Are New Blockchain Laws Fair to the Technology?

As the development of blockchain continues, governments all around the world are engaged in heated debates about a plethora of topics surrounding the technology: its implications, businesses using it, and of course, trading cryptocurrencies.

And if any government doesn’t have blockchain on their radar, they’re late to the game — almost $2.5 billion of venture capital has already been poured into new, promising startups since 2012. As those startups start entering profitable stages, taxation will become an issue as well.

Can Bureaucracy Keep up With Blockchain?

One school of thought is that governments who pass pro-blockchain laws are doing so for public relations reasons or to attract more blockchain startups for a more diverse tech scene. Five bills about blockchain and cryptocurrency were active in 2017. 19 were active in 2018, including New York, Hawaii, Nebraska, Colorado, Virginia, Vermont, Florida, North Dakota, and Maryland.

Tennessee made headlines recently when Representative Jason Powell authored a bill that explicitly stated what blockchain is and how it plays into physical contracts. Rep. Powell says, “It shows that our state is supportive of blockchain, and we’ll do what we can to encourage and promote businesses who are already in this space or are interested in it to set up shop here or continue to thrive.”

Angela Walch is a research fellow at the Centre for Blockchain Technologies at University College London. She is also an associate professor at St. Mary’s University School of Law. Walch believes the Tennessee bill isn’t likely to harm the public, but it may create some confusion for rulings in the future. Blockchain is quickly evolving, and bureaucracy is already struggling to keep up. If a business utilizes blockchain in a way that doesn’t match the explicit definition in the Tennessee bill, is it wrong?

Different Interpretations, Different Results

Pete Van Valkenburgh, director of research at Coin Center, a DC-based think tank, says, “If we go down this road where we’re passing a different law for blockchains and smart contracts in every state, we could end up with a bunch of different standards and that would be terrible.”

For example, Wyoming recently passed a decree stating that some cryptocurrencies using blockchain won’t fall under regulations with the state’s securities law. It also passed five laws surrounding taxation of cryptocurrencies, securities laws, exchanges, and business registration. The state hopes this will encourage blockchain developers, traders, and startups to bring their jobs to Wyoming.

“They’re clearly signaling that they want to be kind of putting out the welcome sign for blockchain and crypto companies, and it’s cool that Wyoming did that,” says John Bass, who is the founder of Hashed Health, a startup using blockchain to improve healthcare.

Setting the Tone

But Bass contends that different laws in different locations will complicate matters. “Part of me worries that if a bunch of states come up with their own versions of these laws, then you’re going to have a very complicated environment for companies like ours. I have mixed feelings about it.”

Van Valkenburgh thinks current blockchain laws will stifle any new iterations of it from coming to the states with stricter legislation. And, he’s still skeptical about states’ intentions with blockchain, adding, “Sometimes I wonder whether some of them are just like marketing — ‘We should do something about blockchain and be seen doing something about blockchain.'”

Regarding Tennessee’s new blockchain law, Tara Aaron, an intellectual property transactions attorney who worked with Rep. Powell on the bill, disagrees. She says, “This is not earth-shattering legislation. I don’t think anybody would tell you that it is. It was an effort to make it clear that Tennessee is open for business. I don’t know that legislation is the best way to send a PR message.”

Blockchain adoption still isn’t widespread, but its popularity with the public has skyrocketed over the past three years. It’s great that many governments are starting to broach the subject, but how they interpret the technology will have lasting effects. The actions taken now will set the tone for the future landscape of blockchain.