Recently, three lawmakers wrote and submitted a bill requesting that the Secretary of Commerce study how blockchain can be used to enhance consumer protection. The bipartisan bill was introduced at the beginning of September and subsequently sent to the House of Representatives’ Committee on Energy and Commerce. If the bill passes, the Secretary of Commerce would need to partner with the Federal Trade Commission to create a report on the state of blockchain technology and, in particular, its applications to consumer protection. The legislation could help to better incorporate blockchain into consumer processes in the United States and move the country forward in terms of technology. A Look at the BillThe draft of the bill, known as the Advancing Blockchain Act, was initially circulated among members of Congress in May 2020. The bill has three primary aspects. One involves gathering additional data on the various industry sectors that develop blockchain technology and the public-private partnerships that have formed to promote the adoption of blockchain. In addition, the bill calls for the creation of a list of federal agencies that would have jurisdiction over these sectors and partnerships to ensure proper regulations moving forward. The study would also need to account for the assessment of marketplace trends and related risks. All of this work would enable Congress to undertake initiatives to promote the adoption of blockchain technology. The new bill entrusts the Secretary of Commerce with catalyzing the adoption of blockchain technology in the United States, particularly in terms of increasing consumer protections. Governments across the world are researching and developing their own blockchain pilot programs, so the bill will largely ensure that the United States will not be left behind in the process. Other governments and their industries are creating rules about blockchain, and it is imperative that the United States take part in the conversation to protect itself and its citizens. If the United States does not take action, the values of competing nations will be imposed on digital currency and issues could arise. How Other Countries Are Approaching Blockchain TechBlockchain allows for unprecedented digitization and tokenization that decentralizes many processes and holds great potential for the future of domestic and global economic development. Other countries are making significant progress in this area. China is preparing to launch a central bank digital currency, and Germany is proposing its own legislation to digitize securities using blockchain technology. As in other countries, German securities are securitized through a document, but a blockchain-based mechanism would provide an easier method to ensure compliance and facilitate the overall marketability of financial assets. The legislation would also provide more clarity in regards to the role of the regulators in charge of monitoring systems and maintaining decentralization. The German bill represents the country’s push to remain a key financial center for the world. Maintaining this position involves modernizing the securities law in the country in order to protect its financial markets. The move toward blockchain would encourage continued innovation in regards to financial transactions and consumer protection. This legislative proposal emphasizes the importance of similar initiatives in the United States, which could lose its position as a financial leader if it does not embrace similar innovation and incorporate new technologies into its financial markets. Blockchain makes it easier than ever to undertake international trading of securities, and countries will need to ensure that they create reliable, regulated systems to engage in these exchanges. The United Arab Emirates, Colombia, Canada, and Estonia have all been on the frontlines in the adoption of blockchain. The Question of Regulation and Crypto Trading VolumeThe call for greater adoption of blockchain technology and the increased regulation of transactions conducted through this medium have led to some questions. Some early adopters of blockchain and cryptocurrency believe that government involvement and regulation could hinder the number of transactions that occur. While blockchain can help to protect consumers, regulations will also be needed to reinforce these protections. A number of countries have already introduced regulations, and a general sentiment exists that crypto transactions may simply move to jurisdictions that do not have such heavy government involvement. This issue was recently researched by professors at the University of Pennsylvania’s Wharton School.
The professors looked at regulatory action undertaken in Japan, China, South Korea, Russia, the United Kingdom, and the United States in order to determine whether the volume of transactions decreased following the adoption of new policies. Ultimately, the research revealed that regulatory action in these six countries did not affect trading activity. No reduction in transactions was found. The research points to the ability of blockchain to effectively provide consumer protection through both internal and external means without impacting the overall rate of transactions. In other words, governments can continue to research and implement blockchain policies without worrying about the impact on domestic markets. Comments are closed.
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