The Problem: Blockchain technology is rapidly evolving, leaving regulators struggling to keep up and determine how those who develop this technology should be treated under the law.
Many blockchain developers are currently classified as “money transmitters,” which requires specific licensing and tax treatments in each state. However, many developers aren’t traditional money transmitters at all—in fact, some don’t ever handle consumer funds. This faulty, one-size-fits all regulatory environment leaves startups struggling to grow, stifling innovation, reducing competition, and increasing costs to the consumer.You can read my explainer on blockchain technology here.
The solution: The Blockchain Regulatory Certainty Act affirms that blockchain developers who do not take control of consumer funds, do not need to register as a money transmitter. Examples of these types of developers include "miners" that validate network integrity and multi-signature providers that provide enhanced asset security to users.
As blockchain technology continues to advance, it will become even more important to establish a clear and consistent regulatory structure that is accurately tailored to each unique part of the industry. Blockchain has impressive potential in industries beyond finance, like health care and agriculture. Creating a coherent and innovative regulatory structure will only help to these technologies grow and flourish, instead of slowing their development.You can read the bill here.
Background: In 2019, FinCEN established guidance that many of these blockchain providers are not classified as a “money transmitter.” Bitcoin was developed a decade prior to this guidance, and developers faced uncertainty around whether they needed to abide by this regulation. This uncertainty in the law continues to discourage innovation. The Blockchain Regulatory Certainty Act would confirm this guidance, and cement in law that these providers do not need to be regulated in this manner.