Recently, the Nevada State Senate attempted to regularize crypto activities by presenting a bill to enact the Uniform Regulation of Virtual-Currency Businesses Act and the Uniform Supplemental Commercial Law (URVCBA). The primary motivation behind introducing changes to current procedures and activities through the bill is to accommodate consumer protection.
To ensure the fulfillment of the primary objective, State Senator James Ohrenschall sponsored the bill which suggested virtual currency businesses to either get licensed or registered with the state’s Department of Business and Industry. People involved in businesses with volume ranging from $5,000 to $30,000 are required to register whereas, in the case of exceeding the range, a license is compulsory. After defining prerequisites, section 40 of the bill tells that the Department has complete authority to examine a licensee or registrant. Furthermore, section 41 emphasizes licensee or registrant to maintain a record of their business activities. Section 40 and 41 combined lay foundations for section 42 which empowers department to share any information regarding licensee or registrant with state or regulatory bodies. Striving to make standards for crypto customers like those developed for customers of banks and broker-dealers, extensive measures put forward by James show that substantial transparency is forced out of crypto businesses. However, up till now, fiat has been regulated thoroughly by many governments but illicit activities possing threat to many couldn’t be efficiently eradicated therefore all steps recommended in the bill cannot be expected to satisfy bill’s primary objective.
To clarify how blockchain is affected, Uniform Law Commission (ULC) addressed several frequently asked questions related to URVCBA and Uniform Supplemental Commercial Law for the Uniform Regulation of Virtual-Currency Businesses Act (the “Supplemental Act”). According to ULC, the acts will not hinder the growth and expansion of virtual currency businesses. ULC claims that acts will benefit users only if they hold virtual currency through a custodian rather than directly. Although ULC stated that they didn’t encourage users to opt for a custodian or pursue holding virtual currency on their own, it is quite obvious that users not liking complex procedures of registration and licensing imposed by acts will prefer to go by themselves for holding virtual currencies. While answering another query encompassing risk exposure to users by the hands of custodians, ULC showed that they might not be able to fully protect the consumer, the primary goal of the acts, in all circumstances. ULC document reads:
Like any regulatory scheme, the URVCBA and the Supplemental Act cannot fully eliminate the risk of custodian misconduct…
A majority of representatives from blockchain and cryptocurrency industries opposed the bill and its propositions. Elisa Cafferata who is the executive director of the Nevada Technology Association regarded SB195 as premature and considered it to hinder the growth and development of state’s blockchain companies. Another personality who is the vice president of government affairs and strategic initiatives at Blockchains LLC, Matt Digesti, voiced very limited participation of Nevada stakeholders in the bill to be troublesome. His contention revolved around under representation of blockchain and cryptocurrency startups as their feedback regarding SB195 mattered. Director of government affairs at blockchain firm Filament, Wendy Stolyarov even wrote a testimony to point out the contradictions he realized in SB195. His submission concerned the impact bill could have on his business by declaring it as a money transmitter and then requiring it to get a license or registration.
BlockPublisher reached out to Ian McAfee, CEO & Co-Founder of Shift Markets which is a crypto and blockchain technology provider, to get his perspective on the bill as well. Upon exploring the bill’s impact on the growth of businesses involving blockchain and cryptocurrencies, Ian stated:
“As with all new regulation, business growth will be hampered. However, the goal is to increase growth in the long-term with certainty and clarity. We think that this bill does not provide dependable clarity and will require future changes, thus preventing growth and forcing business to seek more favorable environments”.
While enquiring how the bill safeguards the interests of his exchange, Ian commented:
The bill was tailored to larger corporations and the banking industry, not exchanges. We understand that customers must be protected, but there is already a robust system in place at the federal level to do this.
Moreover, Ian suggested that he would like Nevada to find common ground with companies who are willing to follow the rules but are unable to pay hefty fees.
Despite intending to make several modifications and updates, the bill has a long way to go before it gets approved and becomes the part of the legislation.
Updated information related to Shift Markets on 18th May 2019.