In March 2018 President Donald Trump signed an executive order banning Venezuela's cryptocurrency. Now that the order is about to become law, other cryptocurrencies might have reason for concern.
There are at least 20 bills related to blockchain in various stages of being considered by the United States Congress, but only one is of imminent, potentially urgent concern to cryptocurrency users, according to Jason Brett, founder and CEO of the Value Technology Foundation, a newly formed research firm in Washington, D.C., dedicated to blockchain law.
Senate bill 1025, which could be approved as soon as Monday, will essentially make law an executive order signed by U.S. president Donald Trump last year that banned U.S. citizens, permanent residents and organizations from buying, holding, trading or spending petro, the cryptocurrency created by the Venezuelan government and purportedly backed by the nation’s vast oil reserves.
Since the petro was presented by Trump as a way for users to “circumvent U.S. sanctions” against Venezuela, which has been accused of crimes against humanity and whose Central Bank has experienced decades of hyperinflation, the law has attracted 19 sponsors, including Republican senator Marco Rubio of Florida; Democratic senator Richard Durbin of Illinois; Republican senator Ted Cruz of Texas; Republican senator Lindsey Graham of South Carolina and Democratic senator Kirsten Gillibrand of New York, more than any of the 20 other blockchain bills being considered.
Unlike traditional state-issued currencies, Venezuela’s petro could be obtained and spent on goods around the world as easily as bitcoin or any other cryptocurrency. Imagine buying a loaf of bread from a bakery in Lincoln, Nebraska, and being able to pay for it with Venezuela’s petro as easily as downloading a mobile app.
More than any of the other blockchain bills now being considered by U.S. lawmakers, Senate bill 1025, officially called the Venezuela Emergency Relief, Democracy Assistance, and Development Act of 2019, or the VERDAD Act for short, could set a dangerous precedent for other cryptocurrencies, according to Brett, who was previously a Booz Allen Hamilton lead associate. If the bill, proposed in April by Democratic senator Robert Menendez of New Jersey, is approved, petro would be the first cryptocurrency banned in the United States, and as Brett puts it, could make future bans as easy as filling in the blank.
“The implications for this are huge because it could be bitcoin or some other cryptocurrency inserted into this language,” says Brett, who after leaving Booz Allen joined ethereum startup ConsenSys as policy head and now runs Value Tech. “We’re talking about a road map for how to ban a particular cryptocurrency.”
Of particular concern to Brett is Title VII of the bill. Buried beneath pages of philanthropic sounding measures promising to provide humanitarian relief, restore democracy, and support the reconstruction of Venezuela, the section on the potential impact of cryptocurrencies on U.S. ability to sanction countries requires that the secretary of state and the secretary of the treasury consult with the chairman of the Securities and Exchange Commission and the chairman of the Commodity Futures Trading Commission, “to develop a methodology to assess how any digital currency, digital coin, or digital token, that was issued by, for, or on behalf of the [Venezuela President Nicolas] Maduro regime is being utilized to circumvent or undermine United States sanctions.”
Within 180 days from the time that happens, the bill requires that the U.S. secretary of state and secretary of the treasury both brief the relevant congressional committees on the best course of action.
While the U.S. has previously allowed cryptocurrency transactions to legally occur, so long as taxes are paid in accordance with existing IRS regulations relevant to commodities, other nations have been more aggressive—and effective—on similar bans similar as the VERDAD Act. China has effectively shuttered China bitcoin exchanges and other companies or forced them outside the nation’s borders, even while making rapid progress on its own centralized cryptocurrency, which, similar to the petro, is being designed to be spent anywhere in the world.
This is what makes the VERDAD Act is so interesting. On the surface the reasons the law includes for banning the cryptocurrency, “public corruption, narcotics trafficking, and money laundering,” are easy for most Americans to agree on. But as Venezuela, China and other nations that would love to see the U.S. dollar lose its position as global reserve, start to explore cryptocurrency, the asset once thought of as “un-censorable” becomes both a potential threat and a potential solution. Bitcoin, and more privacy-focused cryptocurrencies like zcash and monero could keep citizens in some of those very same oppressive regimes connected to global commerce.
According to Brett, the benefits of a borderless, global ledger of transactions not controlled by a government outweigh the risks of a borderless, global ledger of transactions controlled by a government. Unfortunately, he says, bill 1025 is “essentially banning the use of a particular cryptocurrency throughout the U.S.,” adding, “that’s to me a large act and a really wide net on the way we’re going to start to do sanctions in this country because of the fact that cryptocurrencies cross borders so seamlessly.”
Since Trump originally signed the executive order banning petro, Facebook revealed plans to co-develop a cryptocurrency called libra, backed by central bank assets, causing Congress to raise its hackles against cryptocurrency more than ever before, according to Brett. Last week alone, Congress hosted three hearings related to cryptocurrency, and Brett expects that the pace will only increase as giant corporations and state governments increasingly adopt digital assets.
In addition to VERDAD, Brett has identified two other bills pertaining to blockchain in the senate and 17 bills in the House of Representatives, for measures a simple as a House FinCEN study to educate law enforcement in areas including cryptocurrency and as broad as the Senate’s Digital Taxonomy Act of 2019, which would give the Federal Trade Commission $25 million a year for five years to help prevent cryptocurrency fraud.
“Now is the time to pay attention,” says Brett. “And the fact is, because there are 20 active bills that could be impacted and could change in some way shape or form along the way, it’s very important that we watch them, almost like the weather map.”
By Michael Del@forbes