Digital Currency Weekly Recap 12-13-2015
North Carolina Exempting Some Cryptocurrency Companies from Regulation
In an apparent recognition of the difficulties resulting from cryptocurrency regulation in other states, North Carolina has taken steps to provide regulatory exemptions for certain digital currency and blockchain enterprises. The exemptions are noted on the FAQ page of the state’s website, and indicate that the North Carolina Office of the Commissioner of Banks has decided to exempt miners, certain blockchain companies, and various wallet providers from regulation that would otherwise be enforced under the terms of the Money Transmitters Act.
These exemptions were provided after negotiations between the Chamber of Digital Commerce and the NCCOB, which has been supportive of separate legislation to regulate digital currency enterprises. The Chamber is a well-known cryptocurrency advocacy organization, and partnered with BuckleySandler LLP in its efforts to reach accommodation with North Carolina officials on this issue.
These changes are noteworthy in that prior exemptions could only be obtained for businesses that went through the money transmitter licensing process. The new standards are already being hailed by some as an example of how a sound regulatory approach can work to provide clarity to business without stifling innovation. As a result, some already see this regulatory approach as a possible template for other US jurisdictions.
Central Banks Consider Creating Digital Currency
Though no central bank has yet actively initiated a process for developing its own digital currency, there is an increasing level of discussion on the issue percolating throughout the banking industry. As most digital currency enthusiasts already know, the recent trend has been for bankers to praise the blockchain even as they routinely dismiss cryptocurrency’s potential for use in the banking industry. Despite their best efforts to ignore digital currency, however, Bitcoin, DNotes, and other crypto solutions continue to capture the imagination of an increasingly large segment of the world’s population. A recent article in the Wall Street Journal gives some insight into how central bankers around the world are approaching the issue.
Right now, the central banks are still weighing the advantages and disadvantages of adopting digital currency. While these bankers understand that there are potential cost savings and reduced transaction times involved, they remain skeptical about security and other aspects of the technology. And before enthusiasts get too comfortable with the idea, it is important to remember that many of these central banks are not even remotely considering adoption of an existing form of cryptocurrency. Instead, there is mostly talk about developing their own digital currencies – currencies that would have the full support of government, as well as strict regulation governing their use.
While some might be prepared to cheer what seems on the surface to be a move toward broader acceptance of the idea of digital currency, caution is warranted. After all, one of the most important benefits offered by cryptocurrency as it currently exists is that it remains free from the centralized control of governments and moneyed elites. Crypto enthusiasts might indeed be justified in viewing this type of development as little more than an attempt to co-opt the cryptocurrency revolution.
BitWalking: Stepping for Digital Currency!
A London tech startup is doing its part to encourage people to do a little more walking each day. Bitwalking Ltd. Plans to accomplish this goal through the release of its new Bitwalking app that will track the number of steps iOS and Android users take each day, and pay them in the company’s BW$ cryptocurrency (Bitwalking dollars). The current plan would enable users to earn the equivalent of one of these dollars for each 5 miles walked, with a maximum earning potential of BW$3 per day.
The founders have noted that this is an app that is most likely to appeal to citizens in developing countries, but that it can also help to motivate people in the developed world to walk a bit more each day as well. For those in the poorer regions of the world - where earnings are sometimes less than a dollar a day, the app and program could have a major impact on income.
Minnesota Issues Crypto Warning
In the latest installment of the hit series Government Warnings Gone Wild*, the Minnesota Department of Commerce did its best to bring a little levity to the issue of digital currency risks and dangers.
In all seriousness, though, this latest warning from an American state to its citizens seems like the type of recipe for confusion that ill-serves the community it purports to protect. Every serious digital currency advocate understands the need to educate consumers about cryptocurrency, and a serious warning that actually addresses the right concerns should be applauded. When these agencies include pointless tidbits of information just to pad their list of “risks,” they diminish the effectiveness of those warnings.
In the Minnesota warning, the state’s Commerce Department focused on several areas of reasonable concern, including the lack of regulation, absence of FDIC protection for crypto accounts, and the possible promotion of various risky investment schemes. At the same time, however, it also included the following “risks” that crypto actually shares with fiat currency, stocks, and other forms of property and investment vehicles:
- It is susceptible to cyberattacks. (As if bank accounts aren’t vulnerable to those attacks, right?)
- Digital currency prices can experience volatility. (Yes… like the stock markets - and … uh … fiat currency?)
- Many businesses that accept crypto are unregulated, and that increases fraud risk. (There must be one business somewhere in America that will be surprised to learn that it is completely unregulated. Perhaps that neighbor girl’s summertime lemonade stand? Does she accept Bitcoin?)
- There are various crypto exchanges that have been used for - gasp! - criminal activity. (Just think about that twenty dollar bill in your pocket and you’ll immediately understand why this one is scarcely worth addressing)
- The IRS considers digital currency to be “property” so you have to report it on your taxes. (Since this is ostensibly a warning to protect consumers against fraud and other risks, one could reasonably wonder why Minnesota would include this one in its list. But I digress…)
As with most warnings issued by governments, the devil - and more than a little strangeness - can usually be found in the details.
*Time-wasting alert: don’t bother looking for the program in your cable TV guide. It’s not an actual show - though I am surprised that some creative sitcom writer has yet to pick up on the sheer comedic entertainment value inherent in so many of these dire warnings.