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Experts Caution Against Overregulating Cryptocurrency

Though regulators may want to regulate cryptocurrency to protect consumers, experts argued that overdoing it could impact innovation.

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WASHINGTON, February 16, 2022 – Despite the unknowns of cryptocurrency, experts cautioned last week against overregulating it for fear of stifling innovation in the burgeoning sector.

During the Broadband Breakfast event on February 9, University of Arkansas Professor of Law Carol Goforth argued that one of the most significant issues facing cryptocurrencies is striking a balance between regulation and consumer safety.

“The growing challenge is finding a balance between the legitimate need to protect the public, investors, and our financial structures and systems against abuse, [with] the desire to protect and encourage legitimate entrepreneurs,” Goforth said.

One of the benefits that often piques the interest of consumers while also worrying regulators is the decentralized nature of cryptocurrency. Cryptocurrency advocates often tout the lack of a single regulatory body with domain over the blockchain and cryptocurrency as an enticing feature, while governments are often left scrambling for ways to still protect consumers in the often anonymous and deregulated sector.

Matthew Snider is the senior vice president of Centri Tech – an organization dedicated to improving broadband connections and utilizing those connections to improve user quality-of-life. “Decentralization is a spectrum,” Snider said. “There are lots of different places where people can land on that [spectrum].”

He explained that this spectrum has extremes on both sides – with one extreme relying on a central bank, all the way to a completely disaggregated blockchain that operates independent of any body.

Goforth said that if regulators, such as the Securities and Exchange Commission, had their way, entrepreneurs and companies may find themselves disincentivized to conduct their business in the United States if they were planning to leverage blockchain and cryptocurrency technologies.

“There is a huge pressure – not just to not do business [in the United States] – but to protect American investors by not letting them decide for themselves whether or not this is a risk they want to take.”

“To my mind, that is a very clear example of regulatory overreach that is likely to harm American investors and is likely to push technology and entrepreneurs away from our country in a way that is not optimal for anyone – other than folks who like large jurisdiction for the SEC.”

Uncertainty still exists

Snider said that while you have some countries that are leaning into the technology, many are still unsure of how to approach it.

“You have got some countries that have made [cryptocurrency] their national currency, and you have got countries like Russia and China that said ‘no, it is banned,’” Snider said. “I think you have people who do not understand something who are taking laws that are anachronistic in nature – very old – and saying ‘hey, these buckets apply because we cannot think of other buckets to put them into at the moment and we do not have the time or the effort, so we are just going to put them into these buckets and hope that they work.’”

Snider also added that for all the effort regulatory bodies and countries have put into trying to regulate cryptocurrency, all it takes to circumvent the laws is a virtual private network, or VPN, that enables users to send and receive data while obfuscating their location from those who might be trying to monitor them.

“There is a very big lack of being able to control [cryptocurrency], and it is freaking them out,” Snider said.

Our Broadband Breakfast Live Online events take place on Wednesday at 12 Noon ET. You can also PARTICIPATE ONLINE in the current Broadband Breakfast Live Online event on Zoom.

Wednesday, February 9, 2022, 12 Noon ET — Harnessing Cryptocurrency

Join us in person for a Broadband Breakfast for Lunch on cryptocurrency. In Broadband Breakfast’s premiere session on the subject of decentralized finance, we’ll explore recent developments in the blockchain, consider the ways that cryptocurrencies are impacting global financial transactions and transfers, and address government officials’ attempts to harness – or to banish – blockchain-based digital coinage.

Panelists for this Broadband Breakfast Live Online session:

  • Jennifer Schulp, Director of Financial Regulation Studies at the Cato Institute’s Center for Monetary and Financial Alternatives
  • Carol Goforth, Clayton N. Little Professor of Law, University of Arkansas in Fayetteville
  • Matthew Snider, Senior Vice President, Centri-Tech
  • Drew Clark (moderator), Editor and Publisher, Broadband Breakfast

Panelist resources:

Jennifer Schulp is the director of financial regulation studies at the Cato Institute’s Center for Monetary and Financial Alternatives, where she focuses on the regulation of securities and capital markets. She has testified before the U.S. House Committee on Financial Services, and her writing has appeared in Business InsiderMarketWatch, and others. Before joining Cato, Schulp was a director in the Department of Enforcement at the Financial Industry Regulatory Authority Inc., representing FINRA in investigations and disciplinary proceedings relating to violations of the federal securities laws and self-​regulatory organization rules.

Carol Goforth is the Clayton N. Little Professor of Law at the University of Arkansas in Fayetteville. She is the author of more than a dozen academic articles dealing with regulation of cryptoassets and transactions in them, as well as Regulation of Cryptotransactions, a comprehensive text for law students and others interested in crypto regulation published in 2020 by West Academic. The second edition of that book is expected April of this year.

Matthew Snider is Senior Vice President of Strategy and Business Development at Centri Tech. His career has been focused on bringing broadband affordability and adoption to underserved communities, both urban and rural. An active participant in the blockchain economy for the past six years, Snider understands the impact that these technologies play in building out use case solutions that bring more adoption to broadband, and to the blockchain.

Drew Clark is the Editor and Publisher of BroadbandBreakfast.com and a nationally-respected telecommunications attorney. Drew brings experts and practitioners together to advance the benefits provided by broadband. Under the American Recovery and Reinvestment Act of 2009, he served as head of a State Broadband Initiative, the Partnership for a Connected Illinois. He is also the President of the Rural Telecommunications Congress.

WATCH HERE, or on YouTubeTwitter and Facebook.

Illustration of blockchain from Exin used with permission

As with all Broadband Breakfast Live Online events, the FREE webcasts will take place at 12 Noon ET on Wednesday.

SUBSCRIBE to the Broadband Breakfast YouTube channel. That way, you will be notified when events go live. Watch on YouTubeTwitter and Facebook

See a complete list of upcoming and past Broadband Breakfast Live Online events.

Blockchain

IBM Exec Touts Blockchain Technology as Economy Accelerator

Blockchain will be commonplace in the economy ‘within the decade,’ the IBM executive said.

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Screenshot of Jerry Cuomo, IBM vice president of blockchain technologies

WASHINGTON, August 23 – Blockchain technology will speed up the economy in the coming decade in part by making the process of verifying information – such as user identity – more safe, streamlined and efficient, said IBM’s vice president of blockchain technologies at a Tech Forward event on Tuesday.

Jerry Cuomo described blockchain as an “odd duck” type of database with a few defining features, explaining that each blockchain has several administrators, that each transaction must be vetted by the administrators before being recorded to the digital “ledger,” and that transactions, once recorded to the ledger, are essentially impossible to change or delete. Cuomo also explained that each data point – or “block” – in each blockchain is heavily encrypted, which creates high levels of security and user trust.

Although blockchain is most widely associated with the transactions of cryptocurrencies like Bitcoin, Cuomo said it can used for a wide variety of purposes – including identity verification, food safety and intra–supply chain communication. For example, Cuomo suggested that instead of making hundreds of accounts on various websites, a user may soon be able to have a single, blockchain-based identity that would be accessible whenever verification is necessary.

Cuomo said he believes food safety, for example, can be improved by using blockchain technology to document salient information about food conditions during transport. IBM Food Trust is a blockchain-based service that the company says allows participants to track a food product throughout a given supply chain and to ensure that it is safe, fresh, and sustainably sourced.

The company said it offers a wide variety of blockchain services. IBM’s supply chain service, for instance, promises “data integrity and faster reconciliation,” features that are made possible by the immutability of each blockchain record once it is entered into the ledger.

As for the timetable on blockchain technologies becoming commonplace in the economy? “I think its within the decade,” said Cuomo. “This is not an ‘if,’ this is a ‘when.’”

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Commodity Futures Chairman Calls for Single Regulator as Crypto Falls and Fraud Rises

‘Our guiding principle at the CFTC must be to stop fraud or harmful conduct that harms our markets.’

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Screenshot of Rostin Behnam, chairman of the CFTC from Monday's Brookings event

WASHINGTON, July 26, 2022 – In light of dwindling crypto stock prices and reports of the increasing risk of fraud associated with the digital currencies, the chairman of the Commodity Futures Trading Commission said at a Brookings Institution event Monday that there needs to be more regulation.

Rostin Behnam said amid the crypto market chaos, regulation is needed to protect Americans. Since the beginning of 2021, “More than 46,000 people reported losing over a billion dollars in crypto to scams” and that the median loss per individual was $2600 from crypto, Behnam said.

“Our guiding principle at the CFTC must be to stop fraud or harmful conduct that harms our markets,” Behnam said, explaining the need to use CFTC authority to bring justice to those who harm our markets. However, without current regulation, Behnam added that “existing ambiguities force hard decisions at the CFTC.”

Behnam praised recently introduced legislation – the Responsible Financial Innovation Act –which proposes a regulatory framework for cryptocurrency under the CFTC’s authority. “I’m encouraged by the bipartisan, bicameral support for legislation that recognizes the need for guardrails around the digital asset economy,” he said.

Behnam has previously pitched his commission as the preferred regulator. In February, he said there needs to be a single regulator to “fully police conflicts of interest and deceptive trading practices impacting retail customers.

“The CFTC is well situated to play an increasingly central role in overseeing the cash digital asset commodity market,” he said then.

Until then, Behnam said the CFTC is monitoring how it can get mitigate some harms in lieu of legislation. We “need to constantly monitor risky behavior,” he said, adding the commission is thinking “creatively about how [to] use existing regulatory authority to root out fraud and manipulation in the market.”

There has been debate about what type of regulation should be imposed on the digital currencies and who should be administering that. Some have suggested that there should be a singular regulatory body, as there is confusion as to whether the currencies are commodities or securities, which would but them under the purview of the Securities and Exchange Commission.

In June, the Department of Justice announced four cases of criminal offenses of cryptocurrency fraud, one of which was the largest non-fungible token scheme ever brought. All cases involved over $100 million in losses.

“As cryptocurrency marketplaces advance and offer new opportunities for consumers, criminals also seek ways to exploit them,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division.

“We have moved past the stage where digital assets were once a research project,” Behnam said. “There is a critical need to educate and protect the public.”

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Hunter Abramson: Why Ticket Sales are the Next Stage of Non-Fungible Tokens on the Blockchain

NFT ticketing also enables a safer, fairer secondary market.

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Author of this Expert Opinion is Hunter Abramson

Many new technologies tend to evolve rapidly, and that has particularly been the case with non-fungible tokens. It’s a technology that has shown vast potential, and early adopters picked up on this, starting an early — and short-lived — NFT craze that has since passed its initial height. However, new developments in NFTs have led to a possible course correction with exciting implications for the blockchain and every industry it touches.

The issue with early NFTs, and what caused the trend to be met with such initial hesitance, is that the general public is hesitant to accept anything without a tangible benefit to them. However, the recent trend towards utility NFTs — in other words, NFTs that offer some value or benefit to the user beyond the string of blockchain code they are composed of — has opened up the door to numerous opportunities for their implementation in various industries.

Why NFTs are the future of ticketing

The ticketing industry is a perfect match for the NFT revolution. For one, the technology used in the ticketing industry has been around for decades. QR codes, which make up most ticketing operations, were introduced in the 1990s, and the barcode system two decades before. The industry has primarily operated on an “if it isn’t broke, don’t fix it” mindset, but it is time that leaders begin to embrace this shift towards newer, better technologies.

NFT ticketing will help combat many issues plaguing the ticketing industry right now. Fraud will be discouraged — if not entirely eliminated — thanks to the blockchain technology upon which NFT tickets are built. Blockchain code is virtually impossible to replicate, which means that fake tickets cannot be produced. When combined with the revolving QR code technology that has been implemented in NFT ticketing systems, this means that virtually no money will be lost by event organizers, and thus, no unhappy customers being scammed.

From the consumer’s perspective, there aren’t many differences between using an NFT ticket and a standard ticket. Like any other ticket, you simply scan its code and enter the event. But the greater security features will assure customers they aren’t being ripped off, and the pre, during, and post-event benefits that come along with an NFT ticket will be highly desirable.

After a ticket is scanned, the ticket becomes a collectible NFT in the ticket-holder’s Ethereum-based digital wallet. For one, it’s a unique souvenir that fans can keep to remember their experience of going to the event, but the NFT could provide value in and of itself. Trading and selling the collectible NFT after the event could continue its influence long after it is over.

Building a community with NFT ticketing

In addition to these utilities, NFT ticketing benefits from the feeling of community that is associated with going to events. For example, because concerts are generally attended by fans of the artists performing, attendees are relatively like-minded in their interests, creating a built-in audience for NFTs. Many NFT projects fail due to a lack of community support, but with NFT tickets, there is no need to build that community from scratch.

NFT ticketing also enables a safer, fairer secondary market, further establishing that sense of community and protection for the consumer against ticket scalping or fraud. Thanks to the built-in verification of blockchain, Consumers are able to buy tickets on the secondary market without worrying about whether or not they are legitimate. Furthermore, blockchain technology prevents massive purchasing transactions. thanks to its more easily verifiable record-keeping, meaning scalping in the secondary market is substantially reduced, if not outright eliminated.

These advantages offered by NFT tickets show the potential of the technology to make the consumer experience significantly better. Many NFT projects have failed because of their lack of utility — and thus, relevance — to the user and inability to form a community around them. NFT ticketing is not susceptible to either of these issues, making them the future of NFT technology.

Throughout his career as a marketer, Hunter Abramson has contributed to all aspects of experience, from cross-promotional marketing to operations to ticket sales. He always pushes the limits to create positive experiences for both the enterprise and the consumer. He is currently the co-founder and CEO of Relic Tickets, which aims to disrupt the ticketing industry with NFT tickets.This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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