Due to the relative infancy of the cryptocurrency and blockchain spaces, there is little legal regulation or guidelines for companies in the industry to follow.
Recently, however, the Uniform Law Commission (ULC), a private body of lawyers and legal academics, has voted to finalize and approve a uniform model law for the regulation of virtual currency businesses. This is especially helpful for states like New York and California that have vague laws that create a gray area for bitcoin businesses.
Markets discount for uncertainty, whether that's in asset price volatility or ambiguous laws for entrepreneurs. Despite soaring market capitalizations, the crypto business environment has been slower to evolve due to regulatory uncertainty. Efforts like the Uniform Law Commission (ULC) add value by establishing clear and rational guidelines, but it should also be noted that the utility to regulation is best viewed as an inverted U shape.
While some regulation boosts value, too much can be destructive. The effort here seems to be net positive since it does more to protect entrepreneurs than to inhibit innovation.
The ULC’s proposal to create a uniform model law to regulate digital currency across the United States is a step in the right direction for the blockchain community.
As a startup operating in a nascent and largely unregulated industry, it can prove difficult for companies to determine the best practices by which they need to abide and the costs of doing so. This regulatory ambiguity has created an urgent need for a widely-used system that can help promote U.S. based blockchain-related business.
While the challenges of passing legislation in all 50 states are certainly significant, the ULC’s proposal represents an important step forward in providing enhanced regulatory clarity in a current gray area.