Former U.S. President Bill Clinton took the stage as the keynote speaker at the Swell Conference hosted by Ripple yesterday and spoke about the development of blockchain technology and the regulatory environment around the emerging technology.
The Swell Conference focuses on bringing together payment, technology, and policy experts in the global payments industry. The conference comes with Ripple’s official xRapid product launch, as a tool for removing pre-funded nostro accounts for cross-border payments and sourcing liquidity – all through the XRP digital asset on global exchanges.
The annual event is hosted by Ripple and attracts blockchain experts from around the world. Taking place in San Francisco this year, this is the second Swell Conference following the inaugural conference in Toronto last year.
Bill Clinton was slated as the keynote speaker this year, and he touched on a variety of topics. Specifically, Clinton referenced his time as president during the emergence of the Internet and how there is an initial disparity of access, to such novel technologies that need to be overcome. He stated:
“The more you develop new technologies like blockchain … AI technologies, robotic technologies … the more the disparity of access is going to be felt.”
He continues to go on citing that it is necessary to take a cautious approach to the regulation of innovative technologies, while maintaining an openness to them, continuing:
“..you can’t apply an old regulatory regime to a new technology…”
“You end up killing the goose that laid the golden egg.”
Clinton’s remarks, while joined by former advisor and current Ripple board member Gene Sperling, come at a time where compliance issues and the uncertain regulatory environment in the U.S. have come to the forefront of debate.
The uncertain regulatory environment is particularly relevant to the host of the Swell Conference, Ripple.
Ripple has taken a friendly approach to the legacy financial system with a suite of products including xCurrent and xRapid explicitly tailored for banks, payment providers and money remittance services. However, they have had to repeatedly refute that their XRP digital asset should be classified as a security token, even going as far as to hire two former SEC officials in a lawsuit claiming that XRP is a security.
Ripple’s battle for the classification of its XRP digital asset is not the only high-profile case of problems, stemming from regulatory uncertainty in the broader cryptocurrency field in the U.S.
A complete lack of clarity from the IRS has led to calls from multiple sources including both lawmakers and industry executives to provide comprehensive transparency and guidelines for taxpayers on crypto assets.
Further, the SEC’s hesitancy to provide definitive rules for ICOs and cryptocurrencies outside of references to Bitcoin and Ether and a general statement from the end of last year has led to frustrations among the wider community. The SEC has also repeatedly denied proposals for Bitcoin ETFs, citing a lack of exposure and investor protections.
The uncertain regulatory environment has also led to the rise of blockchain havens such as Malta where the government recently passed several laws providing a legal framework for blockchains and cryptocurrencies in the country. Maltese PM, Joseph Muscat, even recently hailed cryptocurrencies as the “future of money” in a speech at the UN General Assembly.
The fears around the uncertain regulation of cryptocurrency assets primarily originate from a concern over potential over-regulation. A tempered approach to the development of the Internet under Bill Clinton helped shape the technology’s success, so this why his remarks bear significance.
Potential over-regulation of the blockchain and cryptocurrency sector could push innovation outside of the U.S. and into other areas, particularly Asia.
“While some degree of oversight is necessary, heavy-handed regulations in blockchain will not only stifle innovation, but shift it internationally away from the United States who risk being left behind in the blockchain revolution,” tells me Seth Hornby, CEO at Zenchain on the manner, “In many cases, regulations are causing material harm to the investors they seek to protect, with many ICOs forced to reduce the value of their tokens by removing dividends, token burns and similar features – for fear of being otherwise deemed a security.”
Michael Arrington, the TechCrunch founder and current partner at Arrington XRP Capital, has referenced the consequences of a second subpoena that they received as his fund halting token investments in U.S. companies until the SEC clarifies token rules.
“Before the SEC began to enforce its strict regulations, America was clearly in the lead when it came to innovation and most importantly, exchange volume,” says Han Yoon, CEO of Lunar Digital Assets.
“By over-regulating these exchanges instead of taxing them, hundreds of millions of dollars in potential tax revenue have left the United States and into other countries, with Chinese exchanges taking the lead by far. This trend is ongoing and even accelerating, as we have personally seen hundreds of American startups leave the United States because of the legal uncertainties, incorporating in places like the Cayman Islands, Malta, Estonia, and others.”
These statements correlate to a strong and growing sentiment within the U.S. about the need for a clearly defined regulatory framework in regards to digital assets.
Fostering a friendly environment, or at least simply providing more clarity, would go a long way in reassuring American investors, institutions, developers and companies that they will not be sideswiped by unfavorable regulations. Bill Clinton’s remarks are in tune with broader industry sentiment, and it is essential to take into account the repercussions of negatively impacting the development of technologies with such vast potential as blockchains and cryptocurrencies.
As the concerns surrounding compliance and regulation continue to evolve, the mounting pressure on the SEC and IRS should force their hand into providing the necessary clarity on the state of digital assets in the United States moving forward.