There was a common thread among the testimonies at the Legislating Certainty for Cryptocurrencies Congressional roundtable last week. Before the bipartisan panel, regardless of their field—whether it be cryptocurrency exchanges, business advisory firms, law, or from an interested advocacy group—the message to the federal government: “Either you come up with some rules or we wither away.”
The powers that be heard the message. Roundtable industry participants and members of Congress alike left the hearing with a sense of what needs to be done to promote and foster blockchain and cryptocurrency. Yet as far as cryptocurrency-sector stakeholders are concerned, the takeaway may have veered from what they expected: they themselves may need to step in and provide the guidance to the government; not the other way around.
Generally speaking, this past week’s hearing, a Congressional call to the SEC, and three new draft bills notwithstanding, the US government has been giving the cryptocurrency sector mixed signals. Given what has seemed to be a perpetual gray area on the status of ICO regulations, crypto industry players are wary of forging new paths, lest the system consider any such forays a misstep, subject to penalties.
The CEO of a major cryptocurrency trading platform noted during the Congressional hearing that international-domiciled fundraises of late have been outpacing US-based ones thanks to a perceived lower threat of regulatory enforcement. With no concrete guidance from policymakers, the legal status quo poses a threat to US economic stability and innovation. A clear regulatory environment would pave the way for the US to become, for example, a safe harbor for security token activity, where investors can enter the market with a sense of reliance.
Yet the present regulatory murkiness poses threats beyond being a proving ground for the latest crypto coin. Players based abroad could wield assaults such as a 51 percent attack on US-owned blockchain systems, meaning foreign actors could seize control of networks.
The popular image of cryptocurrency is often aligned with libertarianism. (There is at least a kernel of truth to this label. Case in point: look no further than the Free State Bitcoin Shoppe in Portsmouth, New Hampshire.) In case you need a refresher on high school political science, libertarians tend to be wary of government intervention. That is to say; they wouldn’t be advocating for regulation at all—never mind knocking at Congress’s door asking for it. Granted, not all in the cryptocurrency arena are staunch proponents of a world without dollars. But even the most die-hard anti-interventionists would likely admit to their pro-regulatory counterparts that a safe and secure environment would allow their interests to flourish.
Granted, nine months of technological advances on the blockchain and cryptocurrency markets would be the rough equivalent of nine years of change on Wall Street. And in Washington, the legislative process tends to be a good five years behind whatever issue is being legislated. When it comes to developing a regulatory framework for cryptocurrency, the onus lies squarely on industry stakeholders to devise a plan.