Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Will Congressional Stamp of Approval Boost Blockchain?

Author: Scarinci Hollenbeck, LLC

Date: August 1, 2019

Key Contacts

Back

The Blockchain Promotion Act, a Bill Aimed at Providing a Legal Framework for Blockchain, is Picking Up Momentum in Congress

Legislation aimed at providing a legal framework for blockchain and helping the technology gain traction is picking up momentum in Congress. The bill, known as the “Blockchain Promotion Act,” has bipartisan sponsors in both the Senate and the House of Representatives.

The Blockchain Promotion Act is Picking Up Momentum in Congress

Regulatory Uncertainty Surrounding Blockchain

In basic terms, blockchain is a distributed database that maintains a continuously-growing list of transactions. It is protected against revision by publicly-verifiable, open-source cryptographic algorithms and immune to data loss through distributed records sharing.

While blockchain gained notoriety as the backbone of the bitcoin payment system, its potential uses extend to numerous financial and commercial transactions. Currently, most electronic transaction technologies rely on centralized databases that are operated by a single organization, such as banks, clearinghouses, and other financial institutions. Proponents of blockchain technology make the case that these organizations are susceptible to corruption and fraud because they rely on human oversight to guarantee a system’s trustworthiness. The argument is that because the database has one single administrator, there is also little transparency for end-users, which can lead to business disputes.

Proponents of blockchain technology maintain that compared to a traditional, centralized database, blockchain could result in lower risk, decreased operational costs, and greater efficiency. One of the roadblocks holding back the growth of virtual currency or other blockchain applications (such as blockchain-backed equity) is the lack of uniform regulations. As blockchain becomes more mainstream, many states have adopted or are considering legislation. Because the state-level regulations often include different definitions of blockchain, the industry has raised concerns about a patchwork of inconsistent laws.

Blockchain Promotion Act

In February, Rep. Doris Matsui (D-CA),Vice-Chair of the House Energy and Commerce Communications and Technology Subcommittee, and Rep. Brett Guthrie (R-KY), both members of the House Energy and Commerce Consumer Protection and Commerce Subcommittee, and Sen. Todd Young and Sen. Ed Markey, members of the Senate Committee on Commerce, Science, and Transportation introduced the Blockchain Promotion Act. One of its goals is to provide standard definitions for terms used in the blockchain industry.

“Opportunities to deploy blockchain technology range from greatly increased transparency, efficiencies and security in supply chains to more-opportunistically managing next-generation broadband networks,” said Congresswoman Matsui. “This bipartisan, bicameral bill will bring a broad group of stakeholders together to develop a common definition of blockchain, and, perhaps even more importantly, recommend opportunities to leverage the technology to promote new innovations. I am pleased to work with Congressman Brett Guthrie and Senator Ed Markey and Senator Todd Young on this effort and look forward to ensuring our efforts maintain the pace of rapidly advancing technologies.”

The legislation requires the Secretary of Commerce to establish a working group, which would be known as the “Blockchain Working Group.” It would be comprised of representatives from federal agencies, as well as non-governmental stakeholders. Under the Blockchain Promotion Act, the representatives must include: information and communications technology manufacturers, suppliers, software providers, service providers, and vendors; subject matter experts representing industrial sectors other than the technology sector that the Secretary determines can benefit from blockchain technology; small, medium, and large businesses; individuals and institutions engaged in academic research relating to blockchain technology; nonprofit organizations and consumer advocacy groups engaged in activities relating to blockchain technology; and rural and urban stakeholders.

Once formed, the Blockchain Working Group would be tasked with submitting a report to Congress that includes:

  • A recommended definition of the distributed ledger technology commonly referred to as “blockchain technology”;
  • A study to be conducted by the Assistant Secretary of Commerce for Communications and Information, in coordination with the Federal Communications Commission, on the impact of blockchain technology on electromagnetic spectrum policy;
  • A study that examines a range of potential applications, including non-financial applications, for blockchain technology; and
  • Opportunities within Federal agencies to use blockchain technology.

Token Taxonomy Act

Separate legislation, known as the Token Taxonomy Act, would exempt certain digital assets from federal securities laws. The bill defines the term “digital token,” and expressly excludes these tokens from the definition of a security under the Securities Act of 1933 and the Securities Exchange Act of 1934. The legislation also includes a preemption provision that would override state-level regulations, such as New York’s BitLicense, which Facebook recently applied for in connection with its roll-out of Libra.

“It is time for the United States to step up and lead in blockchain technology,” said co-sponsor Congressman Darren Soto. “After months of public input, our Token Taxonomy Act and the Digital Taxonomy Act add critical definition and jurisdiction to create certainty for a strong digital asset market in the United States.  This is an important first step to promoting innovation and maximizing the potential of virtual currencies for the U.S. economy, all while protecting customers and the financial well-being of investors.  The strong support for this bipartisan legislation from U.S. businesses and stakeholders is a clear indication that our friendly, light-regulatory proposal will propel the United States to be at the forefront of this industry.”

A companion bill, the Digital Taxonomy Act of 2019, which was also authored by Rep. Soto, authorizes an additional $25 million in funding to prevent deceptive practices for cryptocurrency and blockchain projects. It also directs the Federal Trade Commission (FTC) to produce an annual report outlining the plan to further protect consumers and ensure the United States remains a global leader in blockchain technologies.

What’s Next?

Hearings on the blockchain bills are not expected until the fall. We will be closely watching the debate and will provide updates as they become available. Given the existing regulatory uncertainty, we encourage businesses interested in adopting blockchain technology to work with an experienced business attorney.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
What to Do If You Are Impacted by a Retailer Bankruptcy Part 2 post image

What to Do If You Are Impacted by a Retailer Bankruptcy Part 2

Over the past year, brick-and-mortar stores have closed their doors at a record pace. Fluctuating consumer preferences, the rise of online shopping platforms, and ongoing economic uncertainty continue to put pressure on the retail industry. When a retailer seeks bankruptcy protection, a myriad of other businesses are often impacted. Whether you are a supplier, customer, […]

Author: Brian D. Spector

Link to post with title - "What to Do If You Are Impacted by a Retailer Bankruptcy Part 2"
The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business post image

The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business

Since his inauguration two months ago, Donald Trump’s administration and the Congress it controls have indicated important upcoming policy changes. These changes will impact financial services policies and priorities. The changes will particularly affect cryptocurrency, as well as banking rules and regulations. Key Regulatory Changes in Cryptocurrency For example, in the burgeoning cryptocurrency business environment, […]

Author: Dan Brecher

Link to post with title - "The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business"
Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1 post image

Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1

The retail sector has experienced a wave of bankruptcy filings over the last year. Brick-and-mortar businesses in financial distress include big-name brands like Big Lots, Party City, The Container Store, and Vitamin Shoppe. When large retailers seek bankruptcy protection, they are not the only businesses impacted. Landlords can be particularly hard hit. While commercial landlords […]

Author: Brian D. Spector

Link to post with title - "Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1"
How Understanding Bankruptcy Trends Can Benefit Your Business post image

How Understanding Bankruptcy Trends Can Benefit Your Business

The bankruptcy legal landscape presents both challenges and opportunities for businesses navigating financial distress. Understanding current bankruptcy trends can help businesses make more informed and strategic decisions. Corporate Bankruptcy Filings Trending Upwards Bankruptcy filings continued to trend upwards in 2024. According to statistics released by the Administrative Office of the U.S. Courts, personal and business […]

Author: Brian D. Spector

Link to post with title - "How Understanding Bankruptcy Trends Can Benefit Your Business"
SEC Takes Actions Against Issuers for Failure to File Form D post image

SEC Takes Actions Against Issuers for Failure to File Form D

In December, the U.S. Securities and Exchange Commission (SEC) announced charges against two privately held companies for failing to file a Form D notice, which is generally utilized for exempt securities offerings. Here, the SEC’s enforcement sends a strong message: compliance with regulatory requirements is not optional and failure to comply can have significant consequences. […]

Author: Kenneth C. Oh

Link to post with title - "SEC Takes Actions Against Issuers for Failure to File Form D"
Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda post image

Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda

On February 14, 2025, the Office of General Counsel (OGC) of the National Labor Relations Board (NLRB) under Acting General Counsel William B. Cowen issued Memorandum 25-05, “New Process for More Efficient, Effective, Accessible and Transparent Case handling.” The Memorandum rescinds nearly all of the Memoranda issued by his direct predecessor, Jennifer Abruzzo, setting the […]

Author: Matthew F. Mimnaugh

Link to post with title - "Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!

Please select a category(s) below: