A Call for a Light-Touch Congressional Approach to Cryptocurrencies

In 1991, then-Senator Al Gore championed the High Performance Computing Act—an effort that gave rise to the joke “Al Gore invented the internet.”

The bill funded efforts to expand the internet’s building blocks, and jokes aside, it’s that rare piece of legislation that achieved what it intended. Case in point: The bill helped underwrite the National Center for Supercomputing Applications at the University of Illinois, out of which sprang the modern web browser—an innovation that turned the internet from a geek’s hobby into a vital resource.

Policy-makers should draw from the earliest days of the Internet as they begin to legislate bitcoin and other cryptocurrencies. The foremost lesson: That even when government officials don’t fully understand a technology or how it may change society, they can craft smart policy that fosters growth.

For decades, Congress was largely hands-off on ARPANET, one of the internet’s key predecessors. When it did engage in the late 1980s and early 1990s, it was in the spirit of the “Gore Bill”—providing funding to grow existing efforts as opposed to letting concern about the internet tamp it down. That legislation, it should be noted, was championed by a Democrat but signed into law by a Republican President, George H.W. Bush, who foresaw the economic growth the Internet could enable.

Bitcoin and other cryptocurrencies are at the stage in their development where the internet was in the early 1990s—use cases are still coming into being, and users are still familiarizing themselves with the technology. As of July, only 13% of Americans own some type of cryptocurrency. The economy springing up around cryptocurrency ranges from artists to startups—and more to the belle epoch era of great artistic and scientific advancement than to the “Wild West” that SEC Chairman Gary Gensler so frequently invokes.

That said, because this technology intersects powerfully with finance, Bitcoin and other cryptocurrencies are understandably at the forefront of policy debates. Most recently, Congress considered cryptocurrency in HR 3684—the hotly debated infrastructure package—and in a bill introduced by Sens. Maggie Hassan (D-N.H.) and Joni Ernst (R-Iowa) that would require the Department of the Treasury to report on international cryptocurrency mining. More legislation is likely to follow.

But such efforts should be tempered by the abiding principle that shaped Congress’s approach to the internet: trust, and go light on the verify. By giving the internet a favorable, bipartisan regulatory touch, Congress allowed a cornerstone industry to mature and flourish in the United States.

Congress also needs to be careful not to delegate too much authority on these matters to regulatory agencies. Too often, Congress passes ill-defined legislation, then sends it to the Executive Branch for implementation. That’s what the infrastructure bill would do—give carte blanche to administrative agencies like the Department of Treasury to write whatever rules they see fit for bitcoin and crypto.

That seems like a small matter, but it ends up having industry-wide consequences. Innovations get ground up in regulatory uncertainty and legal battles, and because judges often give deference to executive agencies in court, companies end up having to beg for permission from the government before launching new products. Each election cycle also leaves a sector holding its breath: If the party running the executive branch turns over, the rules of the game could change overnight.

That uncertainty slows down innovation. In a nascent industry, few things matter more than time to market. That goes double for Bitcoin and cryptocurrency, as the United States is in a global contest for primacy in this space. In overall adoption, the United States actually ranks lower than other countries, and while great potential exists in the US for the industry’s development, that success isn’t a given.

Congress’s efforts must match the broader geopolitical picture. Consider that earlier this year, China’s central bank announced a wholesale ban on cryptocurrency transactions. This follows a pattern of China cracking down on crypto’s use, mining, and development. No surprise: A decentralized system like cryptocurrency is incompatible with a centralized state.

But China’s regrettable actions present a real opportunity for the United States. America can play a leading role in building on Bitcoin, similar to the one our scientists, innovators, and policy officials played in the information technology boom of the 1990s and 2000s. But that won’t happen if Congressional efforts ensnare new cryptocurrencies in old regulatory and legislative frameworks, which could ship funding, jobs, and opportunity overseas.

Congress ought to run any potential legislation of Bitcoin and cryptocurrency through some basic tests: Does this bill punish early innovators or prevent future innovation? What is this cryptocurrency designed to do, and what is the proper analogy to the analog world? Does this law sacrifice America’s chance to lead on a key component in the future?

Politicians don’t need to understand the technical arcana of this field to foster its growth, just as they didn’t need to be able to code to help the internet grow three decades ago. A simple guiding principle will help lawmakers and regulators: Remember the power of American innovation and leadership, and unleash it, rather than tying it down. It worked for the internet 30 years ago; it will work for cryptocurrency today.