As the specter of cryptocurrencies grows in regulatory circles across the globe, some policymakers are taking steps to go to war with anonymous cryptocurrency use. Their aim? To stem the tide of assets that can power commerce outside of the state’s purview.
The latest flex against anonymous and psuedonymous cryptocurrency use comes from Texas, where State Representative Phil Stephenson has introduced a draft bill that, if passed by the Texas legislature and signed into law by the state governor, would stringently mandate the deanonymization of Texan crypto users.
The unprecedented bill, H.B. No. 4371, is tentatively titled as “relating to digital currencies.” The legislation would enforce that all enterprises in the state validate the identity of customers paying via cryptocurrency.
— Drew Hinkes (@propelforward) March 10, 2019
Alternatively, identities need not be validated if customers pay with a so-called verified identity digital currency (VIDC). One relevant portion of the bill, Sec. 662.0002, reads:
“Before accepting payment by a digital currency, a person must verify the identity of the person sending payment. A person is not required to verify the identify of a person sending payment if the payment is sent by a verified identity digital currency […] This state may not use a ditial currency that is not a verified identity digital currency.”
Well, What’s a Verified Identity Digital Currency?
Per Rep. Stephenson’s definition of terms, a VIDC would be a “digital currency that allows the true identities of the sender and the receiver to be known before a person has access to another person’s digital wallet.”
General Counsel for Athena Blockchain and NYU professor Drew Hinkes noted on Twitter that it’s unclear if any cryptocurrencies would presently qualify as VIDCs per H.B. 4371. Hinkes also threw into question what amount or kinds of identification would satisfy the draft bill’s requirements.
other questions: would any existing #cryptocurrency /#digitalcurrency qualify as a "Verified identity digital currency” as defined? What level of "id" is required to be "verified"?State issued? Are 4 state administrative bodies the right entities to "promote" a digital currency?
— Drew Hinkes (@propelforward) March 10, 2019
In that same thread, Peter Van Valkenburgh, Director of Research at non-profit cryptocurrency research and advocacy group Coin Center, said the bill was “very oddly drafted” and suggested its language betrayed a lack of understanding in “how digital currencies work.”
Several looming constitutional concerns aside, this is very oddly drafted. "True identities verified before a person has access to another person's digital wallet" that's not even how digital currencies work.
— Peter Van Valkenburgh (@valkenburgh) March 10, 2019
For now, it’s too early in the process to have any indication as to whether H.B. 4371 will pass or not. But its introduction is notable insofar as it marks the first time a bill of its thrust has been put forward in any of the 50 U.S. states. Only time will tell if legislators in other parts of the country follow suit in putting forward similar bills.
French Committee Proposes Ban on Privacy Coins
Rumblings of a privacy-focused crackdown in France’s nook of the cryptoeconomy have taken shape over the last few weeks after the Finance Committee of the National Assembly, the country’s lower parliamentary house, issued a report in which the body said a ban on anonymizing cryptocurrencies had been worth considering.
“It would […] have been appropriate to propose a ban on the dissemination and trade in [privacy coins that] ensure complete anonymity by preventing any identification procedure by design,” the committee president said.
The report hailed privacy coin stalwarts like Zcash (ZEC), Monero (XMR), and PIVX as likely candidates for such a ban.
Like H.B. 4371, though, it remains to be seen whether the committee’s suggestion will lead to any further policy traction in the Western European powerhouse.
It’s Not All Bad in the U.S.A.
The Texas draft bill is something of an outlier, as a handful of American states have recently been taking pro-crypto legislative strides to accommodate, not crackdown, on the cryptoeconomy.
Arguably the most high-profile of these states has been Wyoming, which has moved forward on more than a dozen crypto-friendly bills this year.
WHAT DO WYOMING'S BLOCKCHAIN LAWS REALLY MEAN? Here's my analysis of how all the puzzle pieces fit together. Everyone in #blockchain may want to see it. Once you see what #Wyoming has created, I think it might blow you away! 🤠 https://t.co/mQAwrOUcHE @Tyler_Lindholm @TraceMayer
— Caitlin Long 🔑 (@CaitlinLong_) March 4, 2019
Other states like Utah, Colorado, Pennsylvania, and Arizona have also seen fresh permissive approaches to cryptocurrencies as of late.
Since there have been no federal crypto laws passed in the U.S. so far, states have necessarily had to take the lead toward the ecosystem, and some are doing so much more liberally than others.