Government representatives from the U.S., Bermuda and Europe came to the Consensus 2018 conference in New York Monday to declare they want to encourage blockchain innovation, or at least try to get out of its way.
“There’s pretty much no technology we’re more excited about than blockchain,” said James Patchett, president and CEO of the New York City Economic Development Corporation. Patchett said the Big Apple loves blockchain so much it wants to support hackathons and is opening a blockchain resource center this summer and sponsoring a public policy competition. The city’s actions have a twofold purpose: economic development and ensuring the ongoing success of the financial services industry that is so crucial to New York’s economy.
“As blockchain changes the way these financial transactions occur, it puts these institutions’ financial model at risk,” Patchett said Monday. “That’s something we can’t afford. No matter what financial services look like in the future, Wall Street should always be synonymous with finance.”
It’s not just New York. This month Bermuda enacted laws to govern the issuance of digital asset tokens, according to the premier of the self-governing British Overseas Territory.
“I grow weary of trying to explain [blockchain] technology,” said Rep. Schweikert. “I try to explain the benefits.”
“A lot of countries talk about what they’re going to do, but in Bermuda we actually did it,” said E. David Burt.
The territory’s newly created regulations cover all types of digital assets and include strict compliance controls. “If you’re a bad actor or have a checkered past, don’t waste your time,” Burt said. “Our prison does have water views, but it is a prison.”
Burt said that while creating frameworks was difficult for Bermuda, it represents a “Herculean effort” for large nations with overlapping federal and local governments.
Representatives from those large nations also want to promote blockchain technology, even as their governments attempt to regulate it.
“For many of us trying to do public policy, you’re trying to keep the control freaks from crushing the innovation,” said U.S. Rep. David Schweikert, R.-Ariz., a member of the bipartisan Congressional Blockchain Caucus. He said that regulation by federal agencies should not turn into “a bureaucracy that’s knifing each other over threats to [their] authority.”
European Parliament member Eva Kaili said efforts calling for “legal certainty” within the European Union will take at least two years to put into place. In the meantime she and other lawmakers are working to create “sandboxes” to encourage experimentation and avert contradictions in how member countries treat initial coin offerings and related issues.
Kaili said European lawmakers are also trying to encourage ways to use blockchain to solve common issues for EU member nations, including refugee identities and the estimated $130 billion in hidden transaction fees across Organisation for Economic Co-operation and Development nations.
“We have open-minded politicians exploring the technology,” she said.
Schweikert stressed that policymakers should try to embed blockchain within broader policy priorities. “Could we design and put [blockchain] in a trade agreement today so some of you who are entrepreneurs could develop a product you know every [organization] with customs [issues] will want to use?” he asked.
Those kinds of policy changes will involve educating more lawmakers and policymakers about the technology and pushing for broader disruption. “I grow weary of trying to explain the technology. I try to explain the benefits.”
James Bullard, president of the Federal Reserve Bank of St. Louis, had positive things to say about blockchain technology, too, as part of a larger discussion about the impact of cryptocurrency.
“I’m a big fan of new technology driving economic growth, and I’m all for that,” he said. “But I’m a money guy and I’m here to talk about currencies.”
The good news, he said, is research suggests public and private currencies — and by extension, fiat currencies and cryptocurrencies — can co-exist in beneficial ways. However, history may be repeating itself in less positive ways, creating a “drift” toward the same kind of nonuniform currency environment found in the U.S. before the Civil War, he told attendees.
“Historically, the profusion of privately issued currency created an unsatisfactory system,” Bullard said. “Cryptocurrencies might be unwittingly pushing us in the wrong direction in trying to solve an important social problem, which is how best to facilitate market-based exchange.”
As with fiat currency, the value of cryptocurrencies will be based in large part on the “monetary policy embedded in the code,” said Bullard, or the extent to which promises of a fixed volume of coins remains credible. “The fundamental problems of currency will remain,” he said.