Florida’s next legislative session is quickly approaching with the start of committee weeks as early as September. Receiving input from our community on our objectives is important. With the Task Force yet to be formed, we will be pushing our own initiatives in conjunction with the task force. Our agenda will be forward looking and tackling fundamental blockchain and cryptocurrency issues. Introduction:
If you recall our newsletters from last legislative session, the FBBA and its partners were responsible for passing the first blockchain focused legislation in the State of Florida: Senate Bill 1024. We also successfully piloted the first blockchain day at the Capitol and managed to educate and influence over 50 legislators in just one day.Not bad for an organization that has been around for just over a year.
Of course, very little media attention was given to us. We got in the way of more established interests who were not happy with how involved our community has become in the legislative process. There is no way for us as an organization to succeed, and for our community to flourish, without stepping on a few toes here and there. Further, being new means we do not have the resources to “grease the wheels” to get stories told about us. Such it is.
Where to from here?
To some of our surprise, the Blockchain Task Force created by SB 1024 has still yet to be filled. As far as I know, only one person has been selected to be on this task force. The Senate President, Bill Galvano, chose a Tampa Bay based lawyer from a large well-respected law firm.
Regardless of understanding, large donors and close influencers will often work their way into such committees. This should surprise no one. Fortunately, most of these larger players have plenty of experience in Florida politics and know the lay of the land. My fear is that entrenched interests will end up steering the committee in the wrong direction.This is simply the nature of politics, but I remain optimistic.
There are still 12 members who need to be appointed. We will keep our eye out and let you know as those people are appointed. I am sure all of them will be knowledgeable in many different areas that will benefit the committee as a whole. My hope is that they are also knowledgeable in blockchain and cryptocurrency.
The blockchain task force gives us a unique ability to use a government created entity to advocate for positive legislation. However, because we do not control who is appointed to the task force we do not know if we as an organization will agree with every conclusion the task force comes to.
Therefore, our organization will be running an agenda parallel to the blockchain task force. We are not sure when the task force will be fully formed or when its final recommendations will be released. It could be so late as to be after session.Regardless, we will continue to advocate in Tallahassee this session for policies that will benefit you and your various businesses.
Our focus will be on promoting what I will labeling a “Blockchain Package.” This package will be taken from what my team and I believe to be the most innovative laws in the United States when it comes to blockchain and cryptocurrency. The package will focus on the following issues: Taxonomy, Money Transmission, Fintech Regulatory Sandbox, and (Banking).
I will discuss each issue briefly and note the legislation we are using as a guide. The following will be a short explanation of what we are including in this package and why. In the future, I will be doing a deep dive into each topic.
Taxonomy should be addressed before any other blockchain and cryptocurrency issue. Defining different types of digital assets will target a whole array of blockchain and cryptocurrency issues. A few countries have created a taxonomy for digital assets, but the best example for us as a state is Wyoming’s legislation which can be found below.
Our involvement with digital asset regulation has forced us to get involved on the Federal level as well. The Token Taxonomy Act has been introduced to Congress and is expected to gain a certain level of traction. The Token Taxonomy Act differs from Wyoming’s legislation in a few ways. These differences will not be discussed in this newsletter, but what will be mentioned is the Federal preemption clause in the Token Taxonomy Act. This would create a Federal taxonomy that supersedes any state level taxonomy. We are watching how strong that preemption language is as it could affect any state legislation that is passed. It is important to remember how slow Congress is. The SEC has issued similar guidance suggestions on the issue that are very close to the Wyoming Laws.
For reading on Wyoming’s Taxonomy and the Token Taxonomy Act, please see the following:
Actual Bill: https://www.wyoleg.gov/Legislation/2019/sf0125
Summary of Bill: “Recognizes direct property rights for individual owners of digital assets of all types (virtual currencies, digital securities and utility tokens) and applies the super-negotiability rules of commercial law to virtual currencies — which foster their liquidity — by applying the very same rules that apply to money. Wyoming’s commercial law reflects the true nature of digital assets (directly owned, peer-to-peer assets)” — Caitlin Long
Token Taxonomy Act: https://www.congress.gov/bill/116th-congress/house-bill/2144/text
The Florida Bar has made money transmission laws and regulations surrounding money transmitter licenses (MTL) a focal point. I believe they are correct in doing so, and I hope the FBBA can work with them on such an issue.
The confusion surrounding Florida’s MTL has been made well known through the Espinoza Case that has taken place in Miami. MTL’s can be incredibly expensive for certain companies to obtain. Further, the confusion around whether a company even needs an MTL can keep companies from moving to our state. Reform is needed.
Espinoza Case: https://medium.com/@sashahodler/florida-money-transmission-after-the-espinoza-case-98fa706b0805
Court Ruling: https://law.justia.com/cases/florida/third-district-court-of-appeal/2019/3d16-1860.html
Fintech Regulatory Sandbox:
A fintech regulatory sandbox, which has been enacted in two states so far, is a good practical and marketing-based approach for any state to try. It gives companies the ability to experiment without fear of being prosecuted. My one concern is that Federal regulations will keep international companies from coming to Florida even if we do have a sandbox. However, it may help those companies already in the United States make a choice on which state to reside in.
Banking always has been and always will be the largest priority for the blockchain and cryptocurrency communities. We do not need legislation to get banks to bank blockchain/cryptocurrency companies. There is no law or regulation keeping banks from banking blockchain or cryptocurrency companies. Therefore, there is no law we need to pass, or could pass that could elevate this trouble. We could take the Wyoming approach, which is to set up a state-chartered bank that does not do fractional reserve banking and that will bank our businesses.Unfortunately, Florida is very different than Wyoming, and I do not foresee replicating this for various reasons.
Our best option is to work through the Chief Financial Officer’s office and the Office of Financial Regulation to help encourage banks to bank our community.
We welcome your feedback and are happy to answer any questions or concerns.