The cogs and gears of democracy have shown their ability to delay the approval of a necessary bill yet again. Although it had many detractors, and the debate raged for over a year, there is still no agreement as to the implementation of AB-1326 in California. The bill will not be sent back to the state’s legislature again this year, and will instead have to wait until next year. Nevertheless many still doubt that it will pass in its current form, due to the vocal opposition of entrepreneurs, experts and enthusiasts in the digital currency arena.
The History of California’s ‘Bitcoin Bill’
The controversial bill was introduced on February 27th, 2015 and has been amended twice in the assembly and three times in the senate until it was recently tossed out for the remainder of 2016. This shows how rocky the road can be towards the regulation of financial instruments that are arguably still experimental. The alternative is to keep on going without regulation, a choice preferred by those who lean towards libertarian principles.
Arguments For and Against Regulation
The bill as it stands, is pretty stringent and could lead to the stifling of blockchain/FinTech/cryptocurrency projects in the State of California. Nevertheless, there is a need for some kind of regulation, in order for investors to pour in the necessary funds to accelerate their development. Many would argue that funds seek profit naturally and will thus go on undeterred, but there is a lot of evidence to show that good regulation is necessary for healthy amounts of investment in any given industry.
Those opposed to regulation in the state of California have made the following points to substantiate their opposition:
- Regulation is too premature given the stage of development that cryptocurrency is in at the moment.
- A lack of regulatory harmony might lead to confusion. This point suggests that regulation should go through Federal channels instead of state channels.
- The bill itself has vague language, fails to grasp the concept of cryptocurrency and has only temporary provisions for small businesses which prevents scalable efforts.
Taking a Cue from the CFTC
In practical terms it shouldn’t be too controversial to craft a bill around the limited Federal regulation that exists for bitcoin nowadays. The CFTC has declared that it will treat bitcoin as a commodity, so by extension, states should do the same and incorporate other cryptocurrencies into the same kind of definition. Businesses that deal with commodities as a whole, should already be regulated, which will help circumvent the problems caused by the sluggish workings of the democratic process.
The public, the legislative powers and other parties interested, would then be able to continue discussing the appropriate legislation for cryptocurrencies specifically, knowing that businesses are in any case operating on the basis of a clear set of rules. Regulatory harmonization will eventually happen as a matter of a competitive process for investment between jurisdictions.
Final Thoughts
Regulation has its advantages, and it is definitely a process that should be discussed with all interested parties. The fact that it takes so long, shouldn’t surprise anyone, especially those in the Bitcoin community – who have had their share of consensus issues in dealing with their own system. Nevertheless, the lack of local regulation shouldn’t be used either as an enabler of ‘free for all’ behavior, nor as an excuse to shut cryptocurrency related businesses out. There is a middle ground available for California in the meantime, and it should be used until more permanent legislation arises.
Click here to read the AB-1326 bill and all of its amendments
