing on the benefits of digital currencies and blockchain, it offers a look at where the industry could grow.