Around the world, governments are rapidly experimenting with and deploying blockchain to improve efficiency, secure platforms, and promote transparency in areas like supply chain management, identification, titles, bookkeeping, energy consumption, voting, and more.
The United States, however, has lagged behind the global movement towards blockchain adoption. In many cases, costly barriers to entry and confusing regulatory regimes (ie. federal vs. state laws) have pushed a great deal of development internationally to hubs like Singapore, Malta, and Hong Kong.
An example of the regulatory murkiness that has staggered development in the US is the New York BitLicense, which requires all blockchain companies operating in the state to go through a time intensive, extremely costly process to get licensed. Although some large companies like IBM and Facebook have taken initiatives in the space, many large tech companies have shied away from fully exploring blockchain technology. Many companies and entrepreneurs find that the juice isn’t worth the squeeze and have chosen to take their ideas to more progressive enclaves.
In comparison, world superpowers like China have heavily embraced blockchain technology. The CCP recently unveiled their digital yuan; although this digital currency represents a much more centralized approach to implementing blockchain technology, the nationwide implementation of a distributed ledger to improve their financial sector is still leaps and bounds ahead of the current US initiatives. along with their own native digital currency, China has made heavy investments into mining operations for more decentralized cryptocurrencies like Bitcoin, notably recently removing mining operations from the CCP’s list of “undesirable activities”.
Advancing Blockchain Act: Better Late Than Never For the United States
This Advancing Blockchain Act is the third attempt by Rep. Guthrie to get Congress to study blockchain technology. It comes on the heels of the Blockchain Promotion Acts of 2018 and 2019, both of which he co-authored with Rep. Doris Matsui. Neither of those made it to a committee hearing. The draft “Advancing Blockchain Act” goes further than these previous iterations and would have a more substantial impact. While the ‘promotion acts’ would have created a blockchain working group tasked with defining blockchain and identifying possible use cases, this draft would create a report with legislative suggestions to promote the growth and adoption of blockchain, address regulatory barriers and advance the U.S. position among a list of 10-15 countries in terms of adoption and development of blockchain technology.
Bringing Blockchain Back to the United States
The impact of this bill’s passing would be profound. The legislative recommendations could serve as a rallying cry for the industry to organize effective and cohesive lobbying efforts. By clearly ranking 10-15 countries, the study would almost certainly not put the U.S. at the top of the list, which would provide a strong argument for swift regulatory clarification. Regulatory clarity is critical to growing the cryptocurrency industry in the United States, with many businesses moving offshores to countries like Singapore and Switzerland with clearly defined crypto-asset classes.
By providing policymakers clear regulatory imperatives, the Advancing Blockchain Act can facilitate more efficient collaboration between the public and private sectors. U.S.-based crypto and blockchain firms will experience accelerated growth, and create more jobs as the industry expands. Institutional investors will feel more comfortable with clear government guidance. Most importantly, the U.S. will see the benefits of cryptocurrency and blockchain technology sooner. The technology’s implementation and subsequent economic impact remain hard to project, but the prospect of a more efficient economy is tantalizing. Cryptocurrency and blockchain have the potential to significantly reduce transaction costs throughout the economy.
Reducing the Cost of Trust
The creation and maintenance of trust is a significant source of transaction costs within our economy. A recent study estimated that, in 2010, 35% of U.S. employment was related to upholding trustful economic relationships. Blockchain’s ability to decentralize trust would reduce economic inefficiencies created by costly third party institutions. Predatory payday lenders and check cashing stores will face competition as decentralized financial services become more widely available to underbanked communities. In the same way that the internet democratized access to information for the average consumer, allowing the public to make more informed decisions, blockchain technology can help introduce the same level of transparency for financial issues that the public faces.
By leveraging the transparency of the DeFi lending markets, average consumers can now get meaningful returns from their capital without even having to invest their money in traditional financial products. The tiny interest rates on most traditional checking and savings accounts highlight how the current opaque banking systems prevent users from accessing transparent financial information and allows collusion of several large entities to prevent consumers from having real choices about where to park their capital.
CoinFlip has actively engaged with politicians and regulators for years to work towards clarity in law and effective consumer protections. The Advancing Blockchain Act is something the crypto world cannot afford to sit on the sidelines for. Without strong advocacy, this bill is likely to be denied a hearing.
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