The United States Congressional Blockchain Caucus has introduced a new bill that, if passed, would provide a safe harbor for blockchain service providers and developers who do not act as custodians.

Finally there's proof that somebody in Washington has some sense. They have taken a step in the right direction to make things the way they should be with the introduction of the bill.

State Regulation

State-by-state regulation of virtual currency (which is considered money transmission in several states) is ridiculously broad encompassing just about everything from cash to paper airplanes and whereas the Federal law is not much better, the individual state laws comes with a heavy requirement of obtaining a money transmitters license in each and every state that considers virtual currency transactions money transmission and those fees can pile up to over $5 million USD to obtain licensing nationwide.

State laws are inherently protective of consumers affairs while the federal laws target the prevention of money laundering (AML) and combating the funding of terrorism (CFT), however, when a states money transmission laws are violated, federal laws, see 18 USC § 1960(b)(1)(A), kick in and the penalty jumps from whatever state fines are imposed to up to 5 years in prison for a federal offense.

Which is absolutely ridiculous.

In 2017, there were a record number of arrests, convictions, and incarcerations of several individuals worldwide and while some may have been seemingly warranted, others like the case of United States Vs. Jason Klein were simply absurd.

In Klein's case, the HSI (Homeland Security Investigations) conducted most of the transactions that combined to raise the transaction volume high enough to file realistic charges going so far as to do a final transaction a year later with Klein to raise the volume into another classification of sentencing penalty.

The Bill

The Blockchain Regulatory Certainty Act aims to change some of that providing a safe harbor from these exact scenarios whereas a simple bitcoin trader exchanging an investment with another party for US dollars or startup software company using a blockchain to provide utility or services would be exempt from being treated as a money transmitter. The bill reads:

No blockchain developer or provider of a blockchain service shall be treated as a money transmitter, money services business, or or any other State or Federal legal designation requiring licensing or registration as a condition to acting as a blockchain developer or provider of a blockchain service, unless the developer or provider has, in the regular course of business, control over digital currency to which a user is entitled under the blockchain service or the software created, maintained, or disseminated by the blockchain developer.

This certainly wouldn't change anything over at Coinbase or Gemini as the bill is very specific to exclude custodial services, but for developers and small bitcoin companies operating in the OTC space, this may have a major impact if passed.

The chances of passing are likely not as strong as most of us would hope as there is likely going to be allot of opposition to the bill, but with growing blockchain support in congress, there is exactly that ... hope.

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