To date, while some federal agencies have made public statements, Congress has not exercised its constitutional power under the commerce clause to regulate cryptocurrencies and blockchain technology to the exclusion of the states. This means that the states remain free to enforce their own legislation. Sixteen states have enacted legislation related to virtual currency or cryptocurrencies and nine states have enacted or adopted laws that reference blockchain technology.
To help assist lawmakers (and the general public), the State of Wisconsin Legislative Reference Bureau (LRB) created a summary that highlights the responses of major economic players as well as innovative practices on cryptocurrency and blockchain technologies. The report is designed to help gain a broad perspective of the current global regulatory market and the breadth of proposals for further policy and legislative guidance. Cryptocurrency, a subset of digital currency, is held up by some as the "currency of the future," and the technology that allows its existence could revolutionize business and government.
As cryptocurrency becomes more mainstream, governments around the world have taken the first steps toward regulation; however, advances in technology frequently outpace legislation. The LRB report describes the principal characteristics of cryptocurrencies and the underlying technology that enables its existence-decentralized, distributed ledgers based on blockchains. The report then details recent developments in regulations in the United States by various federal regulatory and enforcement agencies and the most relevant case law. Finally, the report explores developments at the state level and summarizes the global regulatory landscape of international responses to the regulation of cryptocurrency.
How Blockchains Work: A Sample Case Study
- Charlotte and Susie download digital wallets, providing the encryption keys necessary for the transaction.
- Charlotte creates a message requesting a $15 transaction to repay Susie for dinner. The message is encrypted using Susie's public key, ensuring that only Susie can decrypt the message using her private key. The message also includes Charlotte's private key to validate her status as the initiating entity.
- The message is broadcast to a peer-to-peer (P2P) network consisting of private computers, or nodes.
- The network validates the transaction and Charlotte's user status, then records and time-stamps it to verify that the cryptocurrency has changed possession.
- The transaction is combined with other transactions to create a new block of data for the ledger.
- The new block of data is added to the existing blockchain in a way that is permanent and unalterable.
If you'd like to read the full LRB report please visit www.banconomics.com.
By, Amber Seitz