As cryptocurrency and the associated blockchain celebrate their tenth birthdays, CEI’s new “Free to Prosper” agenda for the 116th Congress aims to ensure that bureaucratic red tape doesn’t stunt their growth.
Over the last two months and into the new year, various milestones in the development of cryptocurrency and blockchain have been and will be celebrated. These include the white paper issued online on October 31, 2008 by the presumably pseudonymous Satoshi Nakamoto entitled “Bitcoin: A Peer-to-Peer Electronic Cash System.” In the paper, Nakamoto announced that he had created a new digital private currency called “Bitcoin” that could be used for payment of transactions without a third-party, such as a bank, through the uses of encryption and a peer-to-peer network.
January 3, 2009, was debut of the first blockchain with Nakamoto and associates mining the “genesis block” as a ledger for Bitcoin. And in just a couple days, on January 12, we will celebrate the 10th anniversary of the late video game developer and encryption activist Hal Finney receiving the very first cryptocurrency in a Bitcoin transaction with Nakamoto.
Like many ten-year-olds, cryptocurrency and blockchain are having their share of growing pains. The technology is still maturing. Some cryptocurrencies will go by the wayside, just as many Internet-related companies did in the aftermath of the “dotcom” boom.
But the Internet as a whole has vastly improved our lives, and so could these new fintech developments. That’s why in “Free to Prosper,” my Competitive Enterprise Institute colleagues and I urge Congress to take a “light touch” approach to cryptocurrency and blockchain so that they have the potential to flourish just as the Internet did.
In one of our chapter headings, we write that Congress and the regulators it oversees should “Allow Consumers Greater Access to Innovative New Financial Services through the Growth of FinTech, Crowdfunding, Blockchain, and Cryptocurrency.” We warn that the Securities and Exchange Commission (SEC), “without congressional authority, is increasingly claiming jurisdiction by labeling digital currency products as ‘securities.’” We conclude that “such overreach from the SEC, and the threat of overregulation from other agencies, could chill innovation in this sector and related development in improving blockchain-distributed ledger technology that holds promise in everything from health care to land titling.”
We write that policymakers’ goals in passing and enforcing laws relating to cryptocurrency should be to “ensure that government has the tools to punish crypto-fraud but otherwise preserve the culture of ‘permissionless innovation’ that has allowed for the dynamic growth of the Internet and other technologies to proceed largely unimpeded.” I will also dive into the proper approach for regulation of cryptocurrency in a forthcoming paper.