Dogecoin and bitcoin price swings might generate exciting headlines, but policies for effective crypto implementation are the real story going forward.
Blockchain and cryptoassets have developed rapidly, and had a watershed moment with the Coinbase direct listing, but important work still remains. To keep this positive momentum going, there are some opportunities for collaboration between the private and public sectors to construct a policy environment conducive to continued blockchain and crypto success. Even with the recent volatility in bitcoin and other cryptoassets following the Coinbase public debut in April 2021, the push and trend toward wider adoption and integration of the crypto and fiat economies continues to accelerate.
Be it individuals requesting payment in bitcoin and other crypto, certain states and cities embracing crypto and blockchain applications, or comments by the chairman of the U.S. Federal Reserve, the direction is clear.
Bitcoin and other cryptoassets are still an emerging asset class and economic sector, so some volatility is to be expected, especially as the market for said assets continues to mature. But focusing on price moves, as tempting as that may be, misses the more important point that adoption is continuing to progress virtually unabated. That said, and just like every other fast growing and emerging space. there is a need for clear and consistent policy frameworks for individuals and institutions alike. Just a look at some of the trends in 2021 alone – non-fungible tokens, central bank digital currencies, and meme crypto like Dogecoin – illustrate the need for consistent, clear, and objective standards.
Clearly there is going to be a need to balance the need for crypto-specific regulation and policies while not stifling innovation. Fortunately there are several common sense ideas that can be implemented in a jurisdiction of any size, mirroring some of the efforts already underway in the United States and the world over. Let’s take a look at some of the specific policy steps that can be taken starting almost immediately.
Results over name brands. It is tempting, as with any other economic area, to default back to the brands or organizations with the highest brand recognition. Especially in the blockchain and crypto space, with such a global mindset and outlook, it is imperative that policymakers conduct an unbiased assessment of potential technology partners. There are clearly security, privacy, and consumer protection implications that need to be taken into account – ignoring that would be naïve- but the main focus should be on the results of the product versus the product name itself.
Enforceability. Smart contracts, finally, seem to be receiving the attention and focus they so richly deserve, as the portals and connection points actually allow blockchains to interoperate with other technology systems. Even as this focus continues to increase, however, the legal enforceability around smart contracts remains somewhat ambiguous. This is an area where policymakers can absolutely create innovation zones, sandboxes, or other areas in which smart contracts are more clearly defined. Depending on the success of these areas or zones, this enforceability can be expanded to include other cryptoassets.
More than bitcoin. Bitcoin continues to receive the majority of the headlines and attention, and for good reason; it is the largest and most well known crypto by far. That said, depending on the proposed use case or application – such as a viable currency alternative – other cryptocurrencies or cryptoassets might actually be a better fit. Remaining unbiased and not overly preferring or favoring one crypto over another – no matter how tempting that might be – is important to develop a robust crypto ecosystem. Specifically, privately issued stablecoins might actually make more sense if the proposed goal is to actually leverage cryptocurrencies as a medium of exchange.
Crypto innovation zones. Innovation zones, economic opportunity zones, or some other self-contained economic area is not a new idea by any stretch of the imagination. That said, there are several crypto-specific tactics that can and should be integrated into any such crypto innovation idea. Specific items include but are not limited to exempting crypto transactions from certain local taxes, setting up a mechanism for merchants and individuals to convert crypto back to fiat currencies and vice versa, and being an active participant in implementing blockchain and crypto applications in the public sector.
Price volatility is going to be a part of the crypto ecosystem for the foreseeable future, and while it is easy to focus on those headlines it is even more important to look ahead to how the current success of crypto adoption can be continued. Regulation and policymakers are not always seen as the vanguard of innovation or creativity, but there is definitely an important role for these participants to play in fostering an innovative and dynamic economic landscape. Blockchain and cryptoassets, after all, are technology tools with care being taken to carve out the hype and focus on the very real potential of these tools.