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In Parts I and II of the Money Morning exclusive interview with Chamber of Digital Commerce President Perianne Boring, she talked about her work in Washington and the importance of having more women in Bitcoin.
At 27, Boring has become one of the preeminent voices in the world of Bitcoin.
She founded the CDC in July of last year. The trade association's purpose is to advocate for Bitcoin not just on Capitol Hill, but amongst the regulatory maze that is Washington.
Previously, Boring served as a White House intern, a legislative aide to a Florida Congressman, and a journalist with her own blog ("Boring Bitcoin Report").
The digital currency world has noticed. On Coinfilter's "Top 40 Women of Bitcoin" list, Boring clocks in at No. 1.
In Part III of our interview, we discuss the many regulatory challenges Bitcoin faces, and why there's reason for optimism.
The Perianne Boring Interview: Part III
MONEY MORNING: So what's a typical day at the CDC like?
PERIANNE BORING: We face some very serious challenges on the public policy side, in part because there are so many different people involved. There are 10 different agencies and departments just on the federal level that have either already established jurisdiction over digital currency-related issues or have internal working groups that are looking to ensure jurisdiction over the industry.
So you have everything from the CFTC which oversees commodities – and you have the SEC which oversees securities. And you have the IRS, the taxing side, which has said that digital currencies are property. Then you go to FINCEN, which is a division of the U.S. Treasury, that's the money laundering regulator. They treat digital currencies as a currency. So you have a little bit of a conflict just between some of the regulators.
Then you have the CFPB, the Consumer Financial Protection Bureau which is looking at the consumer protections. That was the agency created out of Dodd-Frank, it's under the Federal Reserve. They are looking very closely at digital currency. They're getting very smart on digital currency and they have already put out a proposed ruling on prepaid access. It's very, very clear they're getting involved in the conversation.
MM: So Bitcoin is on their radar.
PB: It's more than on their radar. They're getting very smart on the issues, they're getting quite involved. And actually they're collecting on their website – they have a portal where they are collecting comments from the public – consumer complaints about digital currency. So when I talk about what we're doing [at the CDC], there's a bunch of different bodies here in D.C. that are looking at this technology; and who's coordinating that? Do you think these agencies talk to each other?
MM: Not likely.
"At times it can be like looking at a spaceship and telling it has to fly on a railroad track."
PB: Well, the [Bitcoin] industry would be smart to put forward a coordinated effort to make sure that when the regulators are looking to put forward rules and regulations that they work together across the various agencies.
MM: All of these agencies were set up to deal with specific areas but Bitcoin seems to run across all of them.
PB: It does, it does. That's what makes it difficult. It's quite a challenge and a lot of the financial services regulations many are using to regulate digital currencies – some of them were written before the Internet ever existed. They were written for brick-and-mortar banks, which at the time made perfect sense – or made more sense than it does today. Today we're looking at putting these same types of rules and regulations that were written for brick-and-mortar banks and applying it to a technology that only exists on the Internet in a digital form.
So at times it can be like looking at a spaceship and telling it has to fly on a railroad track. And so, what we try to do at the Chamber of Digital Commerce is create a safe place for the regulators and the government, those in government, to come and have an open dialogue with the industry about what the challenges are. What is the middle ground? How can we work with the regulators and the challenges they have?
MM: So what sort of reception have you gotten from Capitol Hill? I remember back in 2013 when Sen. Joe Manchin wanted to ban Bitcoin…
PB: He recanted. Because after that, [Rep.] Jared Polis [D-Colo.] took his exact same letter and replaced the word "Bitcoin" with "U.S. dollar." So he recanted what he had said. And I think that was a good lesson for public policymakers to not jump the gun on what they want to say about this technology.
MM: How about other policymakers here in Washington?
PB: It's been so interesting. We've been to speak with many people in the Washington, D.C., community and what you'll find is that a lot of the staffs that work for members of Congress and within the agencies – a lot of these are really young people. One of the first things I noticed when I came to D.C. was that our country was literally run by young people. You have some senior level staffers with a lot of experience, but tons of young people work here. And they work in positions on the Hill and in these agencies. And it really is the young people who are first to recognize how this really could change the game for so many different industries. So in going around the D.C. community we have found there are all sorts of allies to the Bitcoin community inside various agencies and departments on the Hill. It's been really encouraging. We have found that there are several people who work on Capitol Hill that have mined Bitcoin on their personal computers. We have found that the children of many members of Congress work in the digital currency ecosystem, or they're investors, or they mine.
MM: So there's more Bitcoin activity going on here in D.C. than meets the eye.
PB: I think so, yes.
MM: That's good to know. Those young staffers have the ear of the people in power.
PB: And equipping these people with the right tools to explain to who they work for what the potential benefits of this technology is – what's the real scoop above and beyond what you might read in the headlines. It's making sure that those who could be allies to the community have the tools they need to be advocates for us in their own roles and in their own work.
MM: Aside from all the federal agencies trying to regulate Bitcoin, we also have states starting to get involved. Do you see a problem with conflicting regulations there?
"Several people who work on Capitol Hill have mined Bitcoin on their personal computers."
PB: Coordination among the states is going to be key. So, on the state level the biggest issue that you're going to see is the regulation of money transmission, which is regulated on a federal and a state level. It's regulated by FINCEN on the federal level. So the first thing you have to do is get permission from FINCEN – either get a license or an exemption from FINCEN to operate on the federal level. And then you have to get a license in every single state you have customers in. And this is what I was alluding to earlier when I said there were rules written for the Internet that may pose issues for these new technologies. Because a lot of these companies, they don't see a border between the line of Florida and Georgia. It's online, it's consistent. So having a license in every single state that you have customers in is a huge barrier to entry. It's so much of a barrier to entry that there's not one digital currency company that's made it through the state regime. There's a number of different companies that have licenses in a couple of the states…
MM: Coinbase has a license in 27 states and Puerto Rico…
PB: So they have about half of what they need to be able to operate across the U.S. And that's after putting millions of dollars in, and years. It's a huge barrier to entry. So, coordinating on the state level is certainly a massive challenge. And then when you take a state like New York, they've written their own virtual currency laws – that's the BitLicense. But when you go to California, what the legislature has proposed is amending the existing Money Transmitter Act. So states are taking different approaches, and for the companies that have to go out and go through every single state and hop through these regulatory regimes – it's very challenging. Actually, it's so challenging that at the moment it seems to be impossible because no one's actually gotten through the entire process.
MM: Bitcoin is so new that nobody seems to know what to do with it.
PB: And that's just the money transmission piece. The other side is, where you're seeing states get involved, is on the tax side. Are you taxing transactions? The tax treatments in the different states and even in the local municipalities are varied. So that is a very serious issue that the industry is going to face, having consistency among the states.
MM: And each country is dealing with Bitcoin differently, too.
PB: We're seeing jurisdictional arbitrage between these different countries, we're seeing jurisdictional arbitrage amongst the states, and you're seeing jurisdictional arbitrage among the companies who are deciding to close up shop and move to other countries that are more business-friendly. We're already seeing all this.
MM: It seems kind of ironic that a lot of Bitcoin's early backers were libertarians. They felt like they'd created something completely outside of government.
PB: It's not outside government. It's highly regulated. It's a big misconception that people have. But there are a lot of properties about Bitcoin that have drawn in many people with free market perspectives, or those who have alternative views of what the financial system should look like. I think there's a lot of positive benefits to this technology. I think it can bring a lot of stability to our economy. It could bring a lot of transparency to our economy.
MM: Some of the early adopters might not like it, but it looks like Bitcoin won't go anywhere without at least some regulation.
PB: Well, regulatory clarity. I think that's the term that we hear most. Investors don't fear regulation, they fear uncertainty.
In Part I, I talk to PERIANNE BORING about how she ended up in Washington as a Bitcoin advocate and what the Chamber of Digital Commerce has achieved in its first year.
In Part II, I talk to PERIANNE BORING about the potential of Bitcoin to revolutionize the world financial system and the growing role of women in Bitcoin.
Follow me on Twitter @DavidGZeiler.