How Congress is Impacting Blockchain and Crypto Regulation: An Overview

So many differing opinions, one ultimate goal: Regulate blockchain and cryptocurrency.

We recently published an overview of the SEC’s current crypto regulation efforts, and wanted to dive into another government entity: congress.

It seems as though the U.S. congress and General Service Administration (GSA), among other federal agencies, see the potential value of blockchain. They’re exploring avenues to leverage the encryption and security possibilities of blockchain to improve efficiency, transparency and trust in data sharing, both within the government and also with American people.

As such, there are a number of potential use cases within U.S. federal agencies, according to GSA.gov:

• Reduction of paperwork burdens and prevention of data errors
• Financial management and procurement
• IT asset and supply chain management and smart contracts
• Patents, Trademarks Copyrights, Royalties
• Government-issued credentials like visas, passports, SSN and birth certificates
• Federal personnel workforce data and appropriated funds
• Federal assistance and foreign aid delivery

The US Congress seems to be fond of the promise of blockchain but worried about unregulated cryptocurrencies. Therefore, its approach has been to talk more about the technology behind crypto and there is not yet a clear regulatory roadmap.

We did see, back in February 2018, that Congress called for a more coordinated effort between federal agencies, including the SEC and CFTC, to build a regulatory framework to oversee cryptocurrencies as allowed by the law.

What Members of Congress Are Saying

About Blockchain and Cryptocurrencies

It seems nearly impossible to find unanimity on any topic in Congress. As such, it’s not surprising to see split opinions about blockchain and cryptocurrencies. Despite the general call for more regulation, there are certain members of Congress such as Republican Representative Dave Brat who prefers the route of less regulation. This sentiment is shared with the Congressional Blockchain Caucus:

“We are a bi-partisan group of Members of Congress and Staff who believe in the future of blockchain technology, and understand that Congress has a role to play in its development. As a Caucus, we have decided on a hands-off regulatory approach, believing that this technology will best evolve the same way the internet did; on its own,” according to the Caucus’ website.

Here’s what a few other congresswomen and men have to say:

Carolyn Maloney: “A lot of people don’t realize there’s nothing backing these virtual currencies.”

Democratic senior member of the House Committee of Financial Services

Mike Rounds: “There’s no question about the fact that there is a need for a regulatory framework.”

Republican Senator, member of the Senate Banking Committee

Tom MacArthur: “We have to look carefully at all of the cryptocurrencies and make sure individuals don’t get taken advantage of.”

Republican, U.S. Representative, House Committee of Financial Services

Dave Brat: “I’m a total free-marketer, so I don’t want to regulate.”

Republican, U.S. Representative, a member of the conservative House Freedom Caucus

Sources : Pictures from https://www.congress.gov/members and quotes obtained from by Reuters.

2018 Movement in Congressional Crypto and Blockchain Regulation

Congress recently released their recommendations in the 2018 Congressional Joint Economic Report. In the report, blockchain is mentioned nearly 100 times as solutions for challenges and issues currently faced by the U.S.

It features an entire chapter on Blockchain (Chapter 9) and the overall tone is positive:

“The technology has many possible applications in addition to managing digital currencies, for which it is most widely known. Blockchain technology has the potential to help the economy function more efficiently and securely. However, the new technology and the possibilities it creates — including structural changes to and extensions of markets — present regulatory and legislative challenges for the Federal Government, including disparate treatment by the States. It is important to proceed with prudence and provide proper guidance to the market.”

Four key recommendations were made related to blockchain and cryptocurrencies in the March 2018 report:

1. Policymakers and the public should become more familiar with digital currencies and other uses of blockchain technology, which have a wide range of applications in the future.
2. Regulators should continue to coordinate among each other to guarantee coherent policy frameworks, definitions, and jurisdiction.
3. Policymakers, regulators, and entrepreneurs should continue to work together to ensure developers can deploy these new blockchain technologies quickly and in a manner that protects Americans from fraud, theft, and abuse, while ensuring compliance with relevant regulations.
4. Government agencies at all levels should consider and examine new uses for this technology that could make the government more efficient in performing its functions.

What’s Up With The Congressional Blockchain Caucus?

The Congressional Blockchain Caucus, co-chaired by Representatives Jared Polis, a Democrat from Colorado and David Schweikert, a Republican from Arizona, was founded in the 114th Congress. This bipartisan group focuses on three strategic areas:

1. Government Applications: How blockchain can improve government services.
2. Data Ownership: Solutions for personal data and identity management and how individual data ownership.
3. Healthcare: How blockchain technologies, such as smart contracts, can be used for increased security in patient records.

This caucus, like Dave Brat, advocates for a hands-off regulatory approach and believes that blockchain technology “will best evolve the same way the internet did; on its own”.

Blockchain- and Crypto-Related Bills

Most congressional bills that are directly or indirectly related to blockchain and cryptocurrencies hinge on the defensive side. The bills are to protect against money laundering, counterfeit, terrorist financing and tax evasion and include:

• S.1241 — Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017
• H.R.3100 — To require the President to develop a national strategy for combating the financing of terrorism and related forms of illicit finance, and for other purposes.
• H.R.2810 — National Defense Authorization Act for Fiscal Year 2018

As with the SEC, there are many differing opinions and a lot of moving pieces when it comes to blockchain and crypto regulation. While this is not good or bad, we feel it’s important to be aware of, especially as supporters of both cryptocurrency and blockchain technology. Stay up to date by checking back for more regulatory overviews.