To get there, the panel urged, would require creating an environment in which digital currency developers, startups and ideas could flourish without the risk of onerous financial rules stifling innovation.
The 5th February hearing was hosted by the New Jersey Legislature's Assembly Financial Institutions and Insurance Committee. Among the topics discussed were the multi-signature wallet technology, the nature of transaction verification and coin creation, and the general state of bitcoin regulation in the US today.
Echoing a number of US regulators, legislators asked about Mt Gox and how the failed bitcoin exchange's mistakes can be prevented in the future; and the BitLicense proposal, of which the New York Department of Financial Services' released a revised draft version this week, was invoked as a cautionary tale for how to not regulate cryptocurrency.
Also mentioned were the potential rewards for New Jersey should the state roll out the proverbial welcome mat for digital currency, including job growth, tax revenue and the chance to play home to an experimental yet fast-growing economy.
New York-based attorney and Blockchain global policy counsel Marco Santori pointed to the growth of capital investment in digital currency companies during the hearing, telling legislators:
"That is a lot of money that could be spent creating New Jersey jobs, leasing New Jersey office space, leasing New Jersey apartments, buying meals from New Jersey restaurants and paying New Jersey taxes, and employing New Jersey residents."
"But right now, all that money is being spent in California and New York," Santori added.
Potentials of bitcoin explored
Those present at the hearing pushed lawmakers to bring regulatory clarity to the US digital currency ecosystem, at the risk of pushing that development – and the possible rewards thereof – out of the country. Speakers at the event included New York Law School professor and Coin Center fellow Houman Shadab, CoinComply managing director Brian Stoeckert, Ziftr CEO Robert Wilkins and Coinware general counsel Quentin Page.
Coin Center director Jerry Brito offered his organization's assistance to the panel in the future, and called for clarity on how either new laws or existing statutes will apply to businesses in the space, saying:
"This technology, again – we don't know where it's going. But there are many positive uses, and we want to make sure those can meet their potential."
Brito fielded a number of technical questions from legislators, and notably defended the industry during discussions of Mt Gox by saying that developers and stakeholders are working to prevent a similar collapse – and the ensuing fallout – from taking place again.
Santori suggested that legislators could create financial incentives, including tax breaks and business grants, to entice developers and investors to New Jersey. He cautioned against using a framework like the BitLicense, urging lawmakers to create a flexible environment that welcomes digital currency businesses instead of turning them away.
"Digital currency entrepreneurs are building this economy, and I ask that you give them good reason to build it here in New Jersey," he said.
Legislators asked the panel about the risks for consumers and businesses when using bitcoin and how regulation has developed in the United States thus far.
ItBit CEO Charles Cascarilla told the committee that businesses that use digital currency should be judged on a case-by-case basis owing to fact that, with bitcoin, there are both financial and non-financial uses of the technology.
"It comes down to: how are you using bitcoin?" Cascarilla explained. "If you're moving a practically worthless amount of bitcoin, you probably shouldn't have any real regulation."
TeraExchange co-founder and president Leonard Nuara, joined by CEO Christian Martin, told the committee that their New Jersey-based company has long operated under the jurisdiction of US regulators. They suggested that federally-regulated exchanges that handle bitcoin can offer tools to help people hedge against price volatility, a topic discussed numerous times during the hearing.
One legislator asked about the maximum coin supply and how the price and bitcoin-denominated financial instruments might be impacted when all of the coins are in circulation.
"In the first instance, it'll be the year 2140 – so I may not have to worry about that," Nuara joked, drawing laughter.
Tanaya Macheel contributed reporting
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