The Chamber of Digital Commerce (CDC) has launched the Global Blockchain Forum (GBF), a partnering of the leading trade associations for the blockchain and digital asset industries.
The goal is to create industry best practices and international regulatory interoperability.
Founding members include CDC, the United Kingdom Digital Currency Association, the Association of Crypto-Currency Enterprises and Startups, Singapore (ACCESS) and the Australian Digital Currency Commerce Association (ADCCA).
The CDC website includes a global map dividing the regions of the globe into four sectors: permissive, contentious, hostile and unknown.
Leading Trade Groups Partner
Perianne Boring, CDC founder and president, told Forbes the forum brings together the leading trade associations to engage with governments. She said it’s important that the stakeholders working with public policymakers and the associations coordinate their efforts.
To date, there has been no formal way to coordinate these efforts, despite the fact that $1.1 billion in venture capital has been invested in the bitcoin and blockchain space in recent years. The forum’s concept emerged after Boring and Ron Tucker, ADCCA chair, realized that efforts in their respective jurisdictions were similar.
Boring said it makes no sense to duplicate resources and efforts. She said the organizations will move faster and farther by working together. In addition, she said many of the associations’ members have an international presence. For such members, it is important to have similar rules, standards and best practices across borders.
“Interoperable” is a word that commonly describes how different digital currency protocols should work together, she said.
Regulations Often Inconsistent
Not having unified policies among jurisdictions can be expensive for startups. CDC believes companies that operate in the U.S. must abide by different state rules for “money transmitters” and pay between $2 million and $5 million annually in compliance costs.
New York has BitLicense, a licensing regulation. California recently updated its money transmitter rules that now include a virtual currency business definition. Hence, a U.S. company with customers in California and New York face two completely different regulatory approaches, Boring said.
Federal regulators oftentimes do not hold consistent views. The U.S. Commodities Futures Tarde Commission (CFTC) views blockchain and bitcoin as a commodity. The Securities and Exchange Commission (SEC) views it as a security, while the Financial Crimes Enforcement Network (FinCen) views it as currency, and the Internal Revenue Service (IRS) treats it as property.
Conflict-of-law issues can arise in which a company could not be in compliance with all the laws, Boring noted. She called this a huge impediment to investment, innovation, and industry growth.
Similar problems exist among countries. The U.S. government can pursue a direction in defining the technology, while in the U.K., regulators view it in a completely different way. Companies with customers in both nations will face very costly compliance costs.
Best Practices Needed
The GBF will support best practices among participants. It will also improve awareness of blockchain technology and the social and economic impacts it creates. Another goal is to work with government agencies and world organizations to develop consistent policy, regulation and legislation.
Tucker said there will be a lot of commercial opportunities coming due to blockchain technology. The GBF wants to foster global relationships and partnerships among commerce and business. This can include existing players in consulting services. ADCCA members include Deloitte, Dun & Bradstreet and PwC. Pairing these companies with startup blockchain and digital currency firms will bring “an entire revolution.”
ADCCA has encouraged the Australian government not to doubly apply value added tax on digital currency transactions. It has also developed a digital currency industry code of conduct that suggests members have the necessary AML/KYC processes in place and conduct an annual code compliance audit.
Projects Already Under Way
GBF members have already begun work on certain projects, collaborating with government, industry and academia to develop real world application standards such as identity management. One initiative, distributed identity (d.ID), attempts to develop blockchain-powered identities for persons not connected to entities like Facebook or Google.
The U.S. has at least 10 regulatory agencies that have established or are looking to assert jurisdiction over digital currency. Jurisdictions like the U.K. and Singapore have similar approaches that the U.S. could learn from, Boring said. She said this is causing what’s called regulatory arbitrage, where firms leave the U.S. and move to countries with lower compliance costs.
Bitcoin startups that have discovered regulatory regimes in other nations more favorable include itBit, which began in Singapore and later expanded to the U.S. Another example is Blockchain.info, a London-based exchange that has found U.S. policy more fragmented and the U.K. policy more consistent, according to Peter Smith, the exchange’s chief executive.
Smith said exchange startups such as Coinbase, itBit and Circle had been seeking an agreement such as the one announced last week with Barclays and Circle in the U.K. This marked the first major agreement between a bank and a digital currency startup.
Future Challenges Call For Change
Boring expects regulators will face more complicated tasks going forward as the blockchain expands to applications beyond currency. She said regulations have to be established narrowly so when new applications like smart contracts or settlement and clearing come to market, they don’t face regulatory limbo.
As the blockchain expands, regulation must be flexible enough to allow for innovation, Boring said.
Images from Shutterstock and Digital Chamber.
Last modified: March 4, 2021 4:47 PM