Crypto Monitors Regulate Blockchain To Pull Your Assets From the Fire
Crypto monitors function as regulatory czars to establish cryptocurrency regulations, and this arises out of the need to protect investors.
A regulation defines a rule of order prescribed by an authority that has the force of law.
All organized social institutions — including governments, companies, schools, and families — naturally provide rules to establish proper codes of conduct. Regulation promote the common good, provide dispute resolution, and specify punishments for bad conduct.
On the national level, the U.S. Securities and Exchange Commission (SEC) currently focuses its energy on combating fraudulent ICO’s. These schemes often involve scammers convincing investors to put money into projects that have no value.
Centra Tech, Inc.
In April of 2018, the SEC halted operations of Centra Tech. Inc. This ICO raised over $32 million from thousands of investors. The company claimed it would build a suite of financial products, including a debit card backed by Visa and MasterCard that would convert cryptocurrencies into fiat currencies. The SEC found that no relationship with Visa or MasterCard existed in actuality. Additionally, the SEC alleges the company created fictional executives with impressive resumes to deceive investors. One of the two founders made flight reservations to leave the country but authorities arrested him before the flight.
RECoin And The Diamond Reserve Club
In September of 2017, the SEC shut down two ICO’s run by the same individual. REcoin Group Foundation claimed to be a cryptocurrency backed by real estate. Similarly, the Diamond Reserve Club (or DRC World) claimed to be backed by diamonds. The crypto for REcoin would pay for real estate investments, and the crypto for DRC World pay for diamond investments. According to the SEC, no organization existed behind either company.
In Texas in January of 2018, the SEC froze the assets of AriseBank and its founders, obtained a court order to halt its ICO, and appointed a receiver over AriseBank. The SEC claimed the ICO amounted to “an illegal, fraudulent and unregistered offering of securities that violated multiple federal securities laws.”
Crypto Monitors Please Stop Me Before I ICO Again
Although businessmen often oppose the limiting restrictions of regulation, in the world of cryptocurrency serious players often welcome crypto monitors to provide helpful regulations. Bad actors taint the entire industry. And a set of cryptocurrency regulations helps to clarify how to structure a business plan and an ICO.
As Overstock shifts from operating as a retailer into functioning as a cryptocurrency company, Overstock CEO Patrick Byrne states his support for regulation:
“I’m actually quite supportive of the SEC cracking down. This ICO craze this year has led to a lot of people being fleeced, I think. There’s been a lot people bringing coins public with no real business plan. I think a lot of that is problematic. So the SEC has been correct to step in and say we’ve got to start scutinizing this.” CNN Money, “Overstock CEO: bitcoin a ‘form of sound money'”, Dec. 14, 2017
I’m A Web Developer Said the Spider To The Fly
State governments pick up the slack where the federal government doesn’t step in. Florida recently decided to create the position of a crypto monitor to protect investors from fraud.
It’s Always Sunny In Florida (Except At Night)
Florida experiences a higher than average rate of fraudulent activity. According to Federal Trade Commission data, Florida leads all other states in consumer fraud complaints. Around 1,000 complaints get files per 100,000 residents. In terms of identity theft, Florida recorded 186.3 complaints per 100,000 people, the highest number of any state.
One of the reasons scammers target Florida results from the state’s large population of seniors. People over 65 accounted for nearly 19 percent of the population in 2013, making it the highest proportion of elderly residents in the nation.
Scammers target the elderly for a number of reasons. For one, older people typically possess more money than kids. Also, identifying data for seniors exists on many systems that fraudsters can harvest and use.
And a notion exists that the mental abilities of elderly people decline such that they become easier to hoodwink. But in fact, data shows younger adults fall for scams more than the elderly. Life experiences give people between 65 and 75 years of age more knowledge and protection against frauds compared to people between 18 and 25.
Consequently, good reasons motivate Florida to look into protecting residents with crypto monitors regulating blockchain.
From a different perspective, on March 29, 2017 Arizona amended its statutes to recognize that a signature secured by blockchain technology qualified as a valid electronic record. Any ownership or other rights whether interstate or foreign in nature remained valid by virtue of the security of blockchain technology. In other words, this statute affirms the immutable truth of blockchain.
Run For The Border
At the international level, national competitions come into play. If one country stifles blockchain innovation with oppressive crypto monitors who apply burdensome regulations, another country will provide incentives to bring in new tech development and the job creation that ensues.
The economics minister of Switzerland, Johann Schneider-Ammann, declared on January 18, 2018 that he wants Switzerland to become “THE crypto-nation.” This follows in the tradition the country has taken to the banking industry.
Canada approaches the issue of cryptocurrency regulation with serious consideration, and it studies the subject thoroughly to find the proper way forward.
On October 8th 2014, Andreas Antonopoulos testified before the Committee on Banking, Trade and Commerce of the Senate of Canada. This talk provides one of the best introductions ever to Bitcoin and cryptocurrency. By and large, the senators make an effort to ask serious questions to truly understand the subject, and as usual, Andreas provides clear, complete, insightful information.
Finally, How To Referee When You Don’t Know The Game?
The hearings conducted by the Canadian Parliament resulted in the approval of Bill C-31 on June 19, 2014. And this constituted the first national law anywhere in the world on cryptocurrencies.
Alternatively, Stephen Poloz, the head of the Central Bank of Canada stated on January 25, 2018, “I object to the term cryptocurrencies because they are crypto but they aren’t currencies…”
Therein lies the rub for crypto monitors in regulating blockchain. How do you regulate something when no understanding or agreement exists on what defines the thing to be regulated? Does Bitcoin provide a store of value or a medium of exchange? Does it function as money or as a security of a company like stock? Since Bitcoin does not belong to a nation, how does a nation tax it? Does blockchain define cryptocurrency? Or does decentralization? Do existing laws suffice to handle abuses such as money laundering?
Cryptocurrency lives today as an emerging technology in the early stages of its development. As the technology matures, cryptocurrency regulators will better understand how to protect investors from fraudulent activities.
ABOUT THE AUTHOR
ABOUT THE AUTHOR
Wilton Thornburg is a software engineer, currently based in the greater Boston area.