Starting with the basics: Is bitcoin even legal? The short answer is yes (at least in most places), but the longer answer meanders through a disorienting thicket of bitcoin regulation.
Cryptocurrency policy is complicated because proper regulations have to address an emerging technology as well as financial issues (like know your customer laws) and tax structures. The wrong kinds of regulations and policies imposed now may stifle future innovation and growth in the blockchain and fintech sectors.
That’s the premise, anyway, set out in Bitcoin: A primer for policy makers. Now in its second edition, the book is written by Jerry Brito, the executive director of the Washington DC-based nonprofit digital currency research and advocacy organization, Coin Center and Andrea Castillo, Brito’s former colleague at the Mercatus Center, an economic market policy research organization based at George Mason University. The Mercatus Center is also the book’s publisher.
Bitcoin: A primer for policymakers, as the title implies, is written for a specific audience. But I do think there are important parts to think about for people that don’t necessarily participate in government affairs every day.
After all, policymakers and government officials are not necessarily actively adopting and using cryptocurrencies. What that means is that the people making the laws might not totally comprehend how and why cryptocurrencies are used. So, it’s important for people who are using cryptocurrencies, or building companies and projects that are powered by cryptocurrencies and blockchain to pay attention to the discussions surrounding new regulations and participate in the law making process.
Cryptocurrency protocols as digital footprints for better services
So far, the blockchain application that receives the most attention is cryptocurrencies as a new financial tool. But when discussing blockchain more broadly, particularly when thinking about other down-the-road applications, it’s also important to remember that blockchain is a framework, or a protocol.
“One of the most promising applications of Bitcoin is as a platform for innovation,” Brito and Castillo write. “The Bitcoin protocol contains the digital blueprints for a number of useful financial and legal services that programmers can easily develop. Since bitcoins are, at their core, simply packets of data, they can be used to transfer not only currencies but also stocks, bets, and sensitive information.”
So, during the development of blockchain and cryptocurrency regulation, it’s important to remember the big picture: Cryptocurrencies are not just about money and store of value, they are an entirely new asset class. In fact, and I’ve written about this before, but it seems like what might be the biggest potential application of cryptocurrencies and blockchain — underpinning the internet-of-things — hasn’t even gotten underway yet.
“Some of of the features that are built into the Bitcoin protocol include micropayments, dispute mediations, assurance contracts, and smart property; the last allows individuals to control ownership of an item through agreements made in the Bitcoin blockchain,” Brito and Castillo write. “A related concept, smart contracts, allows individuals to automate contracts using the Bitcoin protocol to exchange ownership of a good or service once a condition is met.”
Overall utility of Bitcoin: A primer for policymakers
While Bitcoin: A primer for policymakers doesn’t have a driving narrative or eccentric characters like some other bitcoin/cryptocurrency books do, it does contain a lot of good information that will help get your head wrapped around some of the complexities inherent in regulating a complex new technology.
One of the key takeaways of the book, and something that people interested in seeing a cryptocurrency economy develop further, is to pay attention as lawmakers at all levels of government begin developing regulations governing the future of this technology.
While regulations might help bring stability and increase mainstream adoption in the cryptocurrency space, it’s equally important that the regulations do not restrict future growth and innovation.
Brito and Castillo call bitcoin a digital blueprint. But it’s also a roadmap for the future, and unnecessarily confining that map because of a lack of understanding would be a mistake.