People building the infrastructure that powers these innovative networks are operating in a grey area with few protections. Innovators may be may be wrongly found to be money transmitters under state money transmission law (even if they don’t take custody of consumer funds), just as people running servers for message boards, blogs, and web pages could have wrongly been liable for defamation and copyright infringement in the 1990s (even though they were merely relaying other people’s content without editorial control). These problems are the same, and blockchain technologies deserve the same solution and policy approach that the early Internet enjoyed.
On a platform such as Steemit, Peerplays, Ethereum or future tech, we typically have concepts such as witnesses, validators, delegates, signers, masternodes etc. These roles are similar to the server operators who existed in the infancy of the Internet where anybody could set up a web server or email server and host websites. The server host was not liable for the activities of the user or client. If the law did not recognize that the server host should not be liable for the behavior of the client then the world wide web as we know it would not exist, the Internet as we know it would not exist, as many of the technologies including search engines would have been choked off by lawsuits, regulations, and unnacceptable risk.
Deregulation is the way to invite big money and investment into this space
Currently the Blockchain and crypto space operates in the grey. There is great uncertainty about what is legal and illegal, uncertainty about taxes and how to pay it, and these kinds of uncertainties increase the risks for early adopters. As a result the early adopters have to be risk takers, and are perceived by risk adverse as the lunatic fringe in many cases, as it's simply not safe to touch cryptocurrency directly even now in 2017. If many of you have experienced what it was like just to talk about cryptocurrency in 2013 you would remember that you couldn't even talk about it without seeming like a criminal, a hacker, or someone with something to hide. In addition many of you may have experienced trying to give cryptocurrency to people who for some reason would rather not have any contact with it, and wouldn't even accept it as a gift.
In order to change this the laws have to be reformulated. There is simply no way around legal reform because the laws are so bad that the existing laws in many cases make it impossible to follow. The laws being complicated raises the cost for developers who have to hire lawyers and ask law professors how to proceed even with fundraising. If these laws are not changed this could cost millions of dollars in legal fees for projects trying to manage their risks.
Truly smart contracts backed by contract law
Once we deregulate and reform the laws we can focus on creating true smart contracts. An example would be a self executing will which has legal authority to pass resources from one person to another in the event of death. Similar deadman switch style smart contracts which are legally aware, which can have the authority of private law, can allow the passing of crypto-assets from for example father to son, or friend to friend, or many to many, and through this we can gain increased security.
Artificial intelligence and the law
Assuming that Ethereum iEx.ec, Golem, or Tauchain work well with artificial intelligence, then we can finally have truly smart contracts and enhanced legal analysis. This is going to have an incredible impact on contract law, private law, and I'm not even qualified to study the implications other than to say there will be huge implications.
Why we need tax exemption for cryptocurrencies and the blockchain technology
Considering that currently Bitcoins are under a confusing web of taxes and it's decreasing the ability to actually put thee technologies to legal use, we need to in my opinion promote relaxation of the taxes along with deregulation of the space. There is precedent for this move, the Internet Tax Freedom Act:
I would suggest we push for a Blockchain Tax Freedom Act for similar reasons. The fact that we do not have this is one of the primary suppressors of potential in cryptospace. It is what prevents people from using Bitcoin to buy coffee at Starbucks. It is preventing people from truly exploring this space and innovating because of unforeseen risks. In fact, the IRS recently is using a John Doe Summons on Coinbase to pursue their own mission but even Coinbase didn't have enough clarity on taxes to provide tools to help users pay taxes. In my opinion, all taxes should be forgiven, and all activities in these early growth stages of blockchain technology should be tax exempt. This would mean no capital gains taxes on crypto trades, and if possible no capital gains for people exiting crypto.
Conclusion
If we want to reduce risks for developers, users, and all stakeholders in the cryptospace, we should push for deregulation, and a Blockchain Tax Freedom Act. There is no reason not to, as in the United States we have Republicans in Congress, Senate, and the Presidency, yet even in this environment I don't see a push for this? It's time to do it.
References
- https://coincenter.org/entry/congress-should-create-a-blockchain-technology-safe-harbor-luckily-they-already-figured-it-out-in-the-90s
- https://www.nytimes.com/2017/03/19/technology/lawyers-artificial-intelligence.html
- https://law.mit.edu/NinaKilbride
- https://en.wikipedia.org/wiki/Internet_Tax_Freedom_Act
- https://www.law360.com/articles/886479/bitcoin-users-should-expect-more-irs-and-doj-scrutiny