The Truth about Bitcoins and the Blockchain — Part 3
We Need Better Regulation of Bitcoins and Blockchain ICOs
While most bitcoins are majority crowd-owned, there seems to be a continuum of governance models, far too little transparency, and as of yet no easy-to-understand Federal disclosure requirements. Those who launch them tend to reserve large blocks to enrich themselves, making the coin founders the owners of both a currency and a kind of automated venture capital fund (indeed some, like Ripple, have been launched by smart VCs) and that is their basic business model.
Given how they work, I’d love to see the state tax require full transparency and good metrics allowing us to judge how democratic their value creation schemes are, so we know which ones to invest in, and higher tax rates on the profits to the founders behind the less crowd-owned versions of these coins. Ideally, we’d also see not only a bunch of user protections, but also a state application for new coin launch, like a nonprofit or social benefit corporation application.
Like a bank, all DDCs should have some kind of deposit minimums to launch them (which could be crowdfunded), both deposit and liability insurance (after all, we require the government to offer this to banks via the FDIC), and various other user protections. Perhaps they should also have small annual licence fees, and demonstrate a certain threshold of use every few years in order for their licences to be renewed. Such measures would slow the bubble’s development and limit its damage, as most of these coins inevitably fail on the way to consolidation.
New York State Dept of Financial Services regulator Benjamin Lawsky launched the first BitLicence, in 2015. That new requirement drove a large number of startup bitcoin companies out of the state. So far, just three companies (Circle, Ripple, and Coinbase) have received licences to operate in New York State. I hope we see more licenses granted soon, and more states issuing such licenses.