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Our Well-Timed Warning on FTX, Bankman-Fried and Future Cryptocurrency Regulations

This letter was sent to Senators, Congressmen of relevant committees, and regulators in the Consumer Financial Protection Bureau, Securities and Exchange Commission, and Commodity Futures Trading Commission in the aftermath of the FTX collapse. The previous letter can be viewed here.

Referring to the previous letter we sent to lawmakers and regulators on October 26, 2022, warning of the influence and inherent financial risks posed by then FTX CEO Sam Bankman-Fried and his related companies, here we offer our thoughts on what you should consider for future regulation on digital assets, cryptocurrencies, and the platforms that use them.

As you will have read by now, the alleged criminal actions of Mr. Bankman-Fried and his affiliated companies (FTX International, FTX Europe, Alameda Research, etc.), have led to several bankruptcy filings, will likely lead to expensive lawsuits, and, without a doubt, will invite investigations and questions from your colleagues and committees in Congress. All of these are necessary and prudent.

The halting of withdrawals for billions of dollars of customer funds, the intermingling of company and customer assets, the collateralization of new crypto tokens backed by nothing, and the unsustainable leverage conspired to create one of the most calamitous events in recent financial history. It is a stain on the reputation of creative entrepreneurs and builders providing value in the cryptocurrency space. This is made all the more troubling by the influence of this company and its leaders in our nation’s capital.

The significant influence of Mr. Bankman-Fried and his companies among Congressional members and staff, donations to political campaigns, and the close relationship with regulators present a damning case of what happens when politically connected firms aim to control and shape legislation without input from consumers and citizens.

While decision-makers were eager to meet with Mr. Bankman-Fried and mirror his biased suggestions on cryptocurrency policy in legislation and enforcement actions, consumer groups like ours sounded the alarm about the conflicts of interest detrimental to sound and principled policy for the millions of Americans who use and invest in cryptocurrencies like Bitcoin.

The Consumer Choice Center began writing publicly about the conflicts of interest and risky financial dealings of these companies and Mr. Bankman-Fried in September 2022, and how they would pose a considerable risk both to the legitimate cryptocurrency industry and to the savings and investments of millions of consumers. We remain steadfast in our conviction.

That said, as consumer advocates, we remain optimistic about the promises of Bitcoin, its cryptocurrency offspring, and the innovative blockchains, decentralized technologies, and crypto services that have evolved around them.

Users of decentralized technologies, however, do not need an industry approach to regulation. Regulations exist to set the rules of the game, not to chart the leaders of the game. This previous approach gave cover to FTX and its affiliated companies and has led to the disaster we see today.

The main caution we invoke, therefore, is that many proposed regulations aim to cement existing industry players and lockout innovative upstarts, while at the same time requiring the same restrictive rules that caused many people to explore cryptocurrencies in the first place.

As we have stated, if rules on crypto and its customers help solidify the financial portfolios, positions, and stock prices of only a select few companies, this will drive innovation away from our shores.

The bad actions of this particular company, while shocking and injurious to many, reflect the mistakes and alleged crimes of those involved. They do not, in any certain terms, condemn the wonderful possibilities of a crypto future nor the millions of consumers who responsibly use these technologies.

The frauds allegedly perpetrated are not too far removed from those of regulated financial firms that have deservedly reaped the consequences of misbehavior, either by the market or law enforcement. That the end product was cryptocurrencies instead of credit default swaps or mortgages makes no difference.

Fraud is fraud and remains illegal no matter what product a company is selling.

This is a stark contrast to the system of fractional-reserve banking that now underlies much of the American financial system and creates the incentives of malfeasance aided by loose monetary policy.

We should not mistake the ills of the current system for those of cryptographically secure digital assets.

With that in mind, rather than the approaches of several self-interested industry leaders, consumers deserve regulation on cryptocurrencies and digital firms that enforce existing rules on fraud (known as “rug pulls”), remain technologically neutral, offer reasonable and minimal taxation, and provide legal transparency. Punishing fraud and abuse, insider trading, and self-dealing should remain the focus.

As consumer advocates, we promote the principle of “self-custody” for crypto consumers, holding private keys to digital assets. This is a cryptographically secure method of controlling cryptocurrencies as originally intended, and one that should be an industry standard. This is the strongest method by which exchanges, brokerages, and those who regulate them can protect consumers. 

The aim of cryptographic digital assets and decentralized digital cash, since the founding of Bitcoin in 2008 by Satoshi Nakamoto, has centered on creating permissionless, peer-to-peer transactions offering a final settlement in a decentralized manner. That should be the guiding principle rather than temporary self-interest.

The whims of a select few industry players, however successful they may be, cannot be the guiding light for the future of decentralized digital money, as the saga of FTX has proven.

The Consumer Choice Center created a policy primer on Principles for Smart Cryptocurrency Regulations in September 2021 to highlight these concerns and we hope you will apply them.

We remain at your disposal for any further exploration of how best to craft rules, guidance, and regulation on the future of cryptocurrencies in our country, so that all society may benefit.

Sincerely yours,

Yaël Ossowski

Deputy Director

Consumer Choice Center

Aleksandar Kokotovic

Crypto Fellow

Consumer Choice Center

Consumer Group Warns Regulators of FTX CEO’s influence on Upcoming Cryptocurrency Regulations

Washington, D.C. – Today the Consumer Choice Center sent a letter to Senators and Representatives involved in crafting and approving future cryptocurrency regulations, warning them of the substance of regulatory recommendations made by FTX CEO Sam Bankman-Fried, which he made in a recent company blog post.

Bankman-Fried has, in recent years, become a primary player in American domestic politics, pledging to spend up to $1 billion to fund the Democratic Party’s 2024 efforts, and a notable figure promoting cryptocurrency regulatory policy — much of which would benefit his company and properties.

Yaël Ossowski, deputy director of the consumer advocacy group Consumer Choice Center, said “The reason for cautioning lawmakers is that the decentralization that powers the entire crypto ecosystem is at stake if they only hear from vested interests from oscillating agendas that won’t necessarily favor consumers.

“For those of us with a significant consumer interest in Bitcoin and other cryptocurrencies — protocols designed to be decentralized — to see so much capital and control vested in one person who has a major influence in crafting legislation to impact millions is a warning sign,” added Ossowski.

“Users of decentralized technologies do not need an industry approach to regulation. Regulations exist to set the rules of the game, not to chart the leaders of the game. The main caution we invoke is that many proposed regulations aim to cement existing industry players and lockout innovative upstarts, while at the same time requiring the same restrictive rules that caused many people to explore cryptocurrencies in the first place.

“Recent comments and suggestions by FTX CEO and noted Democratic Party fundraiser Sam Bankman-Fried, especially, leave us concerned. If rules on crypto and its customers help solidify the financial portfolios, positions, and stock prices of only a select few companies, this will drive innovation away from American shores. While many proposals laid out by Mr. Bankman-Fried do address consumer needs — especially as it relates to hacks, scams, and protection of funds — his recommendations for a highly licensed regime on all sides of digital transactions, especially Decentralized Finance (DeFi), go against the spirit of why cryptocurrencies were created in the first place,” he said.

“Last year, my colleagues and I at the Consumer Choice Center released our Principles for Smart Crypto Regulation, underscoring the need for preventing fraud, pursuing technological neutrality, reasonably low taxation, and legal certainty and transparency, which we believe will be a better framework for future regulation.

“It would benefit us all if future rules help empower consumers and the firms they interact with, punish fraud, abuse, and insider trading, and provide financial transparency.  The whims of a select few industry players, however successful they may be, cannot be the guiding light for the future of decentralized digital money,” concluded Ossowski.

***CCC Deputy Director Yaël Ossowski is available to speak with accredited media on consumer regulations and consumer choice issues. Please send media inquiries to yael@consumerchoicecenter.org.***

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

Preserve privacy by rejecting a ban on Bitcoin and crypto self-custody in Lithuania

Lithuania’s Finance Ministry has announced plans that would essentially outlaw non-custodial crypto wallets – the practice of self-custodying of Bitcoin and cryptocurrencies on a wallet an individual controls – and impose stricter regulations on crypto exchanges in an attempt to combat money-laundering, terrorist financing, and sanctions evasion. 

The prepared draft law heads to the Seimas and, if passed, would impose stricter regulations on individuals as well as cryptocurrency exchanges in the country.

This bill mirrors a proposed European Commission regulation that has passed various EU Parliament committees but has yet to adopt continent-wide, aiming to restrict cryptocurrency services and institutions.

“Banning 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 – not to mention the harm this does to consumers who want to safely and securely enjoy crypto services,” said Aleksandar Kokotovic, crypto fellow at the Consumer Choice Center, a consumer advocacy group. 

“A measure that aims to prevent money laundering will have very little effect in doing so but will definitely hurt the privacy of Lithuanian citizens and force them to use services based outside of the country, leaving them less secure than they are at the moment,” said Kokotovic.

“Non-custodial Bitcoin and cryptocurrency wallets are basically just code, many of which are open source and can be replicated and forked indefinitely. A government trying to ban code is not only ridiculous but will do absolutely nothing to supposedly stop bad actors. All it will do, in the end, is create a precedent for the government to crack down on its own citizens for using cryptocurrencies,” said Yaël Ossowski, deputy director of the Consumer Choice Center.

“Banning software in 2022 is not only a bad idea that will be impossible to enforce, but will have a wide array of possible negative consequences, including the privacy of financial and crypto customers. 

“We have seen consumers voting with their feet in the past and sometimes being forced to choose service providers in different countries to avoid similar measures. We are still hoping that Seimas will understand the worries around approving such legislation and that they will preserve privacy and safeguard innovation rather than create unfavorable conditions for consumers and businesses,” said Yaël Ossowski, deputy director of the Consumer Choice Center.

The Consumer Choice Center strongly urges Seimas members to vote against this legislation and to preserve the privacy of Lithuanian citizens as well as continue creating a prosperous and friendly business environment for consumers and industry alike.

“We offer the following bedrock principles on smart crypto regulation for lawmakers, hoping to promote sound policies that will encourage innovation, increase economic inclusion across all income groups, all the while protecting consumers from harm,” said Ossowski.

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 for entrepreneurs and consumers in the crypto space,” said Aleksandar Kokotović, CCC’s crypto fellow and co-author of the primer.

“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,” added Kokotović.

The policy primer can be read in full here

New York lawmakers just killed Bitcoin and crypto mining and consumers will suffer

Albany, NY – Early this morning, the New York State Senate joined with the State Assembly to pass a moratorium on Bitcoin and cryptocurrency mining, issuing yet another reminder that state lawmakers want to deny their residents from interacting with cryptocurrencies.

The law would prevent new permits from being issued to carbon-based fueled proof-of-work mining operations that use behind-the-meter energy, putting millions of dollars worth of investments into jeopardy. This follows the logic of the much-derided BitLicense regulation, which has made it nearly impossible for small and medium-sized firms to offer crypto services to New York residents.

“By passing this bill, New York lawmakers are unequivocally stating they want their residents completely locked out of cryptocurrencies, from generation and mining services to actually being able to easily buy them through an exchange,” said Yaël Ossowski, deputy director of the Consumer Choice Center, a consumer advocacy group.

“If Gov. Hochul signs this bill, it will drive a stake through the Bitcoin mining industry, and states like Florida, Montana, Utah, and Texas will rejoice at the opportunity to invite those entrepreneurs and innovators to establish operations in their states.

“Because Bitcoin, and cryptocurrencies more broadly, will serve a vital role in making finance 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 states.

“New York, however, has decided to take the NIMBY approach and deny their residents that opportunity,” added Ossowski.

“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,” said Ossowski.

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

“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,” said Aleksandar Kokotovic, crypto fellow at the Consumer Choice Center. 

“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,” added Kokotovic.

***CCC Deputy Director Yaël Ossowski is available to speak on consumer regulations and consumer choice issues. Please send media inquiries to yael@consumerchoicecenter.org.***

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

NIMBY Bitcoin mining ban threatens to lock New Yorkers out of the crypto revolution

By Yaël Ossowski

In 2015, when New York unveiled the BitLicense, a regulatory framework for Bitcoin and cryptocurrency, there was great fanfare among lawmakers. For innovators and entrepreneurs, however, that began what many labeled the “Great Bitcoin Exodus”.

And though it has been reformed since, much of the cryptocurrency space has walled off the Empire State because of the exhaustive regulations, leaving many customers unable to use a host of exchanges, brokerages, and other services. Residents were even prohibited from buying the much anticipated NYCCoin that launched last year.

Though some exchanges and brokers have applied and received the license — usually those armed with lawyers and staffed by former regulators — New Yorkers are still left out of most of the innovation happening with cryptocurrencies. Miners, however, decided to stay.

Bitcoin mining firms have scooped up abandoned plants in Niagara Falls, Buffalo, and more, using hydropower and natural gas to power the computers needed to “unlock” Bitcoin from the network. Regulators, however, are once again keen to put the screws to crypto. 

A bill awaiting its fate in the Senate would impose a two-year moratorium on crypto mining permits, and launch an expansive environmental review.

As a consumer advocate, I view this bill as a death blow to the Bitcoin and cryptocurrency industry, risking jobs and capital that could otherwise scale up renewable energy, and would deny the benefits of crypto and Bitcoin to consumers.

Embracing climate goals to ensure 100% renewable energy usage in mining is well-intended, but a complete ban would have consequences. It will be yet another signal to entrepreneurs and consumers that Bitcoin and other cryptocurrencies are not welcome in New York, and the regulatory framework is too unfavorable to justify investing here.

For people feeling the impact of inflation, and for those who are locked out of the traditional finance and banking sector, their choices will become even more limited.

I understand the rise of cryptocurrency mining raises questions for residents, particularly when it involves the 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 jeopardy.

When it comes to public policy on Bitcoin and cryptocurrency, I would rather side with financial inclusion and crypto innovation than a “Not In My Backyard” mentality.

New Yorkers deserve better: a choice of whether they want to participate in the crypto revolution, rather than have their lawmakers make that choice for them.

Yaël Ossowski is deputy director of the Consumer Choice Center

EU Parliament Risks ‘Forever Stalling’ Digital Innovation If It Accepts Environmental Scrutiny on Proof-of-Work Mining, Bitcoin, and the Crypto Economy

BRUSSELS, BE – The European Parliament’s Committee on Economic and Monetary Affairs will vote today on a comprehensive regulatory proposal called MiCA (Market in Crypto-Assets). This proposal has been in the works for months, however, last-minute several amendments have been added to the proposal, which if accepted could effectively ban Bitcoin and cryptocurrency mining in the European Union, pushing thousands of innovators out of Europe.

“By effectively prohibiting the issuance or offering for exchange of crypto-assets that rely on proof-of-work protocols under environmental, social, and governance guidelines, the European Union would make a disastrous move that would obliterate not just the nascent crypto industry but also hurt consumers and once again cede technological leadership in innovation to the United States,” said Aleksandar Kokotović, crypto fellow at Consumer Choice Center, a global consumer advocacy group.

“If these amendments are adopted, EU regulators will strike a devastating blow to the crypto industry in member states. Not only will Bitcoin mining face immediate scrutiny, but the entire Defi space based on Ethereum, the rising NFT industry, and hundreds of companies will be forced to close, move or ban EU citizens from using their services. By not letting individuals and companies choose technologies they prefer, EU regulators are going against the principles of technological neutrality and are setting a very dangerous and harmful precedent.

“If the EU wants to completely stifle innovation and financial sovereignty of its citizens, this is the way to go. If it wants to lose millions of jobs, talent, and value that come with innovation, then this is a good plan for that. Otherwise, these amendments must not pass,” said Kokotović.

Yaël Ossowski, deputy director of the Consumer Choice Center, said such a vote risks “forever stalling” digital innovation in the bloc on flawed environmental goals, especially in light of the war in Ukraine.

“The Russian war in Ukraine has demonstrated that Europe has been too comfortable in using lofty environmental goals and ideology to mollify its energy policy and risk its security. By using similar environmental metrics based on ESG to halt innovation for Bitcoin and cryptocurrency mining, the European Union risks forever stalling digital innovation and pushing billions in assets and entrepreneurship off the continent,” said Ossowski.

“Pushing the cryptocurrency industry outside of the EU will encourage citizens to circumvent the law and use more loosely regulated platforms and services, all the while depriving Europeans of their consumer choice.

“Bitcoin and other proof-of-work cryptocurrencies represent a revolution in digital money, especially because proof-of-work is a uniquely strong and fair way to settle the creation of digital property when compared to our fiat money system. The incentives to seek cleaner and greener energy exist because of Bitcoin and cryptocurrencies, not in spite of them,” added Ossowski.

“We hope EU parliamentarians recognize the significant folly they’re due to introduce if they deny the voices of consumers and vote for amendments ALT A and ALT G to the Markets in Crypto Assets Proposal that would effectively kneecap proof-of-work currencies in the EU,” said Ossowski.

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

“Crypto” vs Bitcoin and Why It Matters for Policy

By Yaël Ossowski

One frequent social media criticism against our consumer organization is that we discuss smart policy on “crypto” more broadly rather than just Bitcoin.

Realistically, that means we focus on the significant regulatory hurdles to the general “crypto” economy rather than focusing solely on the merits of Satoshi’s invention of Bitcoin and a path to its universal adoption.

Whatever our thoughts on Bitcoin as the one and true asset, the political narrative is about a category of digital assets and digital cash. Regulators don’t care if you’re stocked up on DOGE or BTC, they just know that you have it, it has value, and they want a cut.

At this moment, there are thousands of online crypto services, wallets, and apps that are only available to you based on your passport or your street address.

And this only gets worse if we don’t push smart and innovation-friendly solutions that will keep the confiscatory and bureaucratic tendencies of national and supranational governments at bay.

That’s because the greatest impediment to any growth in the crypto economy, “hyperbitcoinization”, or whatever you want to call it, is the on and off-ramps. Fiat to crypto, crypto to fiat.

Until people independently charge and get paid in crypto, or create mining collectives in their communities, the on-off ramps will shape adoption, and because these ramps are governed by financial regulators, there will always be a bottleneck.

Or a threat that only certain countries with more relaxed rules will allow on-off ramps, which will necessarily limit market penetration and any crypto future.

The lower we can make the transaction costs (as an economic principle, not dollars and cents) to on-off ramping, the closer we can get to broad crypto adoption. And that means treating crypto as a category in any policy debate or conversation, whatever our personal preference

The arguments of the best cryptocurrencies can and should be fought, and coiners already vote with their wallets, their code, and their clicks. But regulation matters.

If you’re interested in learning more, check out our principles for smart crypto regulation here, and support our efforts to promote these principles at the legislative level by supporting our BTCPay server below, or with altcoins on our donate page.

Is this North Carolina Congressman hawking Bitcoin?

Sometime last week, Neeraj K. Agrawal, the communications director for the DC-based cryptocurrency think tank Coin Center, tweeted a link to an empty website: whitehouse.gov/bitcoin.pdf.

The idea he was trying to convey, in Internet speak, is that hopefully, one day we can look forward to the day when the Bitcoin whitepaper would be hosted on the White House’s website.

That would signal that the executive branch has endorsed elements of the cryptocurrency, and hosted the fundamental founding document to build confidence in the government using Bitcoin as a unit of currency.

That’s futuristic, crypto-fueled optimism that was nothing but a cheeky tweet in that moment.

Taking that to the next level, tech investor and entrepreneur Balaji Srinivasan put forward a challenge: which forward-thinking country or US state would host the Bitcoin white paper on their main domain?

Enter North Carolina Congressman Patrick McHenry.

U.S. Rep. Patrick McHenry (R-NC)

Hailing from Gastonia, a town I once worked in as a newspaper reporter, McHenry represents the 10th district in the northwestern part of the state, home to NASCAR drivers, the mighty Catawba River, and stretching to the stunning Blue Ridge Mountains.

He once represented part of Gaston County in the State House and was later elected to Congress as one of the youngest congressmen in 2004.

As the ranking member on the Financial Services Committee, McHenry has often been involved in regulatory debates and discussions on cryptocurrencies and financial projects, including Facebook’s Libra project.

At least in previous statements and letters, McHenry usually joined hands with his Democratic colleagues to oppose any competition to the US dollar, as we’ve noted in past press releases.

However, it seems McHenry is changing his tune on the future of innovation in the cryptocurrency space.

On Wednesday, he took on the challenge originally posted by Agrawal and followed by Srinivasan: he posted the Bitcoin whitepaper to his own website.

Not only that, but he stated that “policymakers should be on the side of innovation and ingenuity, which are vital to American competitiveness,” and urged his colleagues to join him.

Is this North Carolina Republican Congressman hawking Bitcoin? It seems the answer is yes.

Looking into it more, he’s grown more bullish on Bitcoin and tech-related financial services in the last two years and even clarified his position on why projects like Libra do not represent a true cryptocurrency.

Appearing on series of podcasts, including one with fellow Republican Congressman Dan Crenshaw, McHenry has been more vocal on why Bitcoin’s technology is like nothing before, and in fact, represents the future of financial and digital services.

And top it off — he posted the Bitcoin whitepaper on the congressional web server!

If McHenry’s statements are true, and if he is using his position as a Financial Services committee member to advance those ideas, I think we may have a consumer champion congressman to follow in the next two years.

As a fellow North Carolinian and advocate for consumer-friendly policies, I have been critical toward McHenry’s various positions in the past, specifically on legitimizing financial services for cannabis-related companies.

I believe the exact tagline I used was “The North Carolina Republican singlehandedly blocking progress on cannabis banking“.

Obviously, McHenry’s ideas and policies are more nuanced and deserve a closer look. I look forward to him expounding on that much more. So while we may not agree on cannabis banking, there still could be much to agree on with the congressman.

If more politicians in DC and various statehouses approached this issue like McHenry, perhaps our governments would be better vehicles for fostering innovation and helping grow consumer choice.

Kudos to you, Rep. McHenry.

Yaël Ossowski is deputy director of the Consumer Choice Center

Taiwan’s quest to become a “blockchain island”

It has been over ten years since the world first heard of Bitcoin, but blockchain’s applications are still in their infancy. One legislator in Taiwan wants to change that. Nicknamed “Crypto Congressman” by Vitalik Buterin, Jason Hsu worked as a tech entrepreneur before getting involved in politics in 2016. Today, he’s on a mission to turn Taiwan into the world’s next blockchain island and crypto nation. 

Hsu believes that one of the main challenges for global policy making is bridging the gap between society and technology. He’s bringing his open-minded perspective to Taiwan’s parliament in an effort to promote a more tech-driven future for the country. A future in which blockchain plays a key role. 

Taiwan’s tech-forward governance

 “In September 2017 when China banned ICOs, I realized that Taiwan could capitalize on this opportunity,” explained Hsu in an interview. That’s when his quest to introduce blockchain-friendly legislation in the country began.

What followed was the launch of a fintech sandbox in Taiwan. The idea was two-fold: to attract more foreign investment and to encourage more homegrown tech startups in the financial sector. Favorable regulations coupled with a big pool of local engineering talent are hoped to put Taiwan on the map of world-class fintech hubs. 

But Hsu’s aspiration reaches far beyond the sandbox. He envisions applying blockchain to various aspects of governance: from the Department of Health, through Education, to Justice. The Crypto Congressman is currently involved in 25 different projects that aim to increase efficiency and improve people’s lives with blockchain. He also promised to develop an entire blockchain district in Taipei with a special community coin that would be issued to entrepreneurs. 

What can blockchain do for the people? 

Blockchain has gotten a lot of bad reputation in the last few years. When the Bitcoin bubble burst, skeptics were quick to proclaim blockchain a fad. Others, on the other hand, pointed out that the internet started with a speculative bubble, too. It was only after the dot-com crisis that the World Wide Web reached its maturity. Is blockchain’s real potential still largely unexplored? 

According to Hsu and other visionary legislators, the answer is yes. They see the crypto speculation as a distraction from far greater tasks ahead: improving public services and increasing trust in governments. 

The most important thing you need to know about blockchain is that it consists of a chain of immutable blocks, or pieces of information if you will. Every single transaction is recorded and the records stay in the system forever. You can’t delete, change or hide the data. 

For governments, this could be a real deal-breaker. All the mundane transactions between the citizens and the government bodies would be revolutionized. Birth and death certificates, academic degrees, deeds, proof of identity and any other paperwork could all exist in the decentralized system. This would prevent fraud and make safe online transactions a lot easier, including e-voting or online property exchange. 

The distributed ledger system can also be used to hold governments accountable and fight corruption. Blockchain could provide a permanent record of all public funds and spendings. In a utopian scenario, each citizen would be able to track where every penny of their taxes goes. 

Blockchain adoption worldwide

Taiwan is not the only country to experiment with blockchain. The small nation of the Marshall Islands is set to become the world’s first state to adopt a digital legal tender. Sovereign, or SOV, will supplement the US dollar, which is currently the official currency of the Marshall Islands. Following the launch of the national cryptocurrency, the country will transition to a new model of governance, based on blockchain. 

Another country incorporating blockchain for governance is Estonia. The Baltic state uses Ethereum to manage its e-residency program. Under the first-of-its-kind scheme, anyone can apply online to become an e-citizen in Estonia and legally start a business there. With cutting-edge initiatives like this one, it’s no surprise that the Estonian government was quick to embrace blockchain. However, the plans to roll out a national cryptocurrency, Estcoin, were paused indefinitely. 

And finally, there is a contestant for the “blockchain island” title eyed by Taiwan. Malta is known as one of the most blockchain-friendly countries in the world, thanks to a very favorable regulatory framework passed in 2018. The island country already managed to attract many large cryptocurrency exchanges: OKEx and Binance, for example, have established their headquarters there. 

Technology is the only way forward

More and more governments around the world are realizing what Jason Hsu already knows: that “blockchain is here to stay.” Implementation of blockchain-powered technologies is no longer an “if” but a “when”. In a fast-paced digital environment, legislators have a choice to move forward with the tech developments or become obsolete. The entrepreneurial spirit of “moving fast and breaking stuff” that Hsu brings to Taiwanese parliament might be just what contemporary policymakers need. 

The Consumer Choice Center is the consumer advocacy group supporting lifestyle freedom, innovation, privacy, science, and consumer choice. The main policy areas we focus on are digital, mobility, lifestyle & consumer goods, and health & science.

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.

Poll: Consumers say ‘hands off’ cryptocurrency, Bitcoin and Blockchain

CONTACT: Frederik Roeder Managing Director Consumer Choice Center 8. February 2018 Poll: Consumers say ‘hands off’ cryptocurrency, Bitcoin and Blockchain BERLIN, DE – In an online Twitter poll conducted by the Consumer Choice Center, 85 percent of respondents say they don’t want governments slowing down consumer innovation by outlawing cryptocurrencies and blockchain businesses. While not a scientific survey, […]

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