Earlier this year Bitcoin policy think tank Coin Center claimed the role of interface to policymakers and regulators, with the publication of a framework for state digital currency regulation. On March 27, Coin Center issued a detailed commentary to New York’s BitLicense, combining measured praise with constructive criticism.
MIT Digital Currency Initiative lead Brian Forde praised the Coin Center commentary, and, in particular, the idea that regulations should strike a middle ground in such a way as to protect both consumers and digital innovators.
“Our mission is to build a better understanding of these technologies and to promote a regulatory climate that preserves the freedom to innovate using blockchain technologies,” says the Coin Center website. “We do this by producing and publishing policy research from respected academics and experts, educating policymakers and the media about blockchain technology, and by engaging in advocacy for sound public policy.”
Jerry Brito, executive director of Coin Center, praises a new amended draft of California’s AB 1326, a bill that would specify the state’s licensing regime for digital currency businesses, saying that it’s good news for Bitcoin advocates everywhere. Coin Center issued a letter of support for the legislation.
The main objection of Coin Center to a previous draft was that it contained language that would make exchange or conversion an activity that would require licensing. In the new draft, that language has been removed, perhaps as a result of a commentary that was issued by Coin Center.
Now, “California’s definition of virtual currency business matches closely the standard we’ve set out in our State Digital Currency Framework and that we’ve been fighting for in various states since the start of this year: A company should only need a license if they have actual custody of their customer’s bitcoins,” says Brito. “That shouldn’t include pure software designers; it shouldn’t include minority key holders in a multi-sig address; it shouldn’t include the builders of sidechains, colored coin markets, or smart-contract-based exchange and conversion services for altcoins or new blockchains.”
Coin Center’s “State Digital Currency Principles and Framework” is a model for digital-currency-specific regulations and laws. The document provides a template with structure, definitions and language for the essential components of any digital currency law: who must be licensed, how startups are encouraged, how solvency is guaranteed and other necessary elements.
Coin Center expressed hopes that states will use the framework as a template for their own bills and regulations and try to strike an optimal balance between necessary crime prevention and consumer protection on the one hand, and equally necessary agility and flexibility to ensure innovation and technology leadership on the other.
The latest draft also includes an on-ramp for small startups. By meeting standards set by the legislation, a small company will be able to operate without paying the full licensing fee or meeting the requirements of a full license.
“California’s bill is now a massive step forward from the examples set by New York and Connecticut,” says Brito. “Other states that have already passed less tailored legislation (Connecticut), or promulgated more onerous rules (New York) should take note: California is getting it right, and states waiting to take on this topic should follow its lead.”