Blockchain Legal Digest

The Source for Blockchain Legal News & Opinion

Regulation

Bi-partisan bill reintroduced in Congress to clarify blockchain regulatory regime

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U.S. lawmakers are seeking to encourage blockchain innovation to help American businesses remain competition with Chinese companies. Photo by Hobvias Sudoneighm | CC By 2.0

A bipartisan group of U.S. lawmakers re-introduced legislation aimed at clarifying how securities laws are applied to crypto tokens.

The Token Taxonomy Act of 2019, H.R. 2144, was introduced to provide regulatory certainty for businesses, entrepreneurs, and regulators in the U.S.’s blockchain economy. The proposed law would clarify the numerous conflicting state initiatives and regulatory rulings, and patchwork of judicial decisions, that have clouded certainty for entrepreneurs and businesses that use blockchain technology.

“The Token Taxonomy Act is the key to unlocking blockchain technology in America. Without it, the U.S. is surrendering its innovative origins and ownership of the digital economy to Europe and Asia. Passing this legislation, Congress would send a powerful message to innovators and investors around the world that the U.S. is the best destination for blockchain technology. In the early days of the internet, Congress passed legislation that provided certainty and resisted the temptation to over-regulate the market. Our intent is to achieve a similar win for America’s economy and for American leadership in this innovative space.

Ohio Republican Congressman Warren Davis

The legislation was written by Davidson (OH-08) and co-sponsored by Representatives Darren Soto (D-FL-09), Josh Gottheimer (D-NJ-05), Ted Budd (R-NC-13), Tulsi Gabbard (D-HI-02), and Scott Perry (R-PA-10).

NY State Addresses Crypto Regulatory “Failure” with Task Force

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New York is one of the world’s financial capitals, but it’s struggling in how to regulate cryptocurrency. Times Square Photo by Yoann JEZEQUEL | CC BY 2.0

New York’s cryptocurrency regulation has been “an absolute failure,” but state lawmakers have responded with a task force that will take nearly two years to even issue a report.

The Digital Currency Study Bill, A8783B/S901 was signed in to law by NY Gov. Andrew Cuomo on Dec. 21.  The task force will include various stakeholders including technologists, consumers, investors, business representatives and academics.  A report from the task force is due Dec. 15, 2020, and will cover digital/cryptocurrency and blockchain technology.

“New York leads the country in finance. We will also lead in proper fintech regulation,” said  Clyde Vanel, NYS Assemblyman, Chair of Subcommittee on Internet and New Technologies in a press release. “The task force of experts will help us strike the balance between having a robust blockchain industry and cryptocurrency economic environment while at the same time protecting New York investors and consumers.”

Despite being a world financial leader, New York regulates cryptocurrency perhaps more heavily than any other U.S. state.  In 2015, New York began requiring businesses that engage in cryptocurrency activities to obtain a “BitLicense.”

The BitLicense regime has come under considerable criticism.  ““Let’s call the BitLicense what it is—an absolute failure” is how Erik Voorhees, the CEO of cryptocurrency exchange ShapeShift, described the New York regulatory regime.  Voohees’ business, along with others, pulled out of New York in response to the regulation.    

Only about a dozen businesses have obtained a BitLicense, and some have blamed the regulation for stifling blockchain-related innovation.  “Applying for the BitLicense is an expensive and difficult process, as many have noted,” George Frost, Chief Legal Officer, of Bitstamp was quoted as saying by BTC Manager.  “Some other firms have chosen to abandon the New York market entirely, rather than comply. We do not fault them for doing so.”  

The New York situation highlights a challenge facing lawmakers and regulators:  New technologies can be used to harm others; over-regulation can crush innovation; and the speed with which Fourth Industrial Revolution technologies, including blockchain, are developing makes traditional regulatory processes (such as a task force that has nearly two years to release a report) inadequate.

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