Key Thought Leaders from Government and Industry Come Together to Promote a Coordinated Strategy for Blockchain Technology –  A Read Out on the Day’s Discussion

November 4, 2019

On Thursday, October 24, the International Trade Administration, U.S. Department of Commerce, and the Center for Financial Markets and Policy at Georgetown University McDonough School of Business, in coordination with the Institute of International Economic Law at Georgetown University Law Center and the Chamber of Digital Commerce, co-hosted a Roundtable to discuss American competitiveness and the role of the Unites States’ leadership in technological innovation.

Thought leaders from government, academia, and industry gathered to examine the policy issues facing the industry, as well as global developments and how other nations are approaching the promotion and adoption of blockchain technology. They particularly noted the comparison between U.S. blockchain innovation policy and what other nations are doing to capitalize on this opportunity, including the promotion of policies that encourage adoption.

This event was a key step in realizing the Chamber’s National Action Plan for Blockchain, which calls on the U.S. Government to support the private sector’s development of blockchain technology in the U.S. and provides a set of guiding principles for government as it considers how to best support blockchain technology. James Sullivan, Deputy Assistant Secretary for Services at the U.S. Department of Commerce, supported this endeavor by saying that, “The mission of the International Trade Administration is to help create the conditions for U.S. industries to compete—both at home and abroad. To that end, we must encourage policies that promote blockchain innovation by American entrepreneurs and the U.S. private sector, to ensure that our products and services remain the best and most desired around the globe.”

Some in the group agreed that U.S. policy makers must allow innovation while simultaneously addressing associated policy considerations and risks, and tailor regulatory frameworks accordingly. One participant, Brett McDowell, Founding Executive Director and Vice Chair of the Hedera Hashgraph Governing Council, said, “This is the American way – embracing the promise of new technologies, and the opportunities they create, by supporting responsible innovation and growth so that emerging U.S.-based companies can compete in this global industry.”

Key takeaways from the Roundtable include:

The U.S. Needs a Predictable Legal Environment. Roundtable participant Jack Kiernan, Manager at Deloitte Consulting LLP, said, “The United States is home to the highest caliber global innovators. The challenge is providing these minds with a favorable regulatory environment in which to operate. The same ‘do no harm’ ethos that was applied to the development of the internet should be applied to the implementation of Blockchain and associated technologies.” The problem is, as Kevin Batteh, Partner at Delta Strategy Group, stated, “It’s not just one regulation you can point at that is preventing people from doing business in the U.S. It’s the attitude across many of our regulators. When you look at the climate here in the U.S., there’s a cold wind blowing. Overseas, it’s not just about providing regulatory clarity, though some regulators have. Our competitors overseas are rolling out the red carpet because they don’t want to miss out on the opportunity to attract innovators.” As Jamison Sites, Senior Manager – Washington National Tax at RSM US, said, “We need to be more proactive than a Do No Harm approach.” Overseas, other countries are proactively trying to attract the best and brightest talent through clear regulatory frameworks, government pilot programs, and other strategies.

We Need a Plan to Promote Blockchain Technology. To realize the true potential of this technology, many in the group suggested that the U.S. Government develop a strategic and thoughtful approach that considers the importance of the many technological advancements in blockchain out there today and those on the horizon, as well as potential risks, and develop a strategy for moving the U.S. forward. According to Wendy Henry, Blockchain Lead of US Government and Public Services at Deloitte Consulting LLP, “This is not about the opportunity to lead in blockchain innovation. It’s about the new normal. We have to think more broadly about the world that we’re creating and where we want to be in it.” Jeffery Brown, Chief Technology Analyst at Bonner and Partners, warned, “The Chinese Government is working on launching a digital Renminbi before the end of the year and they are working in partnership with the private sector. The China equivalents of Amazon, Google, and Facebook are providing the digital infrastructure to issue this currency providing the ability to launch in a matter of days or weeks, not years. We have a lack of urgency in the United States. Capital flight is not three years down the road – it started last year. Billions of dollars have been moving off shore that would have been invested here. We must have a sense of urgency.”

Chamber’s Congressional Briefing Provides Insight into Blockchain & AML Challenges & Opportunities

October 23, 2019

This week, the Chamber of Digital Commerce brought together experts from across the industry and government to discuss the application of laws aimed at the prevention of money laundering with virtual currencies and how blockchain technology is being used to combat illicit finance. Congressman Bill Foster, co-chair of the Congressional Blockchain Caucus, kicked off the session describing his work educating other policymakers about the technology, how different cryptocurrencies maintain their own unique characteristics, and how some have varying levels of traceability that can be helpful to law enforcement. “It is really important that we empower agencies like FinCEN and the FBI with the tools that they need to combat illicit financing, without crimping the revolutionary applications of blockchain,” he said.

The panel included Amy Davine Kim, chief policy officer, Chamber of Digital Commerce; Kevin O’Connor, compliance and enforcement officer, the U.S. Department of Treasury, Financial Crimes Enforcement Network (FinCEN); John Roth, chief compliance and ethics officer, Bittrex; Michelle Bond, global head of government relations, Ripple; and David Jevans, chief executive officer, CipherTrace.

Following are key insights from the discussion:

The cryptocurrency landscape in the United States is well-regulated. The U.S. federal government as well as almost every state regulate the transfer of cryptocurrencies. John Roth, former special counsel for international money laundering policy at the U.S. Department of Justice as well as inspector general at the Department of Homeland Security, explained that states not only impose state licensing requirements on money transmission but also regularly borrow from federal anti-money laundering rules. Kevin O’Connor discussed FinCEN’s role in regulating cryptocurrency transactions at the federal level, which have been in place since 2011. David Jevans shared his thoughts on the efforts of the Financial Action Task Force (FATF) in creating international guidelines for cryptocurrencies. 

Blockchain has enormous potential for business and law enforcement to detect and trace criminal activity. Amy Kim noted that Bitcoin and blockchains aided law enforcement; for example, the Department of Justice recently successfully used Bitcoin to bring down a major dark web child sexual exploitation site. John Roth described how the Blockchain Alliance, an initiative co-founded by the Chamber, as well as industry, work to aid law enforcement in this area.

 Law Enforcement Will Be Employed When Necessary. Kevin O’Connor reminded the audience of FinCEN’s action against BTC-e for not having the appropriate AML controls in place when dealing with U.S. customers. “Our message to exchanges that offer these kinds of cryptocurrencies is that you have to have controls in place to mitigate the risks…,” he said.

Download the Chamber’s report “Understanding Digital Tokens: Guidelines for Anti-Money Laundering Compliance and Combatting the Financing of Terrorism” for the Chamber’s thought leadership on this topic.

Reflections on G7 Working Group on Stablecoins Report: Investigating the Impact of Stablecoins

& U.S. Senator Rounds’ Letter

WASHINGTON, DC, October 17, 2019 – Today, the G7 Working Group on Stablecoins released a report investigating the challenges and risks related to stablecoins like Libra. The report also outlined the applicable legal and regulatory frameworks, as well as a way forward to improve cross border payments. In addition, Senator Rounds issued a letter that is significant to the blockchain ecosystem as a whole. The following statement is from Perianne Boring, founder & president, Chamber of Digital Commerce. For follow up/further comment contact: marie@digitalchamber.org +1 202-422-2589.

The G7 Working Group on Stablecoins report is an important resource for global policymakers and regulators to consider in evaluating stablecoins like Libra, ensuring a vibrant and properly functioning marketplace.  Stablecoins may drive efficiencies and innovations throughout the economy, enabling a more inclusive global financial system. Challenges and risks identified by the working group should be carefully considered and addressed, and we urge global policymakers to leverage this work to provide a path forward for stablecoins that have vast potential to benefit the global economy. Regulators and policymakers around the world are recognizing blockchain as a breakthrough technology and we encourage them to continue to view technological progress as an important objective.  It is important that innovation occur according to a strategic plan to ensure that policy objectives and forward progress occur symbiotically. Our members are eager to engage with policymakers, and we will continue to encourage and facilitate those efforts.

In addition, Senator Rounds issued a letter in the stablecoin debate that offers significant meaning for the blockchain ecosystem as a whole. His letter, for the first time, sees beyond the skepticism surrounding one company’s innovation, and instead looks to the leadership of the United States in technological innovation. Policymakers must allow innovation while simultaneously considering associated policy considerations and risks, and tailor regulatory frameworks accordingly. Senator Rounds captures the reality of blockchain technology – the United States is falling behind in this space. We need a Plan to ensure the United States innovates deliberately and strategically to ensure we remain at the forefront of setting the standards and parameters for this industry.

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About the Chamber of Digital Commerce

Headquartered in Washington, D.C., the Chamber of Digital Commerce is the world’s first and largest trade association representing the digital asset and blockchain industry. For more information, please visit: DigitalChamber.org, and follow us on Twitter @DigitalChamber.

Press Contact:

Marie Knowles
marie@digitalchamber.org

Cybersecurity Risks and Opportunities Raised by Blockchain Technology

September 24, 2019

Introducing “Considerations and Guidelines for Advancing Cybersecurity in the Token Economy” the Latest Installment of the Chamber’s “Understanding Digital Tokens” Report

Blockchain technology has incredible potential to strengthen cybersecurity across the digital economy. Blockchain is based on the discovery of new ways to leverage existing cybersecurity technologies like public key cryptography, distributed computing, and consensus mechanisms to create ledgers that feature inherent tamper resistance and resiliency never before realized with traditional approaches. Because of its cybersecurity and other benefits, many experts foresee a time when blockchain will underpin all enterprise business models.

While the market continues to place a strong focus on blockchain’s transformative potential, less focus has been placed on its cyber risks and benefits. Today, we are pleased to introduce “Considerations and Guidelines for Advancing Cybersecurity in the Token Economy.” First, the report addresses cybersecurity considerations for public blockchains. Second, the report explores regulatory considerations from a cybersecurity perspective, addressing the application of both new and existing frameworks. Third, we provide a set of guidelines for advancing cybersecurity in a tokenized economy.

(Read our recent blog posts here describing the series.)

The report discusses the unique and nuanced risks that must be taken into consideration to effectively manage cybersecurity to protect tokenized assets. These include the following five considerations:

1. Lack of central authorities and impact to asset recoverability
2. Compromise of distributed consensus protocols
3. Inappropriate access to private keys and/or endpoints
4. Protocol and smart contract vulnerabilities
5. Inaccurate external data sources

The report also provides guidelines that practitioners and policymakers should follow to enhance security across the token ecosystem. These guidelines aim to create a dialogue around cyber risks and encourage policymakers and practitioners to design standards for technical and business solutions to mitigate these risks.

The full “Understanding Digital Tokens” series includes guidelines on securities and non-securities tokens, anti-money laundering compliance, consumer protection considerations, as well as an economic analysis of the token ecosystem.  We are also in the process of updating the compendium of country laws governing activities with digital tokens. A legal landscape from Japan and an addition to the United Kingdom report are next in the queue and will be published soon.