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Tech Regulation

Regulators and Politicians Are Coming for the App Store

New legislation and an antitrust lawsuit threaten Apple’s monopoly over its App Store. The Department of Justice recently joined Fortnite developer Epic Games in appealing the latter’s failed 2020 lawsuit against Apple. Epic alleges that the tech giant’s exorbitant 30 percent commission on in-app transactions, which users are forced to conduct through the App Store, violates competition laws and harms consumers. 

Meanwhile, Congress could soon pass the Open App Markets Act (OAMA), a bipartisan bill that would stop app platforms from monopolizing payment systems for in-app transactions, restrict them from preferencing their own apps over competitors’ in-store, and require them to permit “sideloading” — the installation of unverified third-party apps outside of official app marketplaces.

This could give smartphone users access to more apps while increasing competition between developers. Lower entry barriers into the lucrative iPhone app market of more than 118 million Americans could spur innovation in apps that may not have been viable before. It would also encourage investment in developer start-ups and could lower prices for in-app purchases, including for emerging technologies like NFTs, by allowing developers to circumvent Apple’s commissions through alternative digital payment methods.

But is there more to the story?

Users aren’t likely to abandon their iPhones for competitors over costly in-app fees and a sideloading ban once locked in. Conversely, they may see this as a trade-off for better app vetting and data security and privacy controls that Apple promises. Android phones don’t levy 30 percent commissions on in-app transactions, but Google collects and monetizes user data for targeted advertising to a greater degree with fewer controls. 

Though conversely, analysts note that Apple’s own data collection and monetization also fuels its growing ad business, which is expected to grow to $20 billion/year in revenues by 2025. Sideloading outside the App store certainly threatens this segment of Apple’s business.

As for security, discerning adults can trust themselves in navigating less restrictive app marketplaces or in taking precautions if they sideload unverified apps. But the same can’t be said for vulnerable demographics like children or the elderly.

Though the OAMA permits smartphone operating systems to restrict or remove apps over legitimate security and privacy concerns, this may be difficult to implement regarding sideloading. A 2020 Nokia cybersecurity reportblamed sideloading, which is already possible on Android devices, for 15 to 47 times higher rates of malware infection on those devices relative to iPhones.

In any case, Google and Apple’s alternative business models have resulted in a split smartphone market. Apple holds 59 percent of the American market, while the global market is dominated by Android, whose share is 72.2 percent. Both companies face competition from alternative smartphone manufacturers like Huawei and non-smartphone app marketplaces, including gaming consoles like the Xbox, which are exempt from the OAMA.

In a competitive market where users already choose what they value, is a legislative or court mandate limiting companies’ abilities to tailor platforms to their user base necessary or desirable? The ability to monetize the app marketplace funds capital-intensive investment in platform and app ecosystem development. Stymying this ability could harm consumers by discouraging innovation and competition between platforms.

And if Target or Walmart’s ability to “self-preference” by placing home brand products in prime locations relative to competing alternatives is an accepted business practice that isn’t seen as “anti-competitive,” then how is self-preferencing on digital platforms different? Consumers already discern between brands and often choose alternatives for reasons other than cost or product placement — whether online or at brick-and-mortar stores. Placing limitations on self-preferencing may result in stores or platforms levying higher prices from consumers elsewhere or offering fewer choices.

The OAMA is likely to yield greater choices in apps for Apple customers and greater opportunities for developers. But there could still be some adverse long-term consequences. At the very least, provisions that restrict self-preferencing should be reconsidered as they won’t meaningfully increase choices consumers already face.

Originally published here

Why Political Interference in Big Tech Continues To Be a Big Mistake

little common sense and a little historical context make it relatively easy to see that monopoly power concerns for Big Tech are blown out of proportion, since internet incumbents don’t last forever and even the greatest industry leaders can be beaten at their own game. Take for instance AOL’s AIM, which despite having immense market powercouldn’t maintain its dominant position indefinitely – and the same is true for others within the tech sector.

Gen Xers remember when Facebook replaced Friendster and Myspace, just as younger audiences have now replaced Facebook with TikTok and Snapchat. And while TikTok is garnering quite a bit of media attention, Twitch and Discord are poised to be next as preferred platforms

Based on these examples, the pitching of proposals in Congress regarding who can or cannot tweet seems counterintuitive, especially since Twitter ranks rather low in usersanyway. 

Yael Ossowski, deputy director of the Consumer Choice Center, notes that “If Congress succeeds in changing antitrust laws to curb tech power, it will not be to the benefit of the typical user and consumer online. Rather, it would fulfill the political goals of a coalition that seeks to curtail much more than mergers and acquisitions: certain political speech, movements they view as hostile, and products to which they would rather consumers not have access.” Indeed, having the government determine who can post or what can be posted is a more concerning matter than that of a private organization.

Given that government oversight tends to grow overtime, and that regulations rarely get repealed once in place, competition serves a better means than government interference for curtailing Big Tech’s bad behavior. Even the best of the best in the business realm go by the wayside in due time, which is why calls for antitrust action against Big Tech should be squashed and claims for content moderation should also be put to rest – despite the detestable deleting of accounts and posts based on political grounds.

The market should be allowed to do what it does best – as conveyed by Joseph Schumpeter and those who advocate for his stance – incentivize competition via consumer interests and promote creative destruction through innovative processes. 

Government interference will only generate greater forms of technocracy, resulting in any entrepreneur in this realm to spend a greater amount of time and money navigating legal matters rather than on learning how to serve users best. And the amount of big bucks Big Tech is currently spending on lobbying fees could certainly be put toward better and more productive use.

Although politicians herald antitrust as being a means for mitigating the abuse of market power, the opposite is true. Antitrust results in nanny state stipulations that inhibit competition from new entrants and increases opportunities for regulatory capture – which, given Congress’s limited understanding of the tech space, is highly likely as the best of the best in the industry will be called upon to advise and consult on the rules being made.  

The aftereffects of antitrust have always been anti-producer, anti-consumer, and anti-progress. Ayn Rand rightly asserted that, “The Antitrust laws—an unenforceable, uncompliable, unjudicable mess of contradictions—have for decades kept American businessmen under a silent, growing reign of terror.” And according to a study for the Competitive Enterprise Institute, “Aggressive antitrust enforcement can create considerable economic uncertainty, which can have a chilling effect on long-term investment and innovation in both products and in business practices that benefit consumers.” 

It is important to remember that a monopoly in its truest sense is not occurring whenever the potential for an alternative to come about is present. And while some cry foul to how some in Big Tech are calling the shots on posting privileges, or how the creation of competing platforms has been hampered by restrictions of certain hosting sites, such asAmazon blocking Parler, the social media landscape is shifting. New entrants and options may not have come about as quickly as we’d like, but alternatives are gaining ground.

It should also be noted that even when there are limited options in a market economy, this does not always mean something is wrong, in fact it can actually mean that something is right. Consumers are creatures of habit, and so if value is being provided for and people are satisfied, other options may simply not be necessary nor desired. And for most of social media’s history, this was the case. Being able to interact online at no cost has been, and continues to be, a great benefit to many. 

Limited choice can also occur when consumers consist of a small or captive market – Milton Friedman noted how it would be inefficient to have more than one telephone poll producer in each town. Fortunately, unlike Friedman’s example, the World Wide Web is a limitless townsquare and so is our potential for contacts and queries – therefore one platform will never be enough. In fact, according to the Global Web Index, Gen Z and Millennials have, on average, 8.4 social media accounts and are known to gravitate toward other sites whenever something better comes along. 

Currently, image-based platforms are proving to be favored by younger audiences, while decentralized P2P platforms are also making waves. Online usage rates, and online offerings, will adjust to interests at hand, and given that network effects are diminishing through the consolidation of accounts, converting followers from one platform to another is getting easier. Perhaps no one knows this better than Mark Zuckerberg. As it turns out, after Meta acquired Instagram and WhatsApp, one of Facebook’s biggest concerns is competition coming from within. And when all three of these platforms became unavailable for roughly six hours, in October of  2021 due to a network outage, online audiences utilized other sites or simply logged off – proving people can pivot and adjust as needed.

Rest assured that Big Tech is more vulnerable than many realize, and competition isproving to be plentiful. The government’s meddling in social media matters is not only a waste of time and resources for both the public and private spheres, but also a big mistake for promoting the progress of user services and options.

Originally published here

Every Industry Should be Concerned about the News Cartels Meant to Bully Big Tech

The Journalism Competition and Preservation Act (JCPA) was introduced in 2021 as a means of protecting local media outlets from becoming obsolete due to the competitive landscape shifting to the online realm. The JCPA claims that the playing field needs to be leveled for news outlets in need of viewers and compensation must be allotted for the content sharing occurring on digital platforms.

This bill, receiving serious consideration from the Senate, would grant broadcasters the ability to collectively collude on matters of revenue generation, sharing privileges, and link click-through access. Essentially, the JCPA will exempt select parties within the news industry from price fixing policies and antitrust penalties – all for the sake of socking it to Big Tech.

The passing of this legislation should be a primary concern for any business professional since it will not only create new forms of industry interference but also set a new precedent regarding antitrust application. And here is why: 

  • The JCPA is targeted since it only focuses on one sector with one bullseye – Big Tech. Historically antitrust policy has had a broad application, but if the JCPA passes, it opens the door for other firms to be specifically called out in the future on similar grounds.
  • The JCPA is preferential in that although antitrust cases are being brought forth against digital platforms, bands of broadcasters will be granted safe harbor from cases being brought against them. They would be absolved from adhering to existing antitrust laws.
  • The JCPA is ex post facto in that changes and charges are to be applied regarding content sharing and link clicking, which were previously free and freely accessible.

The basic premise is that it will “provide a temporary safe harbor for publishers of online content to collectively negotiate with dominant online platforms regarding the terms on which content may be distributed”.

So, first and foremost, we must ask what is meant by “temporary” given that nothing is ever short-lived when agencies and accolades are involved. According to the bill, news outlets with online content will not be held accountable for violations of antitrust law for a four-year term. But, even if those four years are truly locked in place, it is unlikely that any oversight committee, which will be required in this case, will easily disband when that timespan has lapsed – particularly once funding streams and authority status are established.

We must also ask why “safe harbor” should be granted to select firms. Protectionist measures via legislation are a waste of resources given that private actors have historically done a better job at curtailing or even catching bad behavior in a competitive market.

It was Sherron Watkins who exposed Enron, not the SEC, and it was Bernie Maddoff’s sons who turned him in, not federal agents. And just as Mark Zuckerberg’s Facebook unseated Tom Anderson’s Myspace as the social networking site of choice, someone else will come along and upend Meta’s dominance. That is how the market works over time. This leads to the third and final point: should “dominant online platforms” truly be a concern?

While some assert that cable TV simply can’t compete, and “newspapers are locked in a life-or-death struggle with tech giants” we must acknowledge that change is hard and you can’t stop progress. In 2010, the last full set of Encyclopaedia Britannica was printed, and it hasn’t been missed by consumers or even the company that produced them.

Microsoft’s Encarta made the purchase of printed text obsolete, and now Wikipedia makes Encarta CD-ROMs a thing of the past. And one could argue we have greater access and education at our fingertips for it. 

As conveyed by the deputy director of the Consumer Choice Center, “It is up to media firms to discover innovative and effective methods of capturing digital audiences, not lobby governments to siphon money for them.”

Platforms vary in terms of function and service, and Big Tech is not impervious to natural forms of competition given the dynamic nature of market mechanisms and consumer needs. Take, for example, Netflix, which launched in 2007 and skyrocketed to success in 2013 with the release of its first series, House of Cards – coincidentally a storyline based on power struggles and corrupt cronies in Congress. By 2016, Netflix was being touted as monopolizing the streaming service sector and for a few years, the press readily called attention to its success as something to question and even fear.

In 2013, the term FANG stocks came about to represent industry giants with a stronghold in certain lucrative sectors and who could serve as the whipping boy for Big Business on Capitol Hill.  FANG included companies that we love to use but also love to loathe: Facebook (social media), Amazon (e-commerce), Netflix (streaming entertainment), and Google (search engine). 

Although we see these companies being under great scrutiny in the halls of Congress for their supposed monopolization of power, we can see before our eyes how the market is moving despite lobbying efforts and party officials crying foul. Indeed, fast forward to today and the FANG acronym is less applicable not only given name changes (Facebook to Meta) but position changes, whereas success is now dwindling for Netflix.

Hulu, HBO Max, Disney+, Prime Video, Starz, Peacock, Paramount Plus, Apple TV Plus, and more have all emerged despite Netflix’s previous power position. And the same will be true for others in the Big Tech realm over time. Decentralized P2P platforms are increasing in users and Facebook is facing cannibalization from within.

Twitter is another great example of a Big Tech firm that bureaucrats love to bash. Presently, arguments over posting privileges are being raised by Congressional members but if to have a little patience, we can already see the market is making moves. Twitter’s power is waning in comparison to other platform providers in users and reach, and so much of the time spent debating Dorsey’s former firm could be better spent on other matters.

To be sure, Senators have a skewed view of how the market works, and even a limited understanding of where their concerns should lie in regard to the digital media realm – and yet the interest for interference is growing. 

In addition to the JCPA, the House and Senate Judiciary Committees are also aiming to further their control over the online realm through the proposed tech accountability package. This package is proposed as a means for curtailing the dominance of certain digital platforms, but in reality, it is a significant power grab – and the power they are after is truly alarming.

These proposals further embed politics in economics, whereas the government will not only serve as a referee but also determine who can or can’t play. Congress will be corralling competition for online content creation and distribution, and the JCPA will substantiate such a mandate.

While economic power is limited by the market (since purpose and profit are determined by the exchange of goods, services, investments, labor, etc.), political power is a tricky beast given the incentives present for incumbents and the power of the purse strings for those in prominent positions.

To be sure, the network effects of political dynasties in DC are a more troublesome matter than the network effects of social media and so we should be very wary of allowing the government to have a larger role in industry matters – even when it comes to Big Tech.

Why Political Interference in Big Tech Continues To Be a Big Mistake

little common sense and a little historical context make it relatively easy to see that monopoly power concerns for Big Tech are blown out of proportion, since internet incumbents don’t last forever and even the greatest industry leaders can be beaten at their own game. Take for instance AOL’s AIM, which despite having immense market powercouldn’t maintain its dominant position indefinitely – and the same is true for others within the tech sector.

Gen Xers remember when Facebook replaced Friendster and Myspace, just as younger audiences have now replaced Facebook with TikTok and Snapchat. And while TikTok is garnering quite a bit of media attention, Twitch and Discord are poised to be next as preferred platforms

Based on these examples, the pitching of proposals in Congress regarding who can or cannot tweet seems counterintuitive, especially since Twitter ranks rather low in usersanyway. 

Yael Ossowski, deputy director of the Consumer Choice Center, notes that “If Congress succeeds in changing antitrust laws to curb tech power, it will not be to the benefit of the typical user and consumer online. Rather, it would fulfill the political goals of a coalition that seeks to curtail much more than mergers and acquisitions: certain political speech, movements they view as hostile, and products to which they would rather consumers not have access.” Indeed, having the government determine who can post or what can be posted is a more concerning matter than that of a private organization.

iven that government oversight tends to grow overtime, and that regulations rarely get repealed once in place, competition serves a better means than government interference for curtailing Big Tech’s bad behavior. Even the best of the best in the business realm go by the wayside in due time, which is why calls for antitrust action against Big Tech should be squashed and claims for content moderation should also be put to rest – despite the detestable deleting of accounts and posts based on political grounds.

Read the full text here

Proposta da Anatel de padronizar entrada de carregadores é inimiga da inovação

A Agência Nacional de Telecomunicações (Anatel) divulgou nesta terça-feira (28) uma proposta para padronizar a entrada de carregadores nos celulares. Com base em projeto da União Europeia, a agência brasileira pretende exigir a porta USB tipo C como padrão para todos os conectores de celular e carregador no país.

Em resposta, Fabio Fernandes, diretor de comunicação do Consumer Choice Center, disse que um carregador comum imposto pela Anatel, seguindo o modelo da UE, prejudica a inovação, restringe a concorrência e acaba prejudicando os consumidores.

“A concorrência é o maior impulsionador da inovação e do progresso. Todos nós temos preferências diferentes e, na maioria das vezes, cada um de nós tem uma empresa de eletrônicos de consumo favorita, seja Apple, Samsung, ou Google. Compelidas a competir, as empresas têm incentivos para continuar melhorando seus produtos e oferecendo mais opções. Os carregadores padronizados sugeridos pela Anatel infringiriam nesse espírito empreendedor”, disse Fernandes.

Read the full text here

ANATEL QUER PADRONIZAR CARREGADORES DE CELULAR, MAS ESPECIALISTA QUESTIONA INICIATIVA

A Agência Nacional de Telecomunicações (Anatel) iniciou nesta terça-feira, dia 28, uma consulta pública para a proposta de tornar carregadores USB-C obrigatórios para todos os celulares vendidos no Brasil. A consulta vem na esteira da decisão da União Europeia de adotar o USB-C como padrão universal para smartphones e outros eletrônicos até 2024.

“Atenta aos referidos movimentos do mercado internacional, a área técnica da Anatel avaliou o tema e apresentou uma proposta com abordagem similar para aplicação no mercado brasileiro”, diz o texto no blog da agência.

A adoção de um padrão de carregamento tipo USB-C tem o maior impacto sobre a Apple, já que iPhones ainda usam o carregador Lightning da própria companhia. A Apple criticou a proposta de lei quando ela ainda estava sendo debatida na UE, dizendo que legislações do tipo “engessam a inovação em vez de encorajá-la”. No entanto, há rumores de que a gigante de tecnologia já está trabalhando para passar seus produtos para carregamento USB-C, talvez já no iPhone 15.

As vantagens do USB-C obrigatório citadas na consulta incluem reduzir o lixo eletrônico e oferecer mais conveniência aos consumidores brasileiros. A Anatel diz ainda que vem trabalhando na padronização de carregadores para celular há anos. Em 2019, por exemplo, a agência conseguiu a aprovação da Recomendação L.1000, que define o USB-C como protocolo para terminais móveis de carregamento.

A medida que a Anatel pretende adotar é questionada por Fabio Fernandes, diretor de comunicação do Consumer Choice Center, um movimento global que luta pelos direitos do consumidor. Para ele, um carregador comum imposto pela Anatel, seguindo o modelo da UE, prejudica a inovação, restringe a concorrência e acaba prejudicando os consumidores.

Read the full text here

Celulares poderão ter carregador único

A Agência Nacional de Telecomunicações (Anatel) divulgou na terça-feira uma proposta para padronizar a entrada de carregadores dos celulares no Brasil. Com base em um projeto da União Europeia, a agência brasileira pretende exigir a porta USB tipo C como padrão para todos os conectores de celular e carregador no país.

A proposta de ato normativo da Anatel está em consulta pública, o que significa que ainda não está valendo. No site da agência, a minuta de ato normativo receberá contribuições da sociedade.

Read the full text here

John Oliver delivers Democratic Party talking points on antitrust

What does it say about us when we turn to comedians to inform our thinking on politics?

We’ve witnessed the rise of Ukrainian comedian-turned-wartime-President Volodymyr Zelensky. Former Guatemalan President Jimmy Morales was a comedian, too, but was dogged by very unfunny allegations of corruption. Comedian Dave Smith will likely seek the 2024 Libertarian Party presidential nomination, having led the “Mises Caucus” takeover of party leadership last month.

Enter soothsaying comedians of the anti-MAGA resistance. Since the election of former President Donald Trump, late-night comedians Stephen Colbert, Jimmy Kimmel, and Trevor Noah’s monologues have sounded more like Democratic Party spin than headlining acts for comedy TV.

The slyest of the bunch is John Oliver. The British-born comedian and former Daily Showcorrespondent makes a career of political hamming.

While most comedians joke about celebrity scandals or reality TV, Oliver tackles serious issues and demands political action. In 2014, he pushed viewers to petition for net neutrality, demanding the Federal Communications Commission reclassify internet service providers as public utilities to keep the net “free.”

In the last year, his segments on critical race theoryrent control, and misinformation have gone viral among politicos, with Oliver dropping screwball jokes between policy analyses that could have been written by any left-wing think tank.

Recently, Oliver has used his satire program to demand antitrust reform to “punish” Big Tech.

He delivers punchlines and commentary sweetened with a call to action on two bills, the Open Markets Act and American Innovation and Choice Online Act. These aim to crack open the Apple and Google app stores, ban “self-preferencing” on online shops such as Amazon, and chill tech mergers and acquisitions by Meta.

Oliver champions antitrust warrior and bill author Sen. Amy Klobuchar while chastising Senate Majority Leader Chuck Schumer for dawdling on the Senate floor because of his family’s connections to tech firms. He even praises Republicans who’ve joined the cause for their own crusade of content moderation.

To be clear, there are valid concerns about several troubling actions by tech firms. When they break the law, they should be penalized.

But Oliver’s reductionist arguments, delivered in comedic pentameter, manifest a world of rampant consumer harm because Amazon sells its own batteries or because Google heavily features its image algorithm.

What Oliver deplores is vertical integration in tech. But this is precisely why we celebratecompanies such as Tesla and IKEA, which rank highly in consumer satisfaction and make a name for themselves by controlling their supply chains. Somehow, this is deplorable when it’s an online business with millions of users and customers.

That is the message Oliver fans — and serious advocacy organizations and politicians — take from his show.

Digital rights group Fight for the Future, leading a coalition of tech competitors and left-wing pressure groups, is hosting an initiative they call “Antitrust Summer,” demanding Congress take immediate action. No surprise, Oliver’s segment prominently features on the homepage. Democratic heavyweights such as Hillary Clinton share his YouTube video with glee.

When comedic figures become political flag bearers, we should remain skeptical. There is every reason to hold Big Tech accountable without weaponizing the government. And even more reason to avoid complaints from comedians with little skin in the game.

Oliver, and the political factions who celebrate him, should know that complaints about a company’s product cannot be the basis for a sweeping redefinition of federal antitrust policies that would affect hundreds of millions of consumers. Government power is no laughing matter.

Originally published here

EU’s Bitcoin and Cryptocurrency Surveillance Rules to Harm Consumers

The European Union’s final trialogue between Council, Commission, and Parliament has finished crafting the first part of legislation that makes up the new EU anti-money laundering package aligned with the Markets in Crypto-assets rules (MiCA).

These rules are drafted following recommendations from the so-called Travel Rule of the Financial Action Task Force (FATF), a global treaty organization that combats money laundering. The aim of this rule is to effectively track financial assets, and included crypto assets like Bitcoin and other cryptocurrencies beginning in 2019,

The EU’s proposed rules introduce regulations that are far from technologically neutral, are detrimental to innovation, and will harm consumers who depend on cryptocurrency services.

Crypto asset service providers are obliged to keep records and provide traceability from the first euro compared to traditional finance where that requirement is set for transfers larger than 1000 EUR.

Crypto asset service providers will be required to collect information and apply enhanced due diligence measures with respect to all transfers involving non-custodial wallets. A number of risk-mitigation measures will be in place for cryptocurrency exchanges before establishing a business relationship with exchanges in third countries. 

Putting such stringent regulations on non-custodial wallets, together with introducing strict and complicated measures for cryptocurrency exchanges, will introduce unfavorable conditions for the growing industry and will cause a number of businesses to be forced and move their operations abroad – depriving consumers of their ability to safely and securely enjoy crypto services.

Putting these high regulatory costs in place is already influencing the decision-making of crypto asset service providers, now considering changing jurisdictions and moving to more favorable ones. These ham-handed regulations won’t only affect the industry, but many of the consumers who rely on them, pushing them to use non-EU exchanges. 

We have seen consumers voting with their feet in the past, choosing service providers in different countries to avoid similar measures, and this will be no exception.

With more Orwellian stipulations requiring that a consumer who sends or receives more than 1000 EUR to or from their own non-custodial wallet be verified by the crypto exchange, we will be seeing a number of issues arising both for the industry as well as for the consumers, putting additional costs to all transfers. 

The European Union has been criticized in the past for its overregulation especially when it comes to innovative technologies. Even though the EU has been relatively early in creating a comprehensive legal framework for cryptocurrencies, a number of the regulations agreed on will undoubtedly bring harm to both the industry and the retail consumer.

Surveillance of each consumer coupled with copious regulations aimed at crypto asset service providers will once again leave EU citizens looking for alternatives within jurisdictions more open to innovation, decentralization, and consumer-orientated regulatory frameworks.

The entire point of cryptocurrencies is to provide an alternative to the government-controlled fiat money system. These rules aim to disrupt that aim, principally by forcing industry players to comply with even stricter rules imposed on traditional finance institutions.

There is a better way to do this in order to promote innovation, protect consumers, and create a better ecosystem that will benefit all Europeans.

Our Principles for Smart Cryptocurrency Regulations policy primer is available to all regulators, and offers core principles to uphold in order to create regulatory guidance for the nascent industry without hurting innovation.

PRINCIPLES

  • Prevent Fraud
  • Technological Neutrality
  • Reasonable Taxation
  • Legal Certainty & Transparency

The temptation to regulate cryptocurrencies and the blockchain economy based on financial considerations alone, rather than the innovative potential, is an active threat to entrepreneurs and consumers in the crypto space.

Penalizing first-movers in crypto innovation or subjecting them to outdated laws will only serve to limit the unparalleled economic growth currently provided by the sector, or risk pushing all investment and entrepreneurship to less reliable and lawful jurisdictions.

The policy primer can be read in full here

The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva, and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org.

If you would like to help us defeat harmful Bitcoin and cryptocurrency regulation, also using crypto, consider investing value in the Consumer Choice Center via our Donate page.

New Yorkers need prudence, not bans, on Bitcoin and cryptocurrency mining

On May 24, 2022, the Consumer Choice Center sent a letter to New York state lawmakers, warning of the potential consequences to consumers if bill S6486D was adopted, a moratorium on Bitcoin and cryptocurrency mining.

The full letter is available below, or in PDF version here.

Dear Senators,

We write to you to urge you to vote against S6486D, a companion bill to A7389C, which would order a state-wide moratorium on cryptocurrency generation or mining.

If passed, this bill would be a death blow to the Bitcoin and cryptocurrency industry, resulting in thousands of jobs lost in New York, a loss of capital to scale up renewable energy, and would harm all potential benefits to consumers from cryptocurrency projects and initiatives. 

The aim of embracing climate goals to ensure 100% renewable energy usage in cryptocurrency generation and mining is well-intended, but a complete ban will have a devastating impact on innovators and entrepreneurs hosting their facilities in the state of New York, and consumers and investors that rely on their services.

As a consumer group, it may seem odd for us to weigh in on a topic that affects mostly industry players and firms. However, because we believe that Bitcoin, and cryptocurrencies more broadly, will serve a vital role in making finance and economics more inclusive and accessible for sending, receiving, and saving value, we hold it in the interest of consumers that the hashrate (the total computing power of the network) continue to grow, and that better public policy on cryptocurrencies is embraced among state legislatures.

If the Bitcoin hashrate grows specifically in the United States, then we will have more control in how mining develops and how it can benefit the country, its citizens, and our energy grids.. This last part is vital for climate goals, which cannot be said for China or other nations.

According to the latest figures from the first quarter of 2022 on Bitcoin mining specifically, 58.4% of miners are using renewable energy sources, and that number has only increased in several years. In New York, many firms are retooling abandoned processing and power generation plants to build cryptocurrency data centers, and are providing economic value in return that is putting renewable energy to work.

What’s more, this wide-ranging energy diversification is happening at a pace faster than any other industry, leading to more investment in renewable energy capacities and delivery systems. This increased demand is leading to more environmentally favorable energy delivery for customers of all public electricity utilities, and will also help bring down costs. And this is being carried out due to the incentives of firms and individuals who participate in adding hash rate to mining: they want to lower their costs and find better alternatives. 

Cryptocurrency generation and mining firms have an incentive to use the most affordable and renewable energy sources available, and the data backs up this claim. This is a win-win scenario for towns and localities with these facilities, for employees of these firms, residents in these towns that benefit from increased commerce, and energy customers overall.

As cryptocurrency mining has proliferated in New York, it has opened up new entrepreneurial activities that will help improve the lives of New Yorkers in small communities and large urban centers alike. Entertaining a ban on these activities, in pursuit of an unclear climate goal, will negate these gains. There is a better path.

It should not surprise you to know that New York’s previous policy decisions, including the highly criticized BitLicense, have locked many New Yorkers out of the new cryptocurrency ecosystem due to the high compliance costs. Some New Yorkers have chosen to change residences in order to acquire cryptocurrency or to invest in crypto businesses, which they can do in any other state, but more specifically Texas, Wyoming, and Florida.

If this moratorium on cryptocurrency generation comes to pass, it will be yet another signal to entrepreneurs and consumers that Bitcoin and other cryptocurrencies are not welcomed in New York, and the regulatory framework is too unfavorable to justify investing here.

A number of industry organizations, communities, and unions have already expressed their concerns about the impact this bill would have on their families and livelihoods, fearing potential job loss in case industry gets driven away from the state as a result of this legislation. The loss of future investments and new jobs is another concern expressed by many communities in cities such as Rochester, Albany, and Syracuse.

According to the May 2022 Empire State Manufacturing Survey, the general business conditions index has dropped thirty-six points statewide. The last thing many affected and marginalized communities need is a moratorium that would drive businesses away from the state, and keep millions of New Yorkers from being included in a new system of value.

We understand that the quick rise of cryptocurrency mining raises many questions for residents, particularly when it involves the local economy and environment. However, a more prudent path would be an environmental review conducted by relevant authorities, rather than a wholesale ban and moratorium that would put many projects in legal jeopardy.

As consumer advocates, we are strongly opposed to this bill. We believe that New York residents deserve a chance to take part in the nascent industry that so many other states are hoping to accommodate. Using the force of regulation to drive away investments and jobs, stop economic progress, and shut out millions of New Yorkers from a more inclusive financial system would not only be wrong, but it would also be negligent.

Please vote No on S6486D aiming to place a moratorium on proof-of-work and help New York become a hub of innovation that embraces new technologies. New Yorkers should have the opportunity to participate in one of the biggest innovations of our age. With your vote against this bill and a more prudent direction, we can ensure that will happen.

Sincerely Yours,

Yaël Ossowski

Deputy Director

Aleksandar Kokotovic

Crypto Fellow

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