By Greg Leffel
Digital assets like cryptocurrency, NFTs, blockchain companies and metaverse applied sciences are a transformative drive reshaping our financial system. As of this 12 months, digital assets are used by 46 million people in the US, and Virginia ranks No. 7 among the many prime states in the nation which might be making a digital financial system.
Whereas a lot of Virginians are embracing these applied sciences, many lawmakers on the state and federal ranges are nonetheless hesitant to support them. In the meantime, international locations throughout Europe and Asia have acknowledged the potential of digital assets and have already begun implementing clear and affordable rules that foster their development and innovation. If we wish to stay aggressive on the worldwide stage, our legislative our bodies must act swiftly and decisively in support of cryptocurrency and blockchain applied sciences.
For individuals who aren’t acquainted, digital assets – comparable to Bitcoin or Ethereum – supply people and companies a safe and decentralized technique of conducting transactions. Through the use of superior arithmetic and cryptography (the scientific artwork of writing or fixing codes) to create a clear and immutable ledger of transactions, digital assets remove the necessity for intermediaries comparable to banks, scale back enterprise working prices and resolve real-world issues.
At present, companies, such as OodlesBlockchain and IBM, are utilizing blockchain know-how to streamline provide chains, making them extra clear and environment friendly. That is notably related data for Virginians concerned in the state’s strong agricultural sector, the place this know-how may improve traceability and scale back fraud. With fixed improvements in the crypto house, digital assets’ potential profit enterprise house owners in the Commonwealth is limitless.
With the introduction of any new know-how, nevertheless, lawmakers are sure to have issues. Whereas it’s true that the nameless nature of cryptocurrency has allowed a small quantity of dangerous actors to interact in felony actions, you will need to be aware that only 0.15% of all cryptocurrency volume in 2022 was used for unlawful functions, with the overwhelming majority of crypto getting used for legit transactions. One other concern is market volatility, as costs of cryptocurrencies can fluctuate quickly as a consequence of speculative buying and selling, modifications in market sentiment, technological developments, or macroeconomic occasions.
Criminality and volatility are definitely legitimate issues, however we ought to handle these issues by way of correct regulation, simply as different international locations have executed. Japan, for instance, requires crypto exchanges to register with the Financial Services Agency (FSA) and cling to anti-money laundering rules, in addition to counter the financing of terrorism (AML/CFT) obligations. The nation has additionally established the Japanese Virtual Currency Exchange Association (JVCEA) and requires all crypto exchanges to be members of the group. Moreover, all buying and selling good points generated in Japan from cryptocurrency are categorized miscellaneous revenue and traders are taxed accordingly. These are the type of steps that Virginia and nationwide lawmakers ought to be contemplating.
Thankfully, the US has not gone utterly silent on digital assets, because the Biden administration has dipped its toes into regulating the applied sciences with the Infrastructure Investment and Jobs Act in 2021. In keeping with Part 80603 of the Act, any firm or one who “transfers digital assets on behalf of one other individual” is taken into account a “dealer,” and thus, each centralized cryptocurrency trade, comparable to Coinbase or Kraken, must situation a Type 1099-B to every buyer and to the IRS to gather taxes for these transactions. These taxes are vital, as they may create an estimated $11 billion in additional government revenue over the next 10 years.
On the state degree, Virginia has additionally taken some small steps on regulating digital assets. A bill passed in 2022 by the General Assembly permits banks in the Commonwealth to supply digital foreign money custody companies as long as the financial institution has sufficient protocols in place to successfully handle the related dangers. This coverage represents a constructive step ahead however is barely just the start of what must be executed to support digital assets.
Certainly, our authorities’s lack of daring and decisive motion is already having penalties, as many companies in the crypto sector wish to take their enterprise out of the nation. Coinbase, the biggest crypto trade in the USA, has opened a enterprise in Bermuda, and its competitor, Gemini, is contemplating shifting some of its business to the United Arab Emirates. We must act now if we wish to take benefit of all that digital assets have to supply. This window of alternative is not going to be open eternally.
The Virginia Blockchain Council calls on the Common Meeting and Congress to prioritize the expansion of digital assets. By collaborating with business specialists, entrepreneurs and stakeholders, our lawmakers must develop a complete regulatory framework that balances innovation, client safety and the mitigation of potential dangers. By embracing digital assets and fostering an surroundings that encourages their development, the USA, and Virginia, can solidify their place as international leaders in this transformative business and promote financial prosperity for us all.
Greg Leffel is the Founder and Govt Director of the Virginia Blockchain Council.