Lawmakers Try to Wrap Their Heads Around the Blockchain
WASHINGTON — The first question Rep. Michael C. Burgess, R-Texas, asked the gaggle of technologists, entrepreneurs and legal experts at a House hearing on digital currency Wednesday concerned a ransomware attack.
"The payment was instructed to be made in bitcoins," he said. "Now, it wasn't like a bag of bitcoin could be taken down to the waterfront and left under a boat," he added. "Can you enlighten me and the subcommittee about what are some of the law enforcement aspects here?"
"Firstly … bitcoin is highly traceable," explained Dana Syracuse, a counsel at BuckleySandler who helped develop the New York Department of Financial Services' BitLicense rule when he was its associate general counsel.
"That story is less about virtual currency and bitcoin," he added. "It is a story about cybersecurity and a large conversation that needs to be had around regulation in that area and creating proper standards there."
Rep. Burgess responded that this type of crime would have probably not been possible with traditional money transfers. "Seems like Clint Eastwood would have put an ink cartridge into the bag of money that stained the dollar bills so that anyone knew when they were pushed across the counter that this guy's the criminal."
This set the tone for the rest of the House Energy subcommittee hearing, which featured rudimentary questions from lawmakers exploring the future of bitcoin and other blockchain technology and the regulatory framework that could best contain it.
"Does the public have the ability to invest in these digital currencies?" asked Rep. Leonard Lance, R-N.J. In a follow-up question, he asked: "The price fluctuates, I presume, as is true of any currency?" He later inquired: "Are there differences between a public blockchain and a private blockchain?"
The witnesses easily deflected sharper questions about the terrorism financing, transparency and consumer-protection concerns raised by the technology.
In response to a question from Rep. Jan Schakowsky, D-Ill., about how to increase the security profile of digital wallets, Paul Snow, the chief architect of recordkeeping system Factom, argued that consumers could benefit from the traceability of blockchain.
"We can create audit trails for consumers that exist in places well beyond our jurisdictions," he said, and "limit the ability of middlemen to pass off clones and knock-offs as the real product."
Schakowsky said it was still necessary to develop "some sort of framework" to protect consumers. "And maybe some of it is embedded, and some of it is imposed," she said.
In response to a later question, John Beccia, the general counsel at bitcoin wallet company Circle — the first to have ever obtained a BitLicense from the New York regulator — said that the regulatory framework already in place was restrictive enough.
"We operate in a regulatory environment that is very similar to financial services," he said. "I can tell you, having gone through that process, it was almost like getting a bank charter.
When, to close the meeting, Burgess asked the witnesses to discuss their blue-sky predictions for blockchain technology, the witnesses cited cheap remittances, expanded banking access and even applications in Internet of Things objects like self-driving cars.
Burgess mused that blockchain technology could be used to aggregate anonymous health data for the purposes of scientific research, then wistfully noted that the witnesses had nothing concrete to show at the hearing.
"I was so looking forward to finding out whose face is on the bitcoin," he said.