When my colleague Faruk Okcetin and I both decided to put together last year’s Cryptolina Bitcoin Expo, I do not think either one of us knew how consequential the Bitcoin discussion would become, just in the last 12 months.
April 10, 2015
A Call to North Carolina Legislators: Have An Open Mind to Bitcoin
Cryptolina expo organizer calls for progressive and inclusive regulation around cryptocurrency and digital exchanges.
Venture capital is pouring into Bitcoin exchanges and businesses. At the end of 2014, the industry had received nearly $400M in aggregate funding. In January 2015, Coinbase, founded by two Duke alums, raised $75 million in largest-ever VC round for a Bitcoin company. And in May 2014, the Federal Elections Commission (FEC) gave a unanimous green light to permitting bitcoin donations in federal political campaigns. With this exponential growth and interest, it was only a matter of time before the focus turned to the big “r” word—regulation.
States across the United States and nations around the world are mulling over regulatory proposals in an attempt to both define the industry and the businesses growing within the emerging digital currency ecosystem. In response, the industry’s newly founded ‘Chamber of Digital Commerce’ was created to represent business, and to promote the acceptance and use of digital currencies and digital assets among government and the larger public. There is no question that regulatory parameters need to be set up. Our home state of North Carolina has a real opportunity to be a leader in this emerging sector—through technological advancements, entrepreneurship and economic development.
This is why I and many other digital currency proponents are calling on the North Carolina Banking Commission and the State Legislature to thoughtfully consider taking an open-minded, reasonable approach to regulating digital (‘virtual’) currency, just as other states are doing. We all agree that consumer protection must remain a priority, but an unrealistic regulatory barrier to entry for aspiring entrepreneurs is wrong—which includes excessive government fees that increase the difficulty start-ups may face when entering the digital currency sector.
Last summer, New York was the first to propose ‘BitLicense’ framework under the New York Department of Financial Services (NYDFS). The first draft of the BitLicense rules and regulations was severely debilitating to the digital currency industry. The backlash from the industry prompted the NYDFS to extend the 45 day-long comment period, followed by a second draft and another extended comment period. North Carolina should take heed to these various industry comments and amendments, and interact with consumers and proponents in a better organized and more interactive fashion than New York did. Ensuring consumer protection, sensible regulation and access to digital currency innovation can all go hand in hand.
As Netscape founder and venture capitalist Marc Andreessen frequently mentions, new disruptive technologies and ideas typically come from what he calls the “fringe”—not the status quo. This was true of the PC, the Internet, music file sharing and social networking. We saw it with some of the earliest examples of crowdfunding over a decade ago with ArtistShare. Now we are seeing the same classic disruptive examples play out around new peer-to-peer concepts, which include ridesharing with Uber and Lyft, room sharing with Airbnb, and financial services with Bitcoin.
But Bitcoin, which brings finance into the picture, may be among the most profound. Step back and think about this—every day, consumers give out their credit card or bank account numbers to strangers whom they trust to safeguard their sensitive information and withdraw the correct amount. And yet it seems like barely a week can go by that we do not learn of another major security breach in this system. These past six months included Target and Home Depot.
I believe that the security afforded by public key cryptography will eventually make Bitcoin appealing to consumers and merchants everywhere. Moreover, millennials who grew up with costless, frictionless, global means of communication will ultimately expect the same from their financial interactions and are more likely to embrace digital payments or a currency like Bitcoin.
This technology could someday afford the opportunity to change much of what we see as the norm. Financial and legal services could be transformed through digital titles, digital equities, digital contracts, insurance derivatives and currency exchange. As Andreessen said last year referring to the early days of the web, “if we had this technology 20 years ago, we would’ve built into the (web) browser.”
Companies such as BitPay and Coinbase are leading the way on merchant integration—which is one of the most popular aspects of Bitcoin today. As a part of the booming payment processing industry, a merchant can choose to accept Bitcoin and instantaneously convert the payment to USD. Not only is this a great marketing advantage for a merchant, but this method is extremely helpful in eliminating credit card fees and the hassle of dealing with returned checks.
Since 2014, we have seen companies with household names announce they will accept Bitcoin as payment. Dish Network, Microsoft, Expedia.com, Dell, Reeds Jewelers, Overstock.com, and the United Way to name a few. And there will be more. A lot more.
As technology progresses, North Carolina can capitalize on this industry, just as it has in so many others. Together, we can ensure consumer protection, foster sensible regulation and provide access to digital currency innovation. Who knows what the next 12 months will bring?