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Government Needs to Enact Cryptocurrency Policy to Get Ahead on Global Competition, Experts Say

China is believed to be creating a central digital currency soon, as the U.S. lacks policy governing cryptocurrency.

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Melanie Teplinsky and Patrick McCarty

WASHINGTON, December 1, 2021 – Cryptocurrency experts say the federal government needs to implement more policy governing cryptocurrency to get in front of international competition in the space, as ransomware threats in the country continue to rise.

Patrick McCarty, professor at Catholic University of America Columbus School of Law, said at an event at the American University School of Law on November 23 that China’s central bank may create a central digital currency in the near future, and other nations’ central banks are likely to create their own digital currencies in response.

If the U.S. is to remain competitive on the international cryptocurrency scene, they say, the government must take key steps to solidify its digital currency systems.

Meanwhile, the Infrastructure Investment and Jobs Act, signed into law last month, establishes tax reporting requirements for cryptocurrencies.

McCarty said it is unclear whether Congress will take such steps, including clarifying whether cryptocurrencies are securities or commodities, and the Securities and Exchange Commission identifying which assets are considered securities to help with building digital currency systems in the U.S.

Melanie Teplinsky, professor at American University Washington College of Law, pointed out that even the major cryptocurrency players are asking for government regulations to be imposed on the industry.

Need better ransomware security

Teplinsky also said the U.S. must work to improve cybersecurity for cryptocurrency exchange.

With a four-times increase in the ransom that ransomware hackers received last year compared to 2019, she said shortages of available cybersecurity workers pose a very large problem.

She predicted there will be efforts to strengthen cybersecurity as the private sector seeks to work more collaboratively with government, and that active cyber defense through threat hunting will become more prevalent.

Teplinsky also stated that coordinated domestic and international policy responses to ransomware threats are specifically necessary, such as through diplomatic efforts to shut down foreign safe havens for hackers and common exchange regulations to ensure adherence to anti-money laundering rules.

Reporter T.J. York received his degree in political science from the University of Southern California. He has experience working for elected officials and in campaign research. He is interested in the effects of politics in the tech sector.

Blockchain

CES 2022: Cryptocurrency Leaders Press Benefits as Uncertain Over Regional Clampdowns Looms

Regional crackdowns raise questions about the stability of cryptocurrencies.

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From left: Michael Terpin, Tushar Nadkarni, Kristin Smith, and Clara Tsao

LAS VEGAS, January 11, 2022 – Cryptocurrency advocates at the Consumer Electronics Show last week tried calming fears that growing global uncertainty and clampdowns on coin mining would cast a shadow over the nascent space.

“Everybody talks about the volatility [of Bitcoin], but it has tended to go up,” said Michael Terpin, CEO of Transform Group, a company that does public relations for blockchain, on a panel Wednesday. “[2021] has been one of the least volatile years.”

Clara Tsao, founding officer and director at Filecoin Foundation, an organization that deals with certain cryptocurrency governance, added that “there are so many people from around the world who have benefited from blockchain. [Blockchain] touches everything today.”

And Tushar Nadkarni, chief growth officer at Celsius Network, a cryptocurrency earning and borrowing platform, said “this is not the first time that a technology has come in and essentially just railroaded through inefficiencies that were in the [pre-existing] system.

“We have seen this movie before,” Nadkarni added.

Experts argue that one of the most significant benefits to cryptocurrencies is that they decentralize finance. This means that “miners” and consumers from anywhere in the world, in theory, can mine and use Bitcoin regardless of their location, and they do not need to operate through a regulatable intermediary.

But the comments come against a backdrop of global events that are adding to concerns that the state of cryptocurrencies is too volatile.

Beginning on January 4, the government of Kazakhstan, which has been quelling protests in recent days, began implementing internet blackouts that led to a national blackout on January 5. Kazakhstan is the second largest miner of Bitcoin – after the U.S. – and accounts for approximately 18 percent of the mining power in the world.

The value of Bitcoin plummeted in the following days, and though it has since begun to stabilize, questions remain about how truly decentralized the currency is, given how drastically its value can be impacted by the goings-on in a single country.

At the same time, Kosovo joined the growing list of countries that has made cryptocurrency mining illegal, seizing mining devices. Cryptocurrency mining is a notoriously power-intensive process; as the network of miners grows, so to does the complexity of the cryptographic equations required to mine a coin. To combat this, miners rig matrices of graphics processing units, thereby reducing the time it takes to solve algorithms.

Kosovo, much like the rest of Europe, is in the midst of an energy crisis as Russia continues to withhold its glut of natural gas as leverage over European Union and NATO aligned countries, some of whom are largely dependent on Russia to meet their energy needs.

Because of this fuel scarcity, Kosovo, a small country with just under 2 million people, announced a ban on cryptocurrency mining on January 4. On January 6, police forces in Kosovo announced their first arrests for those who refused to comply with the new law.

Kosovo is only the most recent country to outlaw cryptocurrency mining. In September of 2021, China announced a complete ban on cryptocurrency after nearly a decade of cracking down on it. Cryptocurrency is even facing challenges from non-state actors, as it was declared haram – or forbidden – by the national council of Islamic scholars in Indonesia, home to the largest population of Muslims in the world.

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Blockchain

U.S. Needs to Modernize with Blockchain and Cryptocurrencies, Said Former Trading Commission Chairman

Christopher Giancarlo said U.S. falling behind China on new wave of innovation, driven by blockchain and cryptocurrencies.

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Christopher Giancarlo speaking during the panel hosted by the American Enterprise Institute Tuesday

WASHINGTON, January 4, 2022 – A former chairman of the U.S. Commodity Futures Trading Commission said the federal government needs to catch up and modernize the currency system to include cryptocurrencies, lest the U.S. fall behind competitors in the global arena.

Christopher Giancarlo, staunch supporter of cryptocurrencies and adjacent technologies, said during a panel hosted by the American Enterprise Institute Tuesday that, while some entities in the private sector are blazing ahead on cryptocurrencies and the decentralized ledger system called the blockchain — exploring the possibilities and limits to these technologies — western governments and societies at large are lagging.

“Money is changing right before our eyes,” the former chairman said. “Like text messages and photographs, money is becoming digital, decentralized, tokenized and borderless.”

Antiquated methods of transferring and ordering money are still mainstream, and not suitable for the fast-paced transactions that take place in the 21st century, said Giancarlo. He argued that these methods put the U.S. “at a competitive disadvantage to the likes of China, that are building new financial infrastructure from scratch with 21st century digital technology.

“It typically takes days in the United States to settle and clear retail bank transfers, while in many other countries it takes mere minutes if not seconds. And it takes days to settle securities transactions, and it’s ridiculously expensive to remit money overseas,” said Giancarlo. “It is often faster to move money around the globe by stuffing cash in a suitcase and hopping on a plane than it is to send a wire transfer.

“I just rode the Acela from Newark to Washington and the state of our dilapidated American infrastructure is on full display right outside the train window,” he said. “But sadly, the same is true about much of our financial infrastructure, both in the United States and in developed western economies.”

Innovation on the internet comes in waves, said Giancarlo. The first wave was the “Internet of Information,” which gave rise to digitally accessible and nearly instantaneously shareable libraries, such as Wikipedia. The second wave is what is commonly referred to as the “Internet of Things,” where nearly every device one can engage with can be accessed via the internet.

The ‘Internet of Value’

In Giancarlo’s view, a third wave is now in the midst of crashing down: the “Internet of Value” has begun to wash across the internet, where property titles, contracts, stock certificates, and other fungible and non-fungible assets can be shared and exchanged.

“Thanks to stablecoins, value is now transferable around the world in nanoseconds – 24/7/365 – the way that is increasingly decoupled from the traditional bank account-based system and corresponding correspondent banking service,” he said. “And it is the private sector, not the official sector that is leading the way to the future of money.”

Giancarlo condemned the U.S. government’s inability to “declare any national imperative to harness digital asset innovation to upgrade our creaky exclusive financial system to expand inclusiveness and lower costs for new generations of Americans.”

“I believe we can harness this wave of innovation this internet of value for greater financial inclusion, capital and operational efficiency and economic growth for generations to come. But if we do not act, this coming wave of the internet will lay bare in the shortcomings of our aged, analog financial systems with potentially disruptive impact on our western economies.”

Giancarlo stated that 80 percent of the world’s central banks are currently considering a central bank for digital currency. Bearing that in mind, he provided seven core reasons why they are doing so:

  • access to citizens economic data
  • financial infrastructure modernization
  • financial inclusion solution monetary policy execution
  • rising success of stable coins
  • geopolitical influence

He said that over the coming decades, there will be myriad stakeholders attempting to advance digital currencies – ranging from national governments, to legacy fintech institutions, to Big Tech – but that “citizens for a free society” need to be one of the key players.

“Looking back on the carnage of World War One, French premier George Clemenceau is said to have remarked, ‘war is too important to be left to the generals,’” Giancarlo said. “I adapt Clemenceau’s famous quote: money, especially the digital money of the future, is too important to be left to central bankers.”

Giancarlo stated that it is important for both non-sovereign and sovereign currencies to coexist in the same financial ecosystem. “The best protection against impermissible government surveillance of economic activity or restrictions on otherwise lawful transactions may be robust competition from well-constructed stable coins, and other non-sovereign digital money.

“On the other hand, privately held operators of stable coins are not bound by the Fourth Amendment to respect individual privacy. They can easily be brought under political pressure to surveil or restrict politically incorrect transactions.

“Perhaps the best approach is what I call a ‘jigsaw’ approach to privacy, where no entity or provider of the digital currency has all the information about a transaction.”

He argued that such a system would be “the most effective guarantor of economic liberty and individual privacy.”

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Facebook Lobbying Congress on Blockchain Policy

The registration comes after the company rebranded to Meta, taking it beyond its social media origins.

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Photo from PX Fuel used with permission

WASHINGTON, November 18, 2021 – Facebook has registered this month to lobby Congress on blockchain policy, following a rebranding of the company that is intended to take the company beyond its social media roots.

The lobby registration was filed on November 4 and it comes after the infrastructure bill, signed into law this week, established tax reporting requirements for cryptocurrencies, which require the decentralized transaction ledger known as the blockchain to function.

The registration, which does not provide specifics on what the company hopes to discuss, also comes just days after the company rebranded as Meta, which is intended to broaden the company’s scope into new technologies that allow people to be together in the virtual space.

When the rebranding launched in late October, Facebook founder Mark Zuckerberg wrote a letter that indicated that this new metaverse would require open standards and interoperability, including supporting crypto projects.

Meta also has a number of jobs that require knowledge of crypto and blockchain.

Facebook has set its sights on initiatives involving the blockchain for years. In 2018, head of Facebook Messenger David Marcus announced on Facebook that he would set up a small group to “best leverage Blockchain across Facebook, starting from scratch.”

On Thursday, a bipartisan group of House representatives introduced a bill – the Keep Innovation in America Act – that would better define who are crypto brokers for tax reporting purposes.

In a separate lobby registration, Facebook also specified that it would like to discuss specific funding for computer science education in legislation.

The company has previously registered to lobby Congress on Section 230, the law that shields tech platforms from legal repercussions for what their users post.

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