LAW & ORDER

Put simply, the bar is currently too high to expect new major federal legislation in any developed democracy around DLT based currencies in the very near future when so many elected officials haven’t yet begun the educational phase of understanding the technology.

In the United States, a Blockchain Caucus exists in the Congress to explore the technology’s potential, and member representatives have heard from industry leaders like Coincenter’s Director of Research, Peter Van Valkenburgh in recent months. Still, much of the questioning in these sessions revolves around anti money-laundering and terrorist financing implications of the often pseudonymous technology, long-associated with Bitcoin’s bad boy image.

Between these challenges, and the snail-like pace of major monetary changes, Addison noted that regulatory agencies were “going to be far more informed and willing to move quickly than would legislative bodies that are too often willing to throw the baby out with the bathwater”. There is sometimes a habit, Addison explained, to squash or limit the use of new technologies due to the risks associated with them.

Regulatory approval of this structure, especially if framed simply as a business decision, is far more likely to receive the government stamp of approval. Simply put, the issuance and acceptance of immediately transferable and available funds could be viewed as a bank service, just as mobile check deposits or free bank-to-bank transfers are today.

Peripherally, this form of a government token would appear more to simply be a bank token with government approval. Still, as is the case with a new coin or ICO issuance (some of which the US Securities and Exchange Commission states “may provide fair and lawful investment opportunities”), fiat-stable coins must be removable from the bank or consortium’s ecosystem by customers (to be held or traded privately), and redeemable at a later time to truly be a stable coin.

Issuing banks and governments would maintain accessibility to private layers (possibly by using a system based on ring signatures) related to identification and balances, which is necessary to track customer funds and expected taxable events.

Additional regulations might state that the funds that back regularly transferred tokens, or some multiple therein (in addition to the 3% of reserves held by US banks), be held by the issuing institutions to ensure liquidity during extreme economic uncertainty. Additionally, to better ensure solvency at all locations, agreements man exist to equally divide funds between institutions by initiating transfers at regular intervals to balance books.