Virtual currencies are attracting unprecedented worldwide attention from not only businesses and investors but also U.S. policymakers.
The increasingly intense interest in virtual currencies is fueled by all-time highs in the price of bitcoin and other virtual currencies, excitement generated by the flood of POCs (proofs of concept) using the underlying technology, the frenzy of fundraising stoked by initial coin offerings (ICOs), and the additional demand created by unfortunate ransomware attacks.
At the recent Consensus 2017 conference, which is one of the most significant events in the fledgling blockchain world, the predominant topics of discussion were the new virtual currencies and blockchain technologies being unveiled almost daily, the legality of ICOs, and how much and how fast the next ICO would raise money.
Less pronounced at the Consensus conference but an increasingly important topic was the rise of domestic and international regulatory focus on cryptocurrencies and financial technology in general.
No place could better demonstrate this development than the U.S. Congress this week, where three different congressional committees are scheduled to hold hearings the same day on various aspects of financial technologies. A House Financial Services subcommittee will specifically examine virtual currency and its implications for national security. A House Energy and Commerce subcommittee will focus on the consumer perspective on emerging financial innovation. The full House Foreign Affairs Committee will review U.S. policy options for attacking Hezbollah’s financial network.
In addition, several members of Congress are introducing new legislative proposals.
For example, a recently introduced piece of legislation would direct the undersecretary of Homeland Security for intelligence and analysis to develop and disseminate a threat assessment regarding terrorist use of virtual currency. A separate proposal, the “End Banking for Human Traffickers Act of 2017,” is a bipartisan, bicameral piece of legislation that would direct the U.S. Treasury Department to produce recommendations for detecting human trafficking and limiting money laundering related to human trafficking.
Several factors contributing to this heightened focus on fintech and cryptocurrencies include the investigation into alleged Russian hacking related to the U.S. 2016 election, the worldwide ransomware attack in mid-May, and growing concern surrounding how the regime in North Korea is financing itself.
The mid-May cyberattacks, in which the hackers demanded payment in bitcoin, is still fresh in the minds of many members of Congress. Blockchain, the public ledger on which all bitcoin transactions are visible, is being watched carefully by law enforcement and the cryptocurrency communities for any indication that the bitcoins used to pay ransom are being moved to others, converted into other cryptocurrencies or exchanged for fiat currencies. However, the confusion and inconvenience generated by the attacks have caused policymakers to scrutinize more intently the use of cryptocurrencies by bad actors.
While it is still very early in policy debates in the U.S., it appears a bipartisan consensus may be developing in Congress that the time has come to examine and potentially increase U.S. regulatory efforts, especially in connection with the criminal use of cryptocurrencies and, more generally, financial technology.