Navigating recent cryptocurrency and blockchain regulations
After the cryptocurrency market’s meteoric growth in late 2017, it is clear that the asset class has come under increased scrutiny by lawmakers around the world. Aspects of taxation, value transferability and legality are all issues that need to be addressed. After all, in the absence of any oversight, fraudulent businesses managed to siphon large amounts of public money with little to no resistance from the government.
A few states in the U.S. have decided that it is high time to finally introduce or revamp laws related to cryptocurrencies. New York, for one, will soon be modifying the BitLicense program to reduce compliance obligations for cryptocurrency-related businesses. Wyoming also passed a bill earlier this month, as part of its attempts to make the state the “go-to destination” for blockchain-related investors and companies.
Tennessee is yet another early adopter of blockchain technology, evident by its lawmakers’ willingness to accept decentralized transactions. A new bill not only permits decentralized transfers of ownership but also legally recognizes blockchain-based smart contracts.
That said, several US states have still not passed any meaningful cryptocurrency-related laws yet. Nevertheless, on a federal level, the Securities and Exchange Commission (SEC) has been fighting hard against obvious scams in the industry. The department has also stated that securities laws will continue to apply to all digital currencies and exchanges that engage in their trading.
In fact, the industry’s regulation has become so convoluted that a professor at St. Mary’s University School of Law in Texas is introducing a new course aimed specifically at understanding “the legal and policy issues associated with cryptocurrencies and blockchain technologies.”
Bitcoin’s open blockchain has also recently been facing heavy criticism from a number of personalities both inside and outside of the technology industry. Speaking at a Blockstack event in early March, Edward Snowden, the infamous NSA whistleblower, claimed that bitcoin may be “structurally weak” because of its public ledger. According to Snowden, the lack of privacy will allow governments to track transactions between wallets with little to no effort.
In another case, a report authored by researchers from a German university revealed that there are as many as 1600 files embedded within the blockchain, most of which are links to text and image content elsewhere on the internet. The problem, however, is that at least three instances of child pornography have been found amongst the data, making even possession of the blockchain illegal in several jurisdictions by default.
Given that a blockchain is fundamentally designed to be immutable or permanent in nature, neither of those criticisms can be addressed without massive and infeasible overhauls to the way bitcoin and most other currencies work.
In the future, there is no telling whether law enforcement will be able to analyze the blockchain to find a digital money trail or whether governments will opt to ban certain cryptocurrencies altogether for their alleged links to objectionable content. This is also a predicament for the owners of full nodes that have maintained a copy of the blockchain for years, as they may be personally liable for being in possession of illegal content.
Elsewhere in the world, cryptocurrency regulation is also gaining prominence with the matter being acknowledged by almost every country. While a few countries such as Russia and India are reportedly already drafting their own laws, others are taking a slower approach, perhaps gauging the effect of existing regulation.
With the G20 conference recently dismissing any immediate threat of cryptocurrencies to the global economy though, most countries are not looking to hasten the process anytime soon.