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Q&A of the Day - What would Florida regulating Cryptos mean?
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Today’s Entry: Hi Brian. I’m still trying to learn about cryptocurrency and blockchain. It seems like there's enough to this, especially blockchain technology, that it will have long-term staying power. To me it feels a little like the early years of the internet though. I wouldn’t be surprised if many of the most popular cryptos today go away just like many of the early internet companies. I figure that by the time I understand enough to put money behind it, a lot of this will have started to play out. I wanted to ask you about something I heard you say the other day. You talked about tax implications and said something about the state considering new regulations. Could you please explain what’s being considered? Thank you.
Bottom Line: Will do, but first... You’ve raised a really good point regarding what often happens with early innovative companies in what become technological revolutions. The first US automobile company? Duryea Motor Wagon. First consumer internet service provider? Prodigy. First browser for the worldwide web? Netscape. First eCommerce company, the Boston Computer Exchange. Of course, it’s not just that history shows many of the firsts don’t have staying power. Many of the early companies and leaders generally don’t. Think Compuserve, America Online, Lycos, Excite or even an Ask Jeeves. And remember Pets.com? Twenty years since their demise Dania Beaches’ Chewy is worth nearly $23 billion. The point, especially in the internet age, is that being first or early generally - hasn’t been best. Will history repeat itself with cryptos?
Most people don’t know that cryptos are as old as the consumer internet. Over 30 attempted cryptos went bust in the 90’s alone. So, what was it that made the current incarnations something deemed valuable by many? You said it. The use of blockchain which was only invented in 2009 by the creators of Bitcoin. In my opinion blockchain, which legitimized Bitcoin, is more interesting over the long run than the cryptocurrency itself. Blockchain has implications well beyond any specific crypto and we’ve already seen second generation blockchain cryptos like Ethereum and Ripple, serve multiple functions beyond the cryptocurrency itself. It’s complicated for sure and I’m not sure where the dust eventually settles, however history suggests that what’s been most popular early – might not be the longer-term leader in the space. As for your question regarding what the Florida legislature is considering in terms of regulation...
It was in December that Governor DeSantis proposed an initiative that would allow businesses to pay the state in digital currencies. This came after the successful launch of the MiamiCoin in Miami. Miami Mayor Francis Suarez has been clear that he views Miami as the epicenter of the cryptocurrency world. That claim looks legit with the city having hosted the largest annual crypto conference in the world and becoming the first City with its own cryptocurrency. So, with Governor DeSantis behind crypto along with the mayor of Florida’s largest city, the legislature is currently considering taking the next step towards mainstreaming cryptos, by legally defining what they are and allowing them to be used as a medium of exchange. A 2019 court ruling stated only those with a license to sell cryptocurrencies could transact with them. Legislation is needed to enable the visions of Governor DeSantis’ and Mayor Suarez.
While some get nervous when governments talk about regulating cryptos, Florida’s proposal does the opposite. It actually would deregulate cryptos. Under the proposal “virtual currencies” would be a recognized medium of exchange legally accessible to all who want to transact with them. It also would waive a current court ordered standard that all who use cryptos to transact also have assets valued in dollars, that are equivalent to the amount they’re transacting with using virtual currency. Similar legislation was proposed but stalled in last year’s session. This time around it’s been a quick mover with unanimous votes in committees in both the House and Senate and stands a strong chance of passing. If Miami, and Florida generally, are to take the next step to lead with virtual currencies, the legislation needs to pass and I’m willing to bet it does.