The US regulation of digital currencies is out of date, impractical, and damaging to a potentially lucrative economy. The lack of unity in state regulations has created an unworkable system that makes the operations of Fintech (Financial Technology) companies complicated and confusing. A unified and clear regulatory policy would clear these muddy waters and benefit the digital currency industry, and have a positive impact on the American economy as a whole.

The US Once Led the Bitcoin Revolution

Every country is feeling their way through this relatively new digital currency, but America was initially proactive in the digital currency industry. For example, the US Senate was the first to conduct hearings on Bitcoin in 2013. The IRS was the first to release information on taxes in relation to Bitcoin, and FINCEN (Financial Crimes Enforcement Network) was the first crime agency to make any reference to the digital currency.

These steps may have been small but they were significant in the early days of the Bitcoin revolution, and put the US on the world stage as a leader in this evolving area of commerce.

A Patchy Regulation System

Now, 3 years later, each state still has its own regulations - and they differ greatly. The patchy picture that has emerged has left digital currency start-ups with virtually no chance of complying with rules across states.

States like New Jersey, North Carolina, and California have regulations that support the practical business of these new start-ups, even as those who are trying to operate in states such as Connecticut or New York are forced to buy expensive licenses without which they cannot legally operate.

Preventing Growth and Innovation

This erratic and non-unified approach to dealing with digital currency restricts opportunities for growth in the industry. This is because American digital currency start-ups are unable to grow their companies across state lines without encountering regulatory resistance and a mishmash of legal obstacles.

It is difficult to come up with a system that works for everyone with these different state laws to consider. And though the country has thus far resisted calls for a unified approach, change is something that will eventually have to occur if we want to remove barriers that are impeding American FinTech companies from innovating and competing on a national and international basis.

Bitcoin’s in the UK

The UK Treasury has taken a different approach; in March 2015 they set out their intentions to “create a world-leading environment for the development of innovative payments and financial technology.”

Since that statement, the Financial Conduct Authority (FCA) has created a system that allows entrepreneurs to easily and quickly comply with regulations which have been designed to provide consumer protection without limiting innovation and growth for startups.

The UK has also been committed to forming partnerships with other countries, including Singapore, Hong Kong, and South Korea. This has benefited both the European and Asian digital currency markets, having an impact on the economy as a whole.

Other countries like Germany and Switzerland have been following the example set by the UK. Germany has taken the innovating industry to a new level, with German fintech companies receiving venture capitalist funding to the tune of 1.6 billion in 2016.

What Does the US Need To Do Next?

The Comptroller of the Currency (OCC) asked the non-profit crypto-currency research organization, Coin Center, for a comment on the issue, and they responded by suggesting a federal charter to outline a lightweight but unified regulatory framework that would apply to all fintech and digital currencies in the US.

The Coin Center went further and suggested that fintech companies acquire a passport as part of new regulations. This passport would allow business to be operated across state lines, eliminating the need to deal with individual state regulators.

This reorganization would allow fintech start-ups to access financial services including banking. The OCC has the power to do this as they can supervise banks across the US and are therefore well-placed to take action and put these regulations into place.

The OCC Needs to Act

In its white paper, the OCC made a commitment to an open network technology and stressed the importance of allowing innovation within fintech. However, action is needed far more than words. The US has gone from being a leader to lagging behind. It isn’t too late to catch up, but we must act now to secure a bright and profitable future for digital currencies in the US.