March 14, 2018
The creation of blockchain is considered as the most fundamental and revolutionizing invention since the Internet and Electricity, also the most promising new technology for the future. With the rapid growth of blockchain, especially after the launch and success of Bitcoin, it has gained a massive attention in the past few years. However, blockchain is still far from being ready for mass adoption due to the different perspectives of regulators. Because of some negative impacts and criminal aspects of Bitcoin, there are some different judgement as well as different blockchain regulation based on the viewpoint of Government about Bitcoin. And USA, one of the largest nation in the world, has their own rules for navigating blockchain, bitcoin and other cryptocurrencies.
As in any new technology, it takes time for the regulation to adapt and complete, especially in the fintech where regulators are charged with coordinating and guaranteeing industry stability. And blockchain, a nascent innovation that is providing evolving applications in finance, is not an exception (1). After the launch and success of Bitcoin, this technology has had exponential growth in the past couple of years, leading to many platforms, applications, startups, projects and research. Following the development of blockchain, the rise and success of cryptocurrencies have gained maximum attention and there are more than 1,100 cryptocurrencies currently trading in the financial market. Due to the massive attention as well as the potential growth of blockchain and cryptocurrencies, the government is working to complete the blockchain regulation in US.
Blockchain technology is considered as a trustless technology which means a transaction can be verified, monitored, and enforced without the presence of a trusted third party or central institution due to its decentralization. Blockchain is also borderless and frictionless and that leads to a cheaper, faster infrastructure for exchanging units of value (2). Although there are many opinions about blockchain and cryptocurrencies, USA regulators must develop a better understanding of blockchain technology’s impact potential as they continue to engage in its regulation.
Due to blockchain’s advantages in fintech such as increased transaction security and reduced risk of manipulation, this new technology is one of the biggest regulatory challenges for regulators. Some of the regulators concern about blockchain’s impact on financial stability and market integrity so they need to quickly assess how to best regulate this technology in light of the feared instability (3). Until the regulators figure out a coherent response to blockchain technology, each regulatory agency may move independently and inconsistently to apply their own interpretation. And blockchain as well as cryptocurrencies such as Bitcoin, Ethereum, etc. should be regulated by its applications.
For examples, The U.S. Internal Revenue Service (IRS) demands that cryptocurrencies traders must disclose their identity and cryptocurrency transactions should be taxed like property transactions. Besides, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a “ruling that an online precious metals brokerage using blockchain technology was subject to the regulator’s money transmission regulations” (1).
On the other hand, The U.S. Commodity Futures Trading Commission considers cryptocurrencies to be commodities and under their jurisdiction. They noted that “the lack of industry standards to date is a result of the fact that blockchain technology is still emerging and their implementation will be incremental” (1).
Also, U.S. Securities Exchange Commission (SEC), who has been actively exploring potential applications of blockchains for financial services transactions in the public securities market, convinced that cryptocurrencies are under their jurisdiction. Moreover, the SEC has embraced the early adoption of blockchains as it relates to securities using its t0.com blockchain platform (1).
In US, the government has not its constitutional preemptive power to regulate blockchain to the exclusion of states, so the states remain free to introduce their own rules and regulations. For example, at least eight U.S. States have worked on bills accepting or promoting the use of Bitcoin and blockchain technology in 2017 (4). Following Joshi, “the most important developments for blockchain’s regulation and implementation in an evidentiary context occurred in Arizona (recognition of smart contracts), Vermont (blockchain as evidence), Chicago (real estate records), and, most importantly, Delaware (pending initiative authorizing registration of shares of Delaware companies in blockchain form) (4)”.
Infinity Blockchain Labs is a visionary R&D company engaged in intermediary and RegTech services employing blockchain technology. We focus on forming alliances with established businesses and regulatory institutions across various industries, as well as providing collaborative incubation for early stage blockchain projects.
We aspire to empower Vietnam to become a global leader in blockchain. We keep a close eye on blockchain use in other countries to fully understand the technology and learn how to best foster its development and adoption in Vietnam. IBL is working and sharing experiences with regulators in Vietnam and throughout the world about blockchain applications. We strive to keep our readers up to date on the latest movements such as blockchain regulation in India so as to have a full and complete understanding for compliant use and development. We believe Singapore serves as a good way in which blockchain can be nurtured.
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