It seems as though every year during the fourth quarter, the value of the cryptocurrency market climbs to extreme mountaintops and plummets below the valley. Investing in cryptocurrency is not for the faint at heart. In fact, I stopped watching my holdings so closely. My poor heart can’t take it.
Cryptocurrency, however, is more than just an asset that stores value. It is used as currency, a means to exchange goods and services. It’s even used to record contracts and transactions, in addition to existing blockchain technology. Cryptocurrency tokens are also used as utility tokens that can record or store information; from how long someone browses a website to rewarding behaviors.
Even more interestingly, the technology that undergirds cryptocurrency, blockchain technology, can be used in countless applications in the public and private sectors to improve transparency and efficiency. In fact, our government should consider blockchain uses with elections, the recordation of vital records and real estate transactions; to name a few.
Surprisingly, cryptocurrency and blockchain technology are still at their infancy. The document explaining blockchain technology, Bitcoin: A Peer-to-Peer Electronic Cash System, was published on October 31, 2008, almost ten years ago to the date.
In the early days, too often there were instances of Bitcoin exchanges becoming compromised and people losing their holdings. In response to a major exchange compromise, in 2015, New York State’s Department of Financial Services promulgated the BitLicense to protect the New York State investors on cryptocurrency exchanges. New York was first to act and the BitLicense is used by many states and countries as a model, acting as a starting point for regulations.
It has been ten years since the advent of cryptocurrency. It has been nearly four years since the implementation of the BitLicense. In cryptocurrency time and space, a few months is equivalent to years.
With all that being said, as a lawmaker and regulator, how should we proceed with regulating cryptocurrency? In an industry that changes rapidly, how do we find the balance to provide proper guardrails so that innovation and economic growth can occur while protecting consumers and investors?
I believe lawmakers should not make decisions in a silo. I also believe that because the sands are shifting, we should move cautiously.
This legislative year in New York, THE DIGITAL CURRENCY STUDY BILL, Bill A8783B, passed in both the assembly and the Senate. The act will establish a task force that will be composed of experts, technologists, consumers, and investors tasked to provide a report with recommendations on a regulatory regime. In order for it to become law, Governor Cuomo must sign it by December 31, 2018.
In fact, this September, Governor Jerry Brown of California signed into law a similar bill, 2658, that was introduced by the California Assembly majority leader Ian Calderon. The California legislation creates a working group comprised of individuals from different sectors to define blockchain and to study its uses, risks and benefits.
Even though my stomach is weak from this cryptocurrency market roller coaster ride, cryptocurrency and blockchain technology is not going anywhere.
We must work with the various stakeholders to find the proper balanced regulatory regime for blockchain and cryptocurrency in New York State.