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Blockchain Policy: Getting It Right
Image: Capitol Building, Washington DC, Nicolas Raymond, CC BY 2.0
Rules. People love to hate them, but the best way to create a stable, productive, and engaging environment is to ensure that everyone knows what the rules are and why they exist. When there is confusion about rules, innovation tends to suffer because people operate from a place of fear of ambiguous consequences.
This is where we find ourselves today with blockchain, cryptocurrency, and the use of this technology to create the “internet for payments.” There is confusion, misinformation, and concern around the use of blockchain for payments and cross-border transactions, and much of it stems from the fact that the rules are not clear. We want to help clear up confusion and alleviate concerns through engagement with the ecosystem, policymakers, and regulators alike. For us, success would be a shared understanding about the application of existing rules and a clear idea of where new rules may be necessary.
With success in mind, we headed to Washington, DC last week to meet with U.S. policymakers, regulators, and non-governmental organizations to talk about the Stellar Network, answer questions, and ask some ourselves. We were delighted at the open-minded, friendly response we received, and excited to find a pervasive hunger to learn more about our ecosystem and our technology.
Here are some of our key takeaways:
Facebook’s Libra project has accelerated blockchain and cryptocurrency awareness and importance in DC. More bills regarding usage of cryptocurrency and blockchain could be introduced as early as this fall. While some members of Congress harbor valid concerns about Libra, there is general understanding that heavy-handed regulation for Libra could result in collateral damage to other industry players, thereby stifling competition and dampening innovation.
While SDF lives and breathes blockchain, Congress is involved in a myriad of critical issues and doesn’t have the luxury of spending all day perusing CoinDesk, BitcoinTalk, Twitter, or /r/Stellar. It’s up to us as an industry to provide educational opportunities for these leaders, to help them understand the diverse technologies in this industry, and to point out the policy significance of different technical implementations.
During our meetings, policymakers expressed interest in all layers of the stack — from the protocol level to the application level — and understood that there is a diverse pool of participants in the ecosystem. We emphasized that blockchain protocols like Stellar should be approached like the base protocols of the internet — which are generally unregulated — whereas institutions building products on top of those protocols are often subject to existing regulations. The best way to keep customers safe and to prevent fraud and money laundering is to hold money transmitters, broker-dealers, and creators of consumer-facing products to the current standards of compliance; the best way to encourage innovation is to allow protocols to develop unhindered. Understanding the difference between a protocol and an application will allow policymakers to set forth effective regulation, and it’s our responsibility to provide even more information to help make that distinction clear.
This trip was the first of many more to come. We’re grateful to have met with so many kind, talented minds on this trip and are excited to engage more.
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