With DeFi scams, exploitation and collapse becoming more and more common in the digital asset space, the need for comprehensive regulation to protect consumers has never been more important. While the space often fights against oversight from any sort of centralized body, the popularity of modern-day digital assets and the plethora of applications built using blockchain technology has necessitated the need for some level of regulatory guidance, particularly To protect citizens from violent financial schemes that only serve to fill the pockets of creators and their stakeholders.
Note: The cyberpunk group that originally came up with many of the ideas surrounding digital assets valued cryptography as a tool to defend themselves against authoritarian governments.
The purpose of this article is to provide an overview of bitcoin’s role in digital asset regulation, and its differences from the majority of other cryptocurrencies, should encourage regulators to view it in a different light.
Last week, Wyoming Senator Cynthia Loomis, in a bipartisan collaborative effort with New York Senator Kirsten Gillibrand, issued a proposal for regulation around cryptocurrencies and other digital assets. It mostly deals with security and taxation laws in the United States, but if passed, could serve as a standard for other jurisdictions. This offer is certainly good news for cryptocurrency developers and users; It serves to ensure that the United States can become a leader in digital asset innovation while protecting its citizens against fraudulent schemes. While the entirety of the proposal is beyond the scope of this article, key takeaways follow, as outlined in this article. Good luck,
- Digital assets, including bitcoin, should be treated as subsidiary assets or commodities. This would make the Commodity Futures Trading Commission (CFTC) the principal regulatory body overseeing digital assets, instead of the Securities and Exchange Commission (SEC).
- This clarifies the definition of a crypto broker, thus protecting developers working on bitcoin wallets, Lightning clients or other tools from the same reporting requirements that may be imposed on a custodial centralized exchange such as Coinbase.
- It is mandatory that companies raising capital from the sale of digital assets disclose those sales to the SEC.
While the bill codifies and introduces certain rights and oversight for space, it ensures that development in space is not hindered, a concern previously expressed by Jack Dorsey, among others. Senator Loomis in particular has long been a staunch supporter of bitcoin, and unlike his contemporaries, is focusing on innovation rather than the potential downside of its energy consumption.
However, bitcoin’s design gives it certain advantages that must serve to make it a unique asset, both in terms of user security and broader regulation. For starters, many of the disclosure and transparency concerns surrounding other base-layer platforms do not apply to bitcoin (they may apply to companies that build sub-assets or other products on top of the bitcoin blockchain). Due to the lack of a centralized organization that oversees the operations of bitcoin. You will often hear the adage that bitcoin is the purest form of digital money because it doesn’t offer, or even try to offer, anything different. You are not entitled to any special rights by holding bitcoins: you do not have voting rights in any entity, you are not entitled to receive rewards in the form of rewards and you cannot gain control over the underlying protocol by simply buying more of it Huh. Because of the built-in proof-of-work consensus mechanism. This is not to ridicule alternative platforms that may offer these features. After all, many alternative platforms have taken an active role in helping decentralize the Internet, and have allowed stablecoins (along with bitcoin) as an alternative financial instrument for those of us less fortunate. Rather, it is meant to underscore the fact that bitcoin is the best form of digital currency, especially because of its simplicity.
In a previous article, I argued that it is bitcoin, not the broader cryptocurrency market, that is helping to fight authoritarianism and act as a tool for financial freedom. A variation of the same logic applies to distinguishing bitcoin when it comes to thinking about regulation specifications for digital assets. No centralized party within bitcoin’s vast ecosystem can exert significant influence over its protocol, nor can any one party create new bitcoins to satisfy certain needs that serve their own interests.
The core ethos that separates Bitcoin from other protocols is its decentralization. While many in the field argue that bitcoin is actually fairly centralized due to its supply distribution and the presence of mining pools, the reality is that the measure of decentralization of any protocol – be it peer-to-peer digital asset networks, Be it the government or your local recreational sports league – it goes beyond simply analyzing quantitative data such as concentration of hash power or concentration of wealth. Instead, perhaps the most important part of measuring decentralization is the decision-making power that any centralized party has to make decisions over a long period of time for the protocol. Most, if not all, alternative platforms have some form of foundation or organization that makes important protocol or tokenonomic (economics of the underlying asset) decisions. In many cases, there may be some sort of governance or voting mechanism that enables holders to vote on certain resolutions. While it is certainly more decentralized than your traditional Web 2.0 protocol, let’s introduce the decision-making protocol of bitcoin.
In bitcoin, anyone can propose a protocol change through a bitcoin improvement proposal (BIP). For a protocol-change to be codified, it must be approved by miners, with no current ownership weighting. Most importantly, there is no centralized authority that can influence the miners’ decisions. Unlike alternative platforms, bitcoin is more akin to software rather than a company. (The unknown creator/founder has removed himself completely from the public eye, and has not transacted with his own bitcoins for nearly a decade.)
It is this decentralization in particular that allows bitcoin to become a tool for human rights activists and those living in authoritarian countries. It is this decentralization that allows bitcoin to be a version of sound money and an active hedge against inflation. It is this decentralization that regulators and lawmakers should take into account when creating regulation for crypto-based assets. Senator Lumis’ and Senator Gillibrand’s proposal takes a major step in the right direction by specifically distinguishing between protocols/assets that have characteristics of a traditional company and those who are independent, autonomous and help create legitimate change within our society.
This is the guest post of Archie Chowdhary. The opinions expressed are solely their own and do not necessarily represent those of BTC Inc. either . reflect the thoughts of bitcoin magazine,