In the wake of the ground-breaking Korean Series on Netflix SQUID GAME, developers released SQUID virtual coins. The quick development of a cryptocurrency after a popular TV show was new in the cryptocurrency space, but not entirely strange because of the democratic powers that blockchain technology gave developers, and the freedom to be creative. However, months after the virtual tokens’ release, their price shot up astronomically, and the price fell drastically, causing investors to lose money on the token. Issues such as this – situations where developers stack loads of the tokens they created and sell the tokens when the price goes up significantly, rug pull – have been frequent in the cryptocurrency space in the last few years.
So, to curb these fraudulent issues in a space that promises transparency, the New York Government recently passed laws bills that banned mining companies that used non-green energy power for mining and protected investors against rug pull. The move by the New York government, is not like when Nigeria ban cryptocurrency, the effects are likely the same, given the backlash the laws have received in the last week.
WHAT THE NEW YORK LAWS ON CRYPTO ARE
The New York Government has been in the crypto news in the last week for the wrong reasons. The S8839 bill was proposed in the New York State Senate on April 25, 2022. The bills were:
- To punish cryptocurrency developers who commit rug pull and other crypto-related frauds in New York.
- Ban mining companies that don’t use green energy sources for their mining activities.
These bills, although good on the surface, have come under serious criticism for a plethora of reasons, but most notably for being vague.
So, what are the details of these bills that have caused a lot of raucous in the crypto space?
The first of the two bills proposed is the fraud bill, sponsored by State Senator Kevin Thomas. The states that, in summary, “with the advancement of new technologies, it’s paramount to enact regulations that align with the spirit of the blockchain and will help to fight fraud.”
The second bill is to “put a two-year moratorium on issuing air patterns to fossil fuel-based electric generating facilities that supply behind-the-metre energy to cryptocurrency mining”.
The second bill, seeks to improve the use of renewable energy in mining cryptocurrency, whether it’s using bitcoin chain explorer or another blockchain.
THE ISSUES RAISED ABOUT THESE BILLS
When a new bill is proposed, it’s normal for people to criticise the bill and find loopholes in the bill. But when a bill is heavily criticised for being vague, then there’s a problem, first with the hastiness of the bill, and the method of drafting the bill.
One of the major concerns raised was that the ‘fraud bill’ was vague. The Blockchain Association, an organisation of miners, countered the validity and workability of the bill on the following basis:
- The clause in the bill that demanded software developers to provide details of their finances online is bad and unworkable. According to the organisation, the clause is against the law, and such demands aren’t made on other financial sectors, so why is cryptocurrency’s case different?
- Based on vagueness, the Blockchain association also hinted that the laws in the ‘fraud bill’ were already covered under New York State and Federal law. The qualms with the bill are that it’s repeating punishments that other sections of the state and federal already have covered, making people wonder if the law was properly thought-out
- The other bill, which talked about banning mining companies that didn’t use green energy has been criticised as a witch-hunt against cryptocurrency mining.
While the bill against crypto frauds has been criticized with some level of objectivity, the bill on green energy mining has been misinterpreted in the media, this is according to the NYDIG.
The bill’s true intent, the NYDIG clarified, wasn’t aimed at miners but power companies. The clarity makes sense, some have said, but still think the bills were hastily drafted without care for proper research.
WHY THE BILLS, THOUGH?
Despite the criticisms the bills have received, some people believe that the bills, although faulty in many places, come from a good place.
In the last few years, the amount of fraud in the cryptocurrency space has increased. Investors are losing their monies fast as more fraudulent projects are springing up daily in the cryptocurrency space.
Therefore, to curb these scams, lawmakers had to draft bills.
Yes, the content of the fraud bills already exists, still, it shows genuine interest in the cryptocurrency space.
Some people believe that the hastiness of these bills is a testament to New York’s attempt to keep up with the fast-paced cryptocurrency space. Other states in the United States such as Miami and Texas are taking bold steps in cementing their status as investment darlings for cryptocurrency investors. Some believe that in a bid to stay as relevant as these states, New York’s lawmakers drafted these bills.
Concerning the bill on green energy, climate change has made it paramount for the government to pay close attention to energy generation and usage. In a bid to protect the environment, these laws have to consider the dynamics of the cryptocurrency space.
The use of green energy for crypto mining has improved over the years, so the possibility of sustainable energy as the main source for mining companies is high.
WHAT IMPACT DO THESE BILLS HAVE ON CRYPTOCURRENCY IN NEW YORK?
As one of the richest states in the richest states in the United States of America, New York will be well off if these bills are adjusted to meet the demands of the cryptocurrency space.
Although the cryptocurrency space is still new, with aspects of the technology and how it works still unknown to legislators, there is a need, however, for laws that protect investors from scams.
There is still so much left to be done by legislators on crypto laws, but the space is looking more like it needs some form of regulation.
However, to attract investors to New York, these laws have to be drafted after proper research on blockchain technology and cryptocurrency, and input from industry experts.
The cryptocurrency space is rich with opportunities for a rich state like New York, but the laws need to be nuanced and well informed.