If you’re involved in the U.S. cryptocurrency scene, you realize our laws make no sense. We regulate it like a security, tax it like property, use it like currency, and trade it like a commodity. Applicable laws date from the 1930s and 1940s.
Did you know Congress is working to fix that?
Members of the Congressional Blockchain Caucus have introduced a few bills so far this year. What do those bills mean for you?
I used to work on Capitol Hill and later worked in government relations for a Fortune 500 company. I’m no legislative expert but here’s my take on the two bills I consider most important.
Virtual Currency Market and Regulatory Competitiveness Act
The Virtual Currency Market and Regulatory Competitiveness Act announces Congress’s support for cryptocurrency and requires the two main U.S. cryptocurrency regulators, Securities and Exchange Commission and Commodity Futures Trade Commission, to tell Congress how to promote American competitiveness in this field.
This bill changes no laws, it simply asks for a report from CFTC that incorporates SEC’s input.
Why did members introduce a bill that changes no laws? Three reasons:
- Put all members of Congress on record as supporting or opposing cryptocurrency.
- Convey to regulators that Congress wants to support cryptocurrency development.
- Make blockchain companies and cryptocurrency enthusiasts feel good.
Those are all worthy goals.
If it seems odd that Congress cares about your feelings, it’s not. I once worked on a bill honoring Count Basie. It was a favor to the Kansas City Jazz Museum and it passed unanimously. It also changed no laws but it won kudos from the people who ran the museum and may have picked up some campaign contributions, too. Votes, money, and good publicity.
Is that what’s driving members of the blockchain caucus? I don’t know. There’s still a lot of concern about cryptocurrency—criminals and terrorists use it, it’s hard for governments to track, it’s impossible for governments to control, the tech seems to solve problems people in the U.S. don’t have, many people don’t understand how it works, and the name sounds sketchy. For every member who gets votes, money, and good publicity from supporting the bill, there’s a member who gets votes, money, and good publicity from opposing the bill.
If the bill passes, it will send a strong message to the rest of the world that the U.S. government supports cryptocurrency. It’ll be interesting to see what happens.
SEC and CTFC will likely resent having to produce the report. They have enough on their plate and Congress has plenty of smart, savvy researchers who are more than capable of doing this work. It doesn’t need to burden CFTC with hours of extra work for a report that almost nobody will read (except special interests that will selectively quote parts of the report that fit whatever story they want to tell while intentionally neglecting the parts that don’t fit while members of Congress cherry-pick whatever details they need to make the point they want to make).
Such is the life of a U.S. government agency. When Congress tells it to do something, it complies. However, knowing Congress supports cryptocurrency may encourage SEC and CFTC leaders to proactively change rules to make it easier for U.S. blockchain companies to compete with their foreign counterparts, rather than wait for Congress to legislate further.
Blockchain Regulatory Certainty Act
This bill separates blockchain developers from “money transmitters” or “money services businesses.” As a result, many blockchain businesses would not have to suffer unnecessary reporting, staffing, and administrative burdens related to the Bank Secrecy and Money Laundering Suppression acts. While those acts meet compelling needs in the traditional finance industry, they don’t make sense for anybody working on a blockchain project because unlike normal fintech companies, blockchain companies don’t actually handle anybody’s money. That’s the whole point of having a blockchain. The extra requirements add complexity and expense for blockchain projects without producing any benefit for the public. Removing these requirements will help blockchain projects get off the ground.
This bill would also create legal definitions for important terms like “blockchain network,” “digital currency,” and other related words. For example, under the definitions, blockchain companies lose their exemption once their users give them any information “upon demand” as a condition for using their cryptocurrency or blockchain. Good to know if you’re creating a blockchain service. Boundaries are important, rules even moreso. Some might say lack of legal clarity is keeping cryptocurrency entrepreneurs from doing business in the U.S.—if that’s true, this bill will provide a little more clarity.
If this bill passes, it might set the stage for an entirely new regulatory and legislative framework for cryptocurrency, the same way a series of smaller bills led to the landmark High Performance Computing Act of 1991, which opened the doors to U.S. investment in internet technology.
What Does This all Mean?
Right now this means little. These bills have a long way to go before they become law.
First, U.S. House of Representatives will form committees to review the bills and offer amendments. Next, if the bills get approved by their committees, they might get a vote on the House floor. If they get a vote, they might pass. If they pass, they will go to the Senate.
At that point, the Senate will either vote on the House bill or create its own version. If the bills pass the Senate, they will go to a conference committee where Congressmembers and their staffs will make sure the House and Senate versions match. If the bills remain unchanged after conference committee, they will go to President Trump for signature. At that point, nobody knows what will happen.
Lots of “ifs.”
Before you get the urge to write or call your local representative, realize that members of Congress get calls and letters all the time, 99 percent will never read them, and maybe if you’re lucky one of their interns will mention your concerns in a memo. Unless you have a personal relationship with the member, contribute to their campaign, or serve in local or state government, you need to find another way to influence them. Though, if you live in the district they represent, they may humor you with a brief meeting that might get postponed, interrupted by a vote or hearing, or passed off to a member of their staff.
My advice? Connect with advocacy groups. Here are six I know of:
- Blockchain Association
- Chamber of Digital Commerce
- Coin Center
- International Digital Asset and Cryptocurrency Association
- Government Blockchain Association
- American Blockchain and Cryptocurrency Association
If they’re any good, they will bring you into initiatives and activities where you stand a much better chance of having a voice, a role, and an impact on the outcome of legislation, not only in the U.S. but also around the world. If you connect with any of these groups, let me know how it goes—email me at firstname.lastname@example.org.
Individual firms also have their own lobbyists, too. Big money’s coming to Washington, D.C., and it will change everything.
U.S. legislative process is complicated and it can be hard to keep track of bills. Sometimes they change names, sometimes they get tucked into other bills, sometimes they get reintroduced as new bills.
On top of that, members are always writing other bills that cover related topics. In fact, by the time you read this, somebody may have introduced a bill of greater significance than either of the ones mentioned above. I hear Rep. Davidson plans to reintroduce the Token Taxonomy Act (he didn’t do it by the time I posted this blog). I would guess a few more bills are waiting in the wings.
I would advise against DIY legislative research, but if you’re really weedy, you’ll find bits and pieces of crypto-related legislation in unexpected places.
For example, the RESCUE Act for Black and Community Banks includes a line directing the U.S. Government Accountability Office (GAO) to study blockchain technology and whether such technology could be used to increase investment by lower-income individuals in start-ups and other crowd-funded companies.
The FIND Trafficking Act directs the GAO to study how virtual currencies and online marketplaces are used to buy, sell, or facilitate the trafficking of sex slaves and illegal drugs. The Assessment of Terrorists’ Use of Virtual Currencies Act requires the U.S. Department of Homeland Security to report cryptocurrency’s use by terrorists.
I’m sure other bills have crypto-related provisions. Trust your lobbyists and don’t get too excited, everything takes a long time and success is measured in inches.
Also consider we have a long road ahead of us. Congress has been in session for two months. During that time, the pro-crypto RESCUE act hasn’t even had a committee hearing while anti-crypto FIND and Terrorist acts have already passed the U.S. House of Representatives. That should tell you all you need to know about Congress’s general feelings about cryptocurrency.
This is not a reason to worry. Feelings can change—and change can come from strange places. Did you know the Senate will consider creating a “Senior Scams Prevention Advisory Council” to advise CFTC on scams that target senior citizens? Do you know why that has anything to do with cryptocurrency?
Because the bill tells CFTC to include “institutions who engage in digital currency” on the panel. If that bill passes, cryptocurrency groups will have a chance to get representation on a government advisory panel. For the first time. That’s a big deal and it establishes cryptocurrency as a valid technology that U.S. Congress and government should harness not squash.
If any of these bills make it into law, it will mark one more step forward in the march toward legitimizing cryptocurrency in the U.S.—and in doing so, create an opportunity to insert some sense into the U.S.’s nonsensical cryptocurrency regulations.
Mark Helfman is a cryptocurrency commentator and author of Consensusland, a novel about a country that runs on cryptocurrency.