Below is a guest post Nirmini RubinChief of Staff and Global Policy Officer for Hedera.
I Testifying about the future of digital assets Before the House Subcommittee on Commodity Markets, Digital Assets, and Rural Development, the debate focused on the influential use of cryptocurrencies and how the lack of clarity in U.S. regulation could affect the development of the blockchain industry in the U.S. It was argued that it is interfering.
The House Financial Services and Agriculture Committees met jointly in May to work on a cryptocurrency bill, giving the United States a significant opportunity to reestablish itself as a leader in Internet infrastructure innovation.
Why Public Blockchains Need Digital Assets
The “Internet” as we know it is essentially a distributed set of computers communicating with each other through open protocols over public networks. A multi-stakeholder governing body created each protocol. These protocols such as TCP/IP, DNS, and HTTPS continue to evolve to enable additional features that benefit society. Initially, Internet protocols allowed multiple agencies to share information (read-only “web1”).
Protocol innovations allowed people to self-publish and securely send messages to anyone (read-write, “web2”). Innovations in the Web2 protocol enabled secure e-commerce and connectivity for mobile his apps, making the internet everywhere.
The public blockchain is called “web3”. It enables the next major protocol innovation, enabling unprecedented personal control – the ability to read, write and own data and assets – without relying on centralized intermediaries. It’s for Unlike his Web2, where user accounts exist only on her one company’s servers, in Web3, the entire blockchain network records account ownership. Web3 user accounts are persistent across the set of services that exist on the blockchain.
A public blockchain is operated by a network of independent computers, or “nodes.” Because public blockchain nodes act as platforms on which applications are built, they cannot sell ads or subscriptions to fund their operations like Web2 intermediaries do. Instead, users should compensate the node directly through charges such as water and electricity bills.
Node charges are typically small and frequent, with hundreds or thousands of messages or transactions processed per second. Using the existing financial system, it is impossible to transfer fractions of a penny so quickly, efficiently and around the world.
To solve this problem, public blockchains use digital assets, or cryptocurrencies, to transfer value directly between users and operators. Cryptocurrencies act as the fuel that keeps the network running. For example, last month the Hedera network he processed over 1.5 billion transactions. Each transaction costs one tenth ($0.001) and one hundredth ($0.0001) of a penny, paid in the network’s native cryptocurrency, HBAR.
Public Blockchain Advances the Economy and Humanity
Blockchain’s ability to provide a trusted, time-stamped record will enable people to store, track, and monitor data in new and powerful ways. for example:
- Co-founded by Stanford University and the University of Southern California, the Sterling Lab builds a framework for verifying and preserving the authenticity of photographs and other evidence, and from tampering with the University of Southern California Shore Foundation’s Holocaust archives and testimonies. used to store.
- The DOVU Marketplace allows farmers to change their farming techniques and plant additional crops to earn additional income. Their actions will be tokenized as carbon credits to fund carbon reduction projects.
- Built by Avery Dennison, atma.io helps brands reduce waste across their supply chains of over 28 billion items, delivering economic and environmental benefits.
- Everyware monitors vaccine cold chain vaults throughout the supply chain, detecting anomalies before vaccines are administered to patients, keeping patients safe.
Recommendations to Congress
Selling digital assets to raise funds to create networks or applications uses digital assets as fuel to pay network activity costs or to obtain access to other goods and services It is fundamentally different from doing Regulations must be tailored to accommodate each unique characteristic.
Building on the premise that digital asset regulation protects consumers, enables innovation, and promotes competition, Congress will create an activity-based framework to regulate the use of digital assets based on the nature of the transaction. A bill needs to be passed.
- First, Congress should clearly define and draw the line between “digital goods” and “digital security,” or when a digital asset is neither.
- Second, Congress should empower the CFTC to regulate certain digital commodity activities, such as the operation of centralized spot markets. Clarity here will greatly improve consumer safety.
Likewise, not all assets are securities, and not all digital assets are securities. Applying existing securities laws to all cryptocurrencies severely restricts, if not prohibits, the practical use of public blockchains.
For example, in a supply chain application in the food manufacturing process to accurately track expiration dates for consumer safety, an SEC-registered broker-dealer would be charged a 1-cent transaction fee in cryptocurrency to record the supply chain. You may only need to pay event.
Legal clarifications for innovative products have been made before. The Dodd-Frank Wall Street Consumer Protection Act of 2010 succeeded in assigning rule-making authority over swaps to multiple federal agencies. The same approach can be taken for digital assets.
The use of digital assets is international in nature and it is important that any regulation takes that into account. In regulating rapidly developing innovations like digital assets, the CFTC adheres to the concept of “principles-based regulation” while the SEC follows a norm-based approach, making the CFTC more efficient than the SEC. is also an appropriate regulator.
With no clear path to compliance in the current US regulatory environment, there are two options. Either 1) find its way abroad, or 2) continue to hope that regulation catches up before law enforcement punishes another innovator.
The Internet is global, but because it was invented in the United States, American values were able to underpin the underlying Internet protocols. So that the next wave of internet value creation continues to reflect America’s commitment to markets and democracy, Congress needs to define the rules that will allow public blockchains to thrive. Other countries are also rapidly moving forward with their digital asset regulations.
The resulting regulatory certainty may give companies in these regions an advantage over US companies. It could encourage U.S.-based companies to relocate offshore, and could pose national security risks.
Congress should enact rules that allow American innovators to continue to play a leading role in the future of the Internet.