The 2020 meeting of the 116th Congress is a historical moment for digital assets and blockchain legislation. At this Congress, for better or for worse, the United States Government recognized the global effect that digital assets. They are definitely aware of the effects cryptocurrencies have had on the economy over the past decade.
Based on the 32 Bills put forward, they will decide on some of the changes regarding the treatment of the tech industry and digital money.
The United States government has been on the slow side when it comes to responding to cryptocurrency regulation. Some nations such as Estonia, have been making room for digital assets and blockchain much more quickly over the past few years. The US government has remained hesitant to jump in.
32 Congressional Bills have been proposed by a number of congressional leaders. This may seem like a step in the wrong direction for libertarian users. But the significance of this meeting is big. The Bills demonstrate that the reality and the importance that digital currency has is acknowledged. And it signifies that blockchain and cryptocurrency will continue to have an important role in the future.
Essentially, each bill aims at different concerns and realities of blockchain technology and cryptocurrency.
On top of the list of the US government’s concerns are:
- 12 bills that refer to issues related to terrorism, money laundering, and human and sex trafficking.
- There are 13 other bills aimed at the regulation of cryptocurrency and blockchain technology.
- 5 bills are related to how the US government is able to harness the technology.
- And 2 bills intend to define the nature of a digital asset.
The three major takeaways from the proposed blockchain legislation is that:
- The US government is very concerned about the potential threat of bad actors using cryptocurrency for their nefarious gains.
- Government officials acknowledge that blockchain and digital assets have a very real economic and worldly impact. They recognize that the technology offers a lot of potential for a government application.
- This new technology and financial applications need to be incorporated under the umbrella of the US government and financial institutions.
Bills, Bills, Bills
The following is a detailed description of the most notable blockchain legislation proposals, what they do, and the Senator or Congressperson who put them forward. The following information is based on the work of Jason Brett.
Bill: Defending American Security From Kremlin Aggression Act, introduced by Senator Lindsey Graham (R-SC)
- This blockchain legislation regards cryptocurrency as a legitimate financial asset and aims to protect digital assets from cyber theft. The bill proposes that cryptocurrency receive the same status of international protection that other traditional assets receive.
Bill: The EARN IT Act, from Senator Lindsey Graham
- The bill comes on the heels of seeing companies such as Amazon and Google grow to their current size. This is a result of Section 230 of the Communications Decency Act. The major concern is the potential for end-to-end encryption and legal communication that have thus far protected the privacy of users on internet platforms and messaging apps. The Senator’s concern is that Big Tech has become too big. As such, it needs to be considered from the perspective of public policy and safety. The bill raises other concerns that it might act as a deterrent in regards to blockchain development. This is because the bill would place limiting regulations on its future development.
Bill: Managed Securities Are Stablecoins Act from Congresswoman Sylvia Garcia (D-TX) and Congressman Lance Gooden (R-TX)
- The rise of cryptocurrencies was the incentive for this bill, in particular Facebook’s Libra Project. The bill wants to treat certain cryptocurrencies and tokens as securities. Given the design and global reach of Libra’s proposal, many are concerned with the prospect of a giant social media company introducing a global currency. Facebook argued that Libra was not a security, despite the financial backers that made up the currencies backing Libra. To avoid being treated as a currency Libra has shifted from the original plan for a basket of currencies.
Bill: Keeping Big Tech Out Of Finance Act, from by Representative Jesús “Chuy” García (D-IL)
- This bill raises concerns for big-tech and its role in financial institutions. The bill goes beyond treating currencies like Libra as securities and is targeted at all social media platforms. The bottom line is that the bill proposes that no social media platform should be able to engage in financial activities.
Bill: Protecting Consumers From Market Manipulation Act also from Congresswoman Sylvia Garcia
- Yet another bill that highlights the desire to place digital currencies under the financial regulation umbrella. The bill requires that the Financial Stability Oversight Council (FSOC) consider the treatment of digital currencies as a ‘designated financial market utility’. Additionally, under this designation, any non-financial company such as Facebook, that profits from digital currencies must become a Bank Holding Company. That meant that it must be supervised by the Federal Reserve. This would open up social media companies with digital currencies to the same scrutiny and regulation as any other financial system.
Bill: The Crypto-Currency Act of 2020 from by Representative Paul Gosar (R-AZ)
- Both this bill and the Token Taxonomy Act, are a proposed way to divide up regulations between different agencies. This bill in particular aims to regulate crypto by the specifics of its economic function.
Bill: Token Taxonomy Act, from by Representative Warren Davidson (R-OH),
- This blockchain legilsation focuses on a technological approach, rather than an economic one, to build appropriate regulation.
- These bills are different from García (D-IL) Protecting Consumers From Market Manipulation Act, which would make digital assets the sole responsibility of the Federal Reserve to govern.
Bill: The Blockchain Promotion Act, from by Senator Todd Young (R-IN) and Senator Ed Markey (D-MA)
- This bill has already made it out of the Committee and awaits a vote on the Senate floor. It looks to support blockchain growth in conjunction with examining the impact that blockchain will have on other aspects of economics, outside of cryptocurrency.
- The bill calls for the Department of Commerce to establish a “Blockchain Working Group.” It begins with a definition of what exactly constitutes blockchain technology and its distribution network.
- The study group would also examine potential applications for blockchain, both financial and non-financial. One of the intentions behind this bill is to see blockchain technology used worldwide for hospital data. In other words, to track disease research. It also has the potential to be used by the Department of Defense to the Armed Services Committees. The required briefing was an amendment from last year’s NDAA. That was introduced by Congressman Darren Soto (D-FL) which became law on December 15, 2019.
Bill: Banking For All Act, from Senator Sherrod Brown (D-OH) and Automatic BOOST To Communities Act, from Representative Rashida Tlaib (D-MI) and Representative Pramila Jayapal (D-WA).
- These bills both add a new term, ‘digital dollar’, as well as the tracking of ‘central bank digital currency’ legislation. The bills are focused on expediting the delivery of economic stimulus benefits needed as a result of COVID-19.
Climate Behind Proposed Blockchain Legislation
The Pollyanna view of all of this bureaucracy is that the US Government has finally recognized the value of blockchain technology and digital assets. And while that might mean new limitations for some users, it also might mean many positive things. Things such as new wealth for pension plans, increased financial access to the unbanked in the US and around the world, necessary action against dark web crimes, and even the return of lost and stolen cryptocurrency.
It will also very likely lead to new taxation policies. So be sure that you stay on top of those developments.
The biggest shift that these 32 Bills signifies is that there will be an inevitable shift in the ethos of cryptocurrency holders. Taking Bitcoin to Congress is not what creator Satoshi Nakamoto had in mind when he created a decentralized, blockchain-based digital currency.
But, Bitcoin also aimed to cut out the middleman. Now there are endless projects and digital exchanges profiting from the success of cryptocurrency. Things rarely work out the way that they were first intended to. We will have to say in the game, and see exactly what new laws come from the 116th Congress.
Concerns Sparking Controversy
Policy makers have essentially overlooked Bitcoin and cryptocurrency for the past 10 years. But once Facebook’s Libra jumped in, everything changed. Congress at that time began to take seriously the power of a decentralized digital currency.
The main concern with blockchain legislation is complex. Do we really want a free media company in control of a global digital currency? (And what are the alternatives?) Libra intends to become a decentralized digital currency, but it will begin as a centralized currency. There are many important questions to ask of those in charge of the project.
The concerns from Congress are not new. Amazon and Google have had unfettered powers in the marketplace, and many are starting to question if this shouldn’t be considered a kind of monopoly.
John D. Rockefeller saw the wrong side of his oil monopoly, and rather quickly saw his assets sliced and diced by his own peers. The story ended well for Rockefeller, as it often does for the unbelievably rich. He died a rich philanthropist, and his family several generations later continues to profit from his success. But Rockefeller’s oil industry monopoly is a reminder of the real concerns that arise when a central power is in control of the market.
With the burgeoning popularity of cryptocurrency and increased regulations, one wonders how peer-to-peer exchanges will look in the next 3-5 years.
Blockchain and cryptocurrency create their own unique concerns, for unfettered decentralized power. So, it was only a matter of time before Congress got down and dirty, and worked out the matter of brass tax.
One of the major concerns for digital assets and in terms of blockchain legislation is trafficking. Although most nefarious activity still takes place using fiat currency, the FBI is currently in charge of the largest Bitcoin wallet, from funds that have been confiscated.
Investigative bureaus are coordinating efforts to deal with the issue. Including the recent collaboration to take down a large-scale crypto money laundering service based in Spain. Using Bitcoin and other cryptocurrencies for illegal activity is high on the list of concerns for both the US Federal Bureau of Investigation (FBI), the European Union Agency for Law Enforcement Cooperation (EUROPOL).
In June of 2018, the Bureau announced that it had 130 active cryptocurrency investigations. And US President Donald Trump has also recently signed an executive order to create a task force focused on developing cryptocurrency fraud investigation.
The 116th Congress and its 32 Bills focused on blockchain legislation as cryptocurrency signals are changing tides in the world of digital currency. The US Government has completely ignored cryptocurrency up until now, as it was viewed as something pretty much only criminals use; as evidenced by the fact the FBI has been leading the way via cryptocurrency so far.
However, this Congress is the dawn of a new day, that looks beyond the growing pains of cryptocurrency. It shifts the focus onto the real value and effect that blockchain and cryptocurrencies have, and how the technology and ethos behind them might improve the current systems in place.