New Policy Paper for Virtual Currency.
Labyrinthus LLC
Regulatory Policy for Virtual Currency in the United States.
By Shammari Khan, Esq and William J. Hook, Esq
Introduction: It is imperative for the United States (U.S) to move forward with a light handed and even tempered approach to Virtual Currencies (VC). In July, 2016, the U.S House of Representatives submitted H.R 835, to the 114TH CONGRESS 2D SESSION, entitled, “Expressing the sense of the House of Representatives that the United States should adopt a national policy for technology to promote consumers’ access to financial tools and online commerce to promote economic growth and consumer empowerment.” [i]
By voting for such an approach, the US would remain the center for innovation. The nations laws would be crafted to shelter unparalleled human and technological growth.
Analysis:
The Players: Various stakeholders, including technological service providers, venture capitalists, consumers, financial system incumbents and regulators are seeking policies that advance the causes and groundbreaking promises of VC technology represented by decentralized ledger technologies and currencies that move upon it. With a measured and innovation promoting approach, the United States is in a position to frame the global dialogue and rule making for the world’s first global currency.
A Need for Laws: Regulations are required to fertilize the seeds of innovation, as they provide certainty for investment and time, the essential ingredients for any entity to prosper. Startups feel safe to push ideas and attempt explosive progress when there is a general background of regulatory certainty. Thus, any new laws must be positioned in a way that fosters growth, ultimately benefiting citizens in protecting their values, capital, privacy and securing their future potential in a connected and rapidly changing world.
Onerous Burdens on VC Startups: Regulators should be mindful of the criticism and of the mistakes committed by the rash unveiling of the NY BitLicense, which is described as an agencies attempt to establish jurisdiction and set in place vaguely considered, innovation barring and entrepreneurship extinguishing burdens on VC startups. The NY BitLicense is widely denounced as a dangerous example of states overreaching into the federal sphere in its attempt to gather private and confidential information through tender startups for purported Anti Money Laundering purposes. (AML). Regulators must understand how the current regime of AML and other compliance burdens may dim the potential of VC. Also, in the future, there may be no way to monitor AML as VC is no longer exchanged to fiat currencies. Further, as a global currency, regulators should be cognizant of the foolishness of scrambling towards incoherent, piecemeal and patchwork regulations for a global technology. There must be a concerted, world wide effort to frame regulations without cutting out the immense potential unleashed by science and technology.
A Safe Zone: Governments should mandate a safe zone to foster development and innovation, as was allowed to occur in the initial developmental stages of the internet. As information flows, new ideas, connections and insights are born every minute to advance both American technological power and overall human well-being, similarly, with the paradigm of VC, the world may change, as long as the government does not over regulate its budding growth.
Competition: Regulators must educate themselves regarding the stakes at hand, the burgeoning investment into the startups, the job creation opportunities, the potential to unbank the 2 billion people globally, without access to the current entrenched financial system, the losses that may befall present players, the role of incumbent banks as financial intermediaries, their desire to promote ill-considered regulations, as well as potential anticompetitive research papers, media manipulations as well as examples of financial institutions closing the accounts of VC startups and players in an attempt to forestall their growth.
VC Not Used for Terrorism: Regulators should be aware of a recent British Treasury Report that noted that VC was not used for terrorist financial, instead, evidencing the role of traditional financial systems and cash as the main tool used by terrorists. [ii]
Undue Laws that Risk Consumers: Regulators should be aware of the risk of jeopardizing consumer protection and privacy by requiring excessive personal and confidential data collecting and monitoring by startups. As seen in various hacks and cyber security flaws, such unneeded information hoarding can lead to cybercrime and leakage of personal information.
Education of the Benefits of VC: Regulators must enlighten themselves with the role of VC in protecting from economic malaise, inflation and the massive bank bailouts with taxpayer money. They must recognize the citizenry’s growing disenchantment with banks. With knowledge of the truth, they may be captivated by the potential of a new system, with a disintermediated, frictionless form of money flowing like information, enhancing our world, free from central banks and traditional banks stranglehold of the creation, printing, storage, movement and policy of money. Recently, a new use of VC as arisen as a safe haven investment in light of economic turmoil such as the Brexit, the attempted coup in Turkey, racial strife and unpredictable presidential elections in the US.
Conclusion:
The regulatory policy for Virtual Currencies in the United States thus may usher in a
new system that generations hence will credit for orchestrating massive social progress.
[i] H.Res.835 114th Congress (2015-2016)
[ii]UK National Risk Assessment of Money Laundering and Terrorist Financing.
