2018-19 Topic Proposal - Cryptocurrencies

Seth Gannon Assistant Debate Coach at Georgetown University and Westminster Schools

Tim Mahoney Director of Debate, St. Mark’s School of Texas

Thanks to St. Mark’s students Connor Gaffney, Rikhil Manduva, Semaj Musco, and Alexander Zuch for their research assistance

Introduction Bitcoin and other blockchain currencies, operating independently of central banks, have been compared to disruptive technologies no less than the telephone, radio, mobile phones, and the Internet.1 Though these new technologies and the changes they portend may be opaque or unbelievable to an older generation, cryptocurrencies promise to change the face of international trade, government monetary power, and global and personal finance – all in the professional lifetime of today’s high school students. Nobel laureate economist Joseph Stiglitz has already suggested that the United States “phase out paper money all together and move towards a digital economy using digital currencies.”2

1 Giulio Prisco, “It's Much Too Soon to Regulate Bitcoin, Says Deloitte Exec,” https://bitcoinmagazine.com/articles/it-s-much-too-soon-to-regulate-bitcoin-says-deloitte-exec-1446247159/, October 30, 2015. 2 Elizabeth Weise, “Crytpocurrency bitcoin reaches all-time high,” https://www.usatoday.com/story/tech/talkingtech/2017/02/23/crytpocurrency-bitcoin-all-time-high-116359/98315128/, February 23, 2017.

Affirmative Ground Government regulations threaten the adoption and revolutionary potential of cryptocurrencies. “Because Bitcoin is growing in popularity,” writes Jerry Brito, director of the Technology Policy Program at the Mercatus Center at George Mason University, “financial regulators are beginning to make plans for dealing with it, much to the chagrin of those who see the private currency as a revolutionary force inherently unmanageable by statist forces.”3

The United States federal government has applied Anti-Money Laundering (AML), Know Your Customer (KYC), and PATRIOT ACT regulations to online currencies. At minimum, these regulations are outmoded, designed for the “black boxes” of traditional banks, not the transparent and increasingly secure transactions provided by blockchain technologies. According to Primavera de Filippi at the Berkman Center at Harvard Law, these regulations are not only unnecessary but “onerous” and should be “reconsidered,” “reduced,” or “even eliminated.”4

Jon Watts, the director of enterprise services at Deloitte, sees this regulation as premature at the very least, arguing that “there is a critical question that is hanging over Bitcoin, potentially slowing the pace of innovation, and adoption, i.e., how will Bitcoin be regulated?” Watts believes that U.S. regulation of cryptocurrencies is premature, “that global policymakers and regulators should consider giving Bitcoin more time to develop before insisting on regulation. Other key technology innovation such as the telephone, airplanes, radio, mobile phones, and the Internet, were given much more time to develop before coming under serious regulatory supervision.”5 Choking off the adoption of blockchain technologies will carry serious consequences. In De Filippi’s words, “it is important to remember that the real innovation of Bitcoin is not the currency itself, rather than its underlying technology —the blockchain, a decentralized trust platform … In particular, the blockchain gives rise to new possibilities that were previously impossible – or impractical – and are therefore not fully accounted for in the current regulatory regime … Blockchain technologies can also provide a more efficient and secure securities market, by enabling both automatic settlement and clearance by peers, without a centralized clearinghouse.”6 Kelsey Bolin quantifies the efficiency that decentralization brings. “Due to their unique capacity for

immediate and trustless exchange of value, decentralized public ledgers also hold

great promise for the financial markets. Decentralized public ledgers dramatically

lower the transaction costs associated with digital value exchange. Moving value,

even in its digital form, takes money and time. This money and time can be traced

3 Jerry Brito, “Bitcoin: More than Money,” http://reason.com/archives/2013/11/19/bitcoin-more-than-money/print, November 19, 2013. 4 Primavera De Filippi, “Position Paper on: Bitcoin, Blockchain, and the future of the Internet,” https://ec.europa.eu/futurium/en/system/files/ged/primavera_de_filippi_-_bitcoin_blockchain.pdf. 5 Prisco. 6 De Filippi.

largely to the need for centralized authorities to verify digital transactions. For

example, the Automated Clearing House is a centralized verification authority that

supports over twenty percent of all electronic payments made in the United States.

More than $ 40 trillion moves through the Automated Clearing House each year in

over 25.5 billion discrete transactions. Each transaction through the Automated

Clearing House takes an average of two to three days to process, and servicing fees

for that processing range from six to nine percent. In 2015, Automated Clearing

House users paid $ 36 billion in servicing fees. Banks, a commonly used centralized

verification authority, spend close to $ 100-150 billion per year on information

technology and securities operations meant to verify, protect, and store customer

data. In the stock markets, post-trade and securities servicing fees charged by

brokers to verify securities transactions total approximately $ 100 billion per year.”7

Paradoxically, security regulations like KYC (which require users to turn over personal information as if at a traditional bank) may actually undermine the innovative cybersecurity provided by cryptocurrencies, instead creating old-fashioned databases of hackable information.8

The potential benefits of cryptocurrencies – unshackled from government regulation – go well beyond a more secure financial system. As demonstrated on the 2010-11 NDT/CEDA immigration topic, global remittances are an area where domestic and foreign policy intersect, an area of study in economics and political science that lends itself to academic research and deep clash in debate. The blockchain, operating outside of banking fees, is the future of remittances. Lowering transaction costs will make a billions of dollars difference in how much money is leaving the countries of the global north for the countries of the global south.9 It will do the same for crowdfunding, taking one of the distinctive features of life in the last decade and making it far easier.10

The affirmative could easily move into some unexpected areas like securities fraud. Kelsey Bolin explains the value of public ledger systems and their ability both

to rapidly enhance transaction rates but also enable shareholders to more fully

access legal protections in the case of securities fraud, “decentralized public

securities ledgers will enable private shareholders to more fully access the

protections of Sections 11 and 12(a)(2) of the Securities Act of 1933 in cases of

securities fraud…decentralized public securities ledgers will transform the tracing

doctrine from a nigh-insurmountable pleading burden to a simple records search. It

will help a wider scope of plaintiffs meet the judicially-imposed tracing doctrine.”11

Finally, cryptocurrency regulations present a rare topic that allows the affirmative and negative to address the central conflict of the Internet age: the tug-of-

7 Kelsey Bolin JD Washington University School of Law, “DECENTRALIZED PUBLIC

LEDGER SYSTEMS AND SECURITIES LAW: NEW APPLICATIONS OF BLOCKCHAIN

TECHNOLOGY AND THE REVITALIZATION OF SECTIONS 11 AND 12(A)(2) OF THE

SECURITIES ACT OF 1933” Washington University Law Review, 95 Wash. U. L. Rev.

955, 2018. 8 Brady Dale, “The Man Who Wrote the Book on Bitcoin Calls ‘Know Your Customer’ Dangerous 'Ridiculous and disastrous,'” http://observer.com/2016/05/andreas-antonopoulos-kyc-bitcoin/, May 27, 2016. 9 De Filippi. 10 Brito. 11 ibid

war between nation-states and new decentralized technologies. Digital currencies, unlike fiat currencies, are built entirely on mutual consent and not government mandate. Students will find extensive law review research in this area. It is no exaggeration that cryptocurrencies “threaten the effectiveness of central banking … Unlike the Napster case and other decentralized file-sharing networks, competing currencies stand to undermine the value of U.S. currency and, by extension, the sovereignty of the United States.”12 This core controversy presents dramatic affirmative and negative ground.

12 Joseph Cook, “Bitcoins: Technological Innovation or Emerging Threat,” 30 J. Marshall J. Info. Tech. & Privacy L. 535, 2014.

Negative Ground Outside of government control, cryptocurrencies and blockchain technology present sizable risks. Mark Williams, professor of finance and risk management at Boston University, suggests that Bitcoin “could evolve into an existential threat worthy of a science fiction movie.” Any cost-benefit analysis of government regulation, he says, must consider “the potential impact on nations’ currencies, monetary policies, risks of cybercrime, market manipulation, consumer fraud, price instability, bubble risk, global commerce and the possible broader systemic-risk implications … In its short experimental history, Bitcoin is better known as the designer-currency-of-choice for money laundering, tax evasion and other unlawful acts, than as a failsafe financial innovation that will improve the global financial markets. Recent market events – including hyper-price instability, market illiquidity, flawed software and the instability of existing trading infrastructure – reveal the possibility that virtual currencies may not be a safe, stable or usable currency. But if analysis can prove Bitcoin offers clear economic and societal benefit, then its use should be regulated and tightly controlled by sovereigns and managed through well-established and tested banking channels.”13

Core topic disadvantages focus on law enforcement and counter-terrorism. The security, anonymity, and mobile convenience of cryptocurrencies are a natural fit with the logistics and financing needs of terrorists, drug dealers, and human traffickers.14 Primavera de Filippi argues that while “it will be nearly impossible to stop all unlawful activities that will be made possible by blockchain technologies,” governments “could at least limit the adoption, and regulate the development of these technologies.”15

Concerns of bitcoin-fueled terrorism are not far-fetched. According to Newsweek, “nation’s defense and intelligence agencies, as well as private-sector researchers in finance, technology and various think tanks across the country—some of them under contract with the U.S. government—are now investigating how virtual currencies could undermine America’s long-standing ability to disrupt the financial networks of its foes and even permanently upend parts of the global financial system.”16 As early as 2014, the Pentagon’s Combating Terrorism Technical Support Office began studying the contributions of blockchain technologies to the “opaqueness, transactional

13 Mark T. Williams, “Bitcoin Could Evolve Into An Existential Threat Worthy Of A Science Fiction Movie,” http://www.businessinsider.com/bitcoin-sovereign-attack-2014-2, February 13, 2014. 14 Leah McGrath Goodman, “Bitcoin is being monitored by an increasingly wary U.S. government,” http://www.newsweek.com/2016/12/23/virtual-currencies-bitcoin-being-monitored-us-government-532063.html, December 15, 2016. 15 De Filippi. 16 Ibid.

velocity, and overall efficiencies of terrorist attacks.”17 Already, the Islamic State of Iraq and Syria (ISIS) has identified bitcoin as a promising funding tool.18

While the demands of law enforcement will provide one set of reliable disadvantages, the risks of unbridled cryptocurrency expansion go beyond criminality. Entrepreneur Ari Zoldan identifies three major ways in which “Bitcoin could potentially harm our society ... by significantly increasing crime, by causing a drastic decrease in social development investment, and by destabilizing economies due to a lack of government control and regulation.”19

17 Ryan Neal, “Bitcoin A Terrorist Threat? Counterterrorism Program Names Virtual Currencies As Area Of Interest,” www.ibtimes.com/bitcoin-terrorist-threat-counterterrorism-program-names-virtual-currencies-area-interest-1579699, May 3, 2014. 18 Stan Higgins, “ISIS-Linked Blog: Bitcoin Can Fund Terrorist Movements Worldwide,” www.coindesk.com/isis-bitcoin-donations-fund-jihadist-movements/, July 7, 2014. 19 Ari Zoldan, “Bitcoin: Society's Boon or Bane?” http://www.huffingtonpost.com/ari-zoldan/bitcoin-societys-boon-or-_b_3715125.html, August 19, 2013.

Conclusion

As Bitcoin approaches the one-decade mark, and as other non-fiat currencies like Ethereum and LiteCoin take off in its wake, cryptocurrencies are likely to remain a feature of public policy debates for decades to come, and to feature prominently in the lives of today’s students in ways hardly imaginable just years ago. When channeling the intellectual and research energies of some of the country’s smartest and most determined students, policy debate would be remiss to leave out the policy complications of our technological world. In an activity whose 2017 education resolution looks a lot like its 1999 education resolution, cryptocurrencies present – like the early days of the internet – a rare opportunity for truly new research and argument. For better or worse, cryptocurrencies epitomize the decentralized philosophy of our digital era, the radical idea that the top-down control we take for granted, including in monetary policy, may not survive the coming decades. There is no turning back the clock on the technology behind digital currencies. Their future lies in the realm of policy, politics, and debate.

Potential Resolutional Wordings

Resolved: that the United States Federal Government should substantially reduce its regulation of cryptocurrencies. Resolved: that the United States Federal Government should substantially reduce its know your customer regulations of cryptocurrencies. The second topic is a narrow subset of the first. The topic paper authors would prefer the first resolution but if there are concerns that the topic is too broad then the second topic would provide a viable opportunity for debate. Definitions

Cryptocurrency (n.): a digital currency produced by a public network, rather than any government, that uses cryptography to make sure payments are sent and received safely: cryptocurrencies such as bitcoin20

Blockchain: A blockchain is a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network.21

20 Cambridge Dictionary, “cryptocurrency,” http://dictionary.cambridge.org/us/dictionary/english/cryptocurrency. 21 https://en.wikipedia.org/wiki/Blockchain

Appendix 1 Solvency advocates While the primary areas of regulations may seem relatively narrow there is, in fact, a large variety of potential plans. The examples below are just a small sampling of affirmative possibilities.

Plan: the United States Supreme Court should clarify The Howey Test and rule that cryptocurrency should not be considered a security. Hurtrado 18 (Patricia, “Can Bitcoin Be Regulated? U.S. Courts Are About to Decide” Bloomberg. 1/29/18. https://www.bloomberg.com/news/articles/2018-01-29/can-bitcoin-be-regulated-u-s-courts-are-about-to-decide , CG) The U.S. is trying to regulate cybercurrency offerings. It’s still unclear whether it has the authority to do so. Federal judges in Brooklyn, New York, are about to rule on the question. In doing so, they could determine whether Bitcoin and other stateless currencies are securities that can be regulated like stocks or bonds. Courts across the country are likely to consult these rulings when considering other

cybercurrency cases. “If it’s not a security, then what is it?” said Peter Henning, a former SEC and Justice Department lawyer who is now a professor at Wayne State University Law School. In what is believed to be the first criminal case focusing on an initial coin offering, Brooklyn businessman Maksim Zaslavskiy was charged in a case unsealed in November with promoting digital currencies backed by investments in real estate and diamonds that U.S.

prosecutors said didn’t exist. The Securities and Exchange Commission also sued. U.S. District Judge Raymond Dearie said he’ll allow Zaslavskiy’s lawyers in both the criminal and civil cases to challenge whether ICOs can be considered a security under U.S. law. The government has until March 19 to file its argument that cybercurrency is a

security. “If the judge makes the determination that this is not a security, he’d dismiss the criminal case,” said Mildred Whalen, Zaslavskiy’s criminal-defense lawyer. “He recognizes this is a fundamental issue in both cases. It’s all completely new

territory.” U.S. Law Another judge in the Brooklyn federal courthouse is being asked to rule on how cryptocurrencies and ICOs should be treated under U.S. laws. In that case, the SEC sued last month against Dominic Lacroix, whom it called a “recidivist securities law violator.” The SEC says his Canadian company marketed an ICO called PlexCoin to investors in the U.S. and abroad without registering with U.S. authorities or disclosing past misdeeds. Lacroix, 35, and his 26-year-old partner Sabrina Paradis-Royer used Twitter, Facebook and blogs last year to raise about $15 million from thousands of investors, the SEC said. Investors in PlexCoin were told profits would be bolstered because the firm had almost 50 “market experts” working primarily in Singapore, who’d list the virtual currency on digital asset exchanges and push secondary market trading. In reality, the SEC says, it was a scam. Only a handful of employees worked for Lacroix in Quebec, and he concealed his involvement in the company because he has a history of committing securities fraud in Canada. An asset freeze last month was a victory for the SEC’s Cyber Unit, stopping an ICO that promised investors a 13-fold profit in less than 29 days. What’s an ICO? Like an IPO But With Digital Coins: QuickTake Q&A U.S. District Judge Carol Amon said she will first decide if the SEC has territorial jurisdiction sue before determining whether PlexCoin was a security. Lacroix is in custody in Quebec after a contempt ruling. Jason Gottlieb, Lacroix’s U.S. lawyer, said in a letter to the judge that he would challenge the SEC’s contention that it has authority over the matter. “It’s the Canadians who have unique jurisdiction here, and for reasons of international comity, I don’t think we should be mucking about in their process,” Gottlieb told the judge at a Jan. 9 hearing. The SEC’s lawyers plan to file their response to Gottlieb’s argument in May. Ryan White, a spokesman for the

SEC, declined to comment on Gottlieb’s claims. Case Law The answer to whether cybercurrencies are securities may be found in SEC v. J. Howey Co., a Supreme Court case decided seven decades ago. The 1946 case

involved a Florida orange-growing business that sold grove plots and promises of significant profits using a “service contract” that paid landowners based on the harvest’s success. After the SEC sued, Florida landowner W.J. Howey Co. argued that it was selling real estate and services and not a

security, but the Supreme Court disagreed and found Howey could be held liable for violating securities laws. “Many people quote the ‘Howey test’ as if it were a monolith cast in stone, but it’s not,” said Todd Kornfeld, a securities law specialist at Pepper Hamilton in New York. “The SEC

has certainly chosen to read it a certain way, and different courts have had somewhat varying formulations.” Then there are lessons from the earthworm investment craze of the 1970s. Investors were lured into spending millions of dollars to breed earthworms purportedly in demand by fishermen and zoos. The sellers were accused of hawking a fraudulent get-rich-quick scheme. In a 1979 case known as Smith v. Gross, a federal appeals court concluded that an investment in a worm farm was an “investment contract” and established that the worms did, indeed, constitute a security.

Plan: the United States federal government should exempt crypto currency transactions under $600 from capital-gains taxes. Bloomberg 17

(Bloomberg, 12-14-2017, "Washington Is Trying to Regulate Bitcoin. These People Are Trying to Stop It," Fortune, http://fortune.com/2017/12/14/new-bitcoin-restrictions/, accessed 4-17-2018, RXM) Bitcoin enthusiasts struck it rich this year as the cryptocurrency surged. Now they’re preparing for battle in Washington to protect their industry’s ascent. Advocacy groups are gearing up in Washington for a lobbying push in 2018, looking to limit legislation that would subject cryptocurrencies to more regulation and change tax-reporting requirements. Organizations such as the Chamber of Digital Commerce, Coin Center Inc. and the Bitcoin Foundation say they’re concerned about stifling innovation. Their top targets include a Senate bill that would include digital currency in an update of money-laundering laws, requiring more entities to police potentially illicit transactions. Some advocates are also backing a House bill that would exempt crypto transactions of up to $600 from capital-gains tax reporting. The Bitcoin Foundation is pressing the committee to remove the section on cryptocurrencies from the Senate bill or limit the language to digital currency exchanges. Applying the provisions to issuers of digital currency is misguided and the burden of compliance would be greater than the benefit from developing the technology in the U.S., the foundation said. Coin Center, a non-profit research and advocacy organization in Washington, has met with members of Congress and their staff about the bill to argue that while the policy goals make sense, the language as drafted isn’t needed, said Peter Van

Valkenburgh, director of research. The Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, which tracks illicit payments, issued adequate guidance in 2013 for people using virtual currencies. The language should either be removed or the

FinCEN guidance incorporated, he said. The Chamber of Digital Commerce, a Washington-based trade association comprised of more than 130 companies representing the digital asset and blockchain industry, agrees the language is unnecessary. It’s also sent a statement to the committee and met with staff, said Amy Kim, the chamber’s

global policy director and general counsel. The best thing lawmakers can do is consult the cryptocurrency industry when drafting new legislation or regulation to better understand it, and to be very clear about what definitions are used, Fanusie said.

More ev on $600 limit

Polis and Schweikert 17 (Jared Polis and David Schweikert, 9-7-2017, "Creating tax parity for cryptocurrencies," JaredPolis, https://polis.house.gov/news/documentsingle.aspx?DocumentID=398438, accessed 4-19-2018, RXM) Rep. Jared Polis, D-Colo., and Rep. David Schweikert, R-Ariz., co-chairs of the Congressional Blockchain Caucus, introduced the Cryptocurrency Tax Fairness Act of 2017 today. In 2014, the IRS classified digital currency as property. The outdated guidance classifies even the smallest of cryptocurrency transactions the same as buying or selling stock, which dis-incentivizes consumers from using virtual currencies to pay for goods and services. The bipartisan legislation creates a structure for taxing purchases made with cryptocurrency. Similar to foreign currency transactions, it allows consumers to make small purchases with cryptocurrency up to $600 without burdensome reporting requirements. “Cryptocurrencies can be used for anything from buying a cup of coffee to paying for a car, to crowdfunding a new startup and more and more consumers are choosing to use this type of payment. To keep up with modern technology, we need to remove outdated restrictions on cryptocurrencies, like Bitcoin, and other methods of digital payment,” said Polis. “By cutting red tape and eliminating onerous reporting requirements, it will allow cryptocurrencies to further benefit consumers and help create good jobs.”

Plan: the United States federal government should limit money-laundering regulations to digital currency exchanges. Bloomberg 17 (Bloomberg, 12-14-2017, "Washington Is Trying to Regulate Bitcoin. These People Are Trying to Stop It," Fortune, http://fortune.com/2017/12/14/new-bitcoin-restrictions/, accessed 4-17-2018, RXM) Bitcoin enthusiasts struck it rich this year as the cryptocurrency surged. Now they’re preparing for battle in Washington to protect their industry’s ascent. Advocacy groups are gearing up in Washington for a lobbying push in 2018, looking to limit legislation that would subject cryptocurrencies to more regulation and change tax-reporting requirements. Organizations such as the Chamber of Digital Commerce, Coin Center Inc. and the Bitcoin Foundation say they’re concerned about stifling innovation. Their top targets include a Senate bill that would include digital currency in an update of money-laundering laws, requiring more entities to police potentially illicit transactions. Some advocates are also backing a House bill that would exempt crypto transactions of up to $600 from capital-gains tax reporting. The Bitcoin Foundation is pressing the committee to remove the section on cryptocurrencies from the Senate bill or limit the language to digital currency exchanges. Applying the provisions to issuers of digital currency is misguided and the burden of compliance would be greater than the benefit from developing the technology in the U.S., the foundation said. Coin Center, a non-profit research and advocacy organization in Washington, has met with members of Congress and their staff about the bill to argue that while the policy goals make sense, the language as drafted isn’t needed, said Peter Van Valkenburgh, director of research. The Treasury Department’s Financial Crimes Enforcement Network, or

FinCEN, which tracks illicit payments, issued adequate guidance in 2013 for people using virtual currencies. The language should

either be removed or the FinCEN guidance incorporated, he said. The Chamber of Digital Commerce, a Washington-based trade association comprised of more than 130 companies representing the digital asset and

blockchain industry, agrees the language is unnecessary. It’s also sent a statement to the committee and met with staff,

said Amy Kim, the chamber’s global policy director and general counsel. The best thing lawmakers can do is consult the cryptocurrency industry when drafting new legislation or regulation to better understand it, and to be very clear about what definitions are used, Fanusie said.

Plan: the United States federal government should clarify that cryptocurrency is classified as a currency if it is freely transferable and supported by a blockchain that records each transaction. The plan would remove cryptocurrency from SEC regulations

Mokhtarian and Lindgren 18 (Edmund Technology Advisor; J.D., Harvard Law School and Alexander, Partner at

Lindgren, Lindgren, Oehm, & You LLP; J.D., University of Minnesota Law School,

“Rise of the Crypto Hedge Fund: Operational Issues and Best Practices for an

Emergent Investment Industry”, Stanford Journal of Law, Business & Finance, 23

Stan. J.L. Bus. & Fin. 112, twm)

D. Non-Regulation of Virtual Currencies

In the DAO Report, the SEC also distinguishes cryptocurrencies that qualify as securities

from those that qualify as "virtual currencies." n88 A "virtual currency" is:

a digital representation of value that can be digitally traded and functions as: (1) a medium of exchange; and/or (2) a unit of account; and/or (3) a store of value, but does not have legal tender status (i.e., when tendered to a creditor, is a valid and legal offer of payment) in any jurisdiction. It is not issued or guaranteed by any jurisdiction, and fulfils the above functions only by agreement within the community of users of the virtual currency." Virtual currency is distinguished from fiat currency (a.k.a. "real currency," "real money," or "national currency"), which is the coin and paper money of a country that is designated as its legal tender; circulates; and is customarily used and accepted as a medium of exchange in the issuing country. n89

Note: that a virtual currency is, for tax purposes, treated as a commodity but not a

currency. n90 However, for purposes of securities laws, the SEC's analysis suggests that

the distinction between virtual and fiat currency is formal, with fiat currency being in

tangible form and having the official backing of a governmental entity. Thus, the

determining factor regarding whether an instrument constitutes a currency - virtual

or not - is functional: is the instrument a medium of exchange, a unit of account,

and/or a store of value? If so, it is a currency.

Currencies are, in turn, not securities. The term "security" is defined in section 2(a)(1) of the

Securities Act of 1933 (the "Securities Act") and section 3(a)(10) of the Securities Exchange Act of 1934

(the "Exchange Act"), neither of which includes currencies. n91 The DAO Report implicitly

validates the exclusion of virtual currencies [*129] from securities laws by mentioning,

in passing, that both Bitcoin and Ether qualify as virtual currencies, but never referring

to the DAO Tokens as virtual currencies. n92

Unsurprisingly, the SEC failed to acknowledge the DAO Token's capacity as, or

similarity to, a virtual currency because doing so could omit the DAO Token from the

purview of securities laws. In the SEC's analysis, a virtual currency seems to be something

altogether different from the DAO Tokens and other security tokens whose primary purpose is raising capital.

This is particularly notable because security tokens and virtual currencies have more

commonalities than dissimilarities. Nearly all security tokens could conceivably meet

the SEC's functional test for determining whether an instrument qualifies as a virtual

currency because a cryptocurrency, by definition, operates as a store of value that is

generally freely transferable (and thus a medium of exchange) and supported by a

blockchain that records each transaction (such that it is also a unit of account). For

example, the DAO Tokens were freely transferable and ran on the Ethereum

blockchain. Similarly, virtual currencies tend to have at least some of the attributes of securities because of their reliance on blockchain technology. Each blockchain is typically developed by a small and close group of developers. The holders, conversely, tend to be diffuse and numerous, limited ability to act in concert. For instance, Bitcoin had reached over 10 million wallets, each corresponding to a separate Bitcoin holding, [*130] by the end of 2015. n93 In addition to the problem of numerosity, the pseudonymous nature of blockchain transactions further inhibits organized action by token holders. For example, Bitcoin holdings are identified by a custom address rather than the name or other personal information of the holder. n94 Thus, like the DAO Tokens, virtual currencies tend to exhibit at least some hallmarks of stock ownership which the SEC weighed so heavily against the DAO Token.

However, the Securities Act and Exchange Act (having been largely written over 80

years ago) do not contemplate such a nuanced treatment, and so the SEC has no

choice but to ignore some of the currency-like functionality of security tokens and

classify them purely as investment contracts so that they are subject to securities

regulation. In contrast, virtual currencies face no such regulation.

Plan: the United States federal government should rule that “Honor All Wallets” rules do not apply to cryptocurrencies. “Honor All Wallets” rules violate anti-trust regulations when applied to digital wallets

Levitin Georgetown Law Prof 18 (Adam, January, “PANDORA'S DIGITAL BOX: THE PROMISE AND PERILS OF DIGITAL

WALLETS”, University of Pennsylvania Law Review, 166 U. Pa. L. Rev. 305, twm)

Merchants face a different problem. Merchants have only limited ability to refuse or

condition acceptance of payments from particular digital wallets. The three major

payment card networks--American Express, MasterCard, and Visa (collectively, the Card Networks)-

-have network rules applicable to merchants [*309] that accept their cards. The Card

Networks' rules require merchants to "Honor All Wallets" without discrimination.

Specifically, the Honor All Wallets rules require merchants that choose to accept a Card

Network's payments using a particular type of communications technology to accept

the Card Network's payments without discrimination from all devices that utilize that

communications technology. These rules force merchants to take various types of

digital wallets if they accept regular credit and debit payments--which is a sine qua

non of participating in modern retail markets. For example, a merchant that accepts traditional MasterCard magnetic stripe devices must accept MasterCard payments from all devices using magnetic stripe data, including mobile devices such as SamsungPay that utilize magnetic stripe emulation technology to mimic the electromagnetic field created by a magnetic stripe card. Likewise, if a merchant accepts Visa contactless payments from credit cards with Near Field Communications (NFC) "contactless" chips, the merchant must also accept Visa contactless payments from all mobile devices that use NFC. n2 The merchant could not accept NFC payments only from mobile devices that make payments through lower-cost systems like PIN-debit and automated clearing houses (ACH). n3 Under the Honor All Wallets rules, then, a merchant must accept payments from all payment devices that utilize a technology if the merchant accepts any payments using that technology. As a result, merchants cannot refuse to accept payments from payment devices that impose greater risks and costs upon them. Merchants cannot price for the risks created by particular payment devices, nor can they contractually reallocate those risks to the digital wallet provider. Indeed, absent direct physical observation, merchants are presently unable to identify what form factor was used to make a payment, so merchants cannot even distinguish which digital wallet is being used.

In sum, the Honor All Wallets rules mean that merchants lose control over what risks

they accept and on what terms. When accepting payment [*310] from any particular

digital wallet, a merchant is forced to open a digital Pandora's Box of an unknown set

of risks. This Article considers the potential legal and business issues digital wallets raise for both consumers and

merchants, and proposes a pair of necessary interventions in the digital wallet marketplace. First, it argues the CFPB should issue regulations under its power to regulate "abusive" practices and services to require minimum standards for default payment options, security, deposit insurance coverage, and

privacy. Second, it argues the Honor All Wallet rules are likely antitrust violations that

inhibit the development of digital wallet technology by making merchants reluctant

to accept digital wallets and by making it difficult for the digital wallets with the most

attractive value propositions for merchants to gain market share. In particular, the

Honor All Wallets rules foreclose entry into the digital wallet market for digital wallets

that use lower cost payment systems than the Card Networks--namely PIN-debit and

ACH--and thereby help the Card Networks maintain their market power in the face of

a technological transition from plastic cards to digital wallets. Ironically, then, the Honor

All Wallets rules may well be inhibiting rather than encouraging adoption of digital

wallets because the rules enable bad wallets to preserve market access such that the

bad can crowd out the good.

Appendix 2 Specific Negative Arguments

Disadvantage links Financial stability Lagarde IMF Managing Director 18 (Christine Lagarde, former French Finance Minister former French Minister of State for Foreign Trade, Former partner with the international law firm of Baker & McKenzie, https://blogs.imf.org/2018/03/13/addressing-the-dark-side-of-the-crypto-world/, “Addressing the Dark Side of the Crypto World”, March 13, 2018, twm) The result is a potentially major new vehicle for money laundering and the financing of terrorism. One recent example reveals the scope of the problem. In July 2017, an international operation led by the United States shut down AlphaBay, the largest online criminal marketplace on the internet. For more than two years, illegal drugs, hacking tools, firearms, and toxic chemicals were sold all over the world through AlphaBay. Before the site was taken offline, more than $1 billion had been exchanged through crypto-assets.

Of course, money laundering and terrorist financing is only one dimension of the threat. Financial stability is another. The rapid growth of crypto-assets, the extreme volatility in their traded prices, and their ill-defined connections to the traditional financial world could easily create new vulnerabilities.”

Unregulated cryptocurrency will spur climate change Bosotti 18 (Aurora Bosotti, 1/25/18, “Bitcoin WILL come under MORE regulation to protect global finance from criminal activity” https://www.express.co.uk/finance/city/909736/Bitcoin-price-news-today-worth-cryptocurrency-Ripple-ethereum-XRP-USD-IMF-crime-video, SM) "There will be innovations, there will be changes, there will be newcomers. What needs to change is our regulatory approach. We cannot continue looking at things." Bitcoin is a cryptocurrency not controlled by a single administrator and can be used to buy things worldwide electronically. Bitcoin’s popularity has caused demand to skyrocket throughout 2017, pushing other cryptocurrencies like Ripple and ethereum to also reap the benefits of the cryptocurrency craze. South Korea announced plans to “legalise” cryptocurrency trading for registered real-name accounts only in a bid to tackle

anonymity in trading. Real names will have to be used starting from January 30. The IMF President also said that other than the financial security risks, bitcoin could threaten to worsen climate change because of the amount of energy used for bitcoin mining. She continued: "Bitcoin mining, which is this accelerated use of computers to actually determine the value and incentivise the functioning of the mechanism, is energy hungry. "We figured that in 2018 if it continues, that system will likely consume as much energy as Argentina. That’s big and in times of climate change, it’s a big concern." The anonymity of it is likely to facilitate money laundering and things that no one is happy about Christine Lagarde But Mrs Lagarde revealed some banks are looking into using bitcoin's support technology, the blockchain, to

create their own cryptocurrency and establish a transparent system to monitor transactions. The blockchain is a system that allows the transmission of digital information but blocks attempts to copy the data. Speaking to Bloomberg from the World Economic Forum in Davos, the IMF boss continued: "What is fascinating about the bitcoin movement is the technology that is underneath. This technology guarantees identification, trustability, authentification of transactions without interference, without intermediation. "That’s fascinating and could be used in multiple circumstances: tracing transactions, land registry, you just name it. And some central banks are looking at it to use for their own cryptocurrency."

Rgulations key to stopping money laundering, terrorism, and cyber crime. Bosotti 18 (Aurora Bosotti, 1/25/18, “Bitcoin WILL come under MORE regulation to protect global finance from criminal activity” https://www.express.co.uk/finance/city/909736/Bitcoin-

price-news-today-worth-cryptocurrency-Ripple-ethereum-XRP-USD-IMF-crime-video, SM) BITCOIN, Ripple and ethereum are slowly recovering from a value plunge sparked by threats of worldwide governmental regulation but IMF boss

Christine Lagarde said cryptocurrencies need to be controlled to crackdown on financial criminal activity. Bitcoin and competitors Ripple and ethereum saw prices collapse after the South Korean Government announced it would seek to regulate cryptocurrency transactions. Bitcoin skyrocketed to a whopping $20,000 shortly before Christmas but prices have steadied

around $11,000 since the announcement. But Mrs Lagarde said more governments and banks will seek to further control the way bitcoin is used to protect financial stability. She said: "The anonymity of it is likely to facilitate money laundering, dark money moving around and things that no one is happy about if you’re looking for financial stability and transparency of financial transactions. "There will be innovations, there will be changes, there will be newcomers. What needs to change is our regulatory approach. We cannot continue looking at things." Bitcoin is a cryptocurrency not controlled by a single administrator and can be used to buy things worldwide electronically. Bitcoin’s popularity has caused demand to skyrocket throughout 2017, pushing other cryptocurrencies like Ripple and ethereum to also reap the benefits of the cryptocurrency craze. South Korea announced plans to “legalise” cryptocurrency trading for registered real-name accounts only in a bid to tackle anonymity in trading. Real names will have to be used starting from January 30. The IMF President also said that other than the financial security risks, bitcoin could threaten to worsen climate change because of the amount of energy used for bitcoin mining. She continued: "Bitcoin mining, which is this accelerated use of computers to actually determine the value and incentivise the functioning of the mechanism, is energy hungry. "We figured that in 2018 if it continues, that system will likely consume as much energy as Argentina. That’s big and in times of

climate change, it’s a big concern." The anonymity of it is likely to facilitate money laundering and things that no one is happy about Christine Lagarde But Mrs Lagarde revealed some banks are looking into using bitcoin's support

technology, the blockchain, to create their own cryptocurrency and establish a transparent system to monitor transactions. The blockchain is a system that allows the transmission of digital information but blocks attempts to copy the data. Speaking to Bloomberg from the World Economic Forum in Davos, the IMF boss continued: "What is fascinating about the bitcoin movement is the technology that is underneath. This technology guarantees identification, trustability, authentification of transactions without interference, without intermediation. "That’s fascinating and could be used in multiple circumstances: tracing transactions, land

registry, you just name it. And some central banks are looking at it to use for their own cryptocurrency." According to Coindesk, bitcoin was trading for $11,239.45 at 2.43pm GMT on January 25. Ripple's price was recorded at $1.33 at while competitor ethereum traded for $1,064.3 at 2.44pm. The prices of the three cryptocurrencies are all on the rise over the last 24 hours but Bill Winters has warned the prices could soon fall. The CEO of Standard Chartered said he could not see any way where the cryptocurrencies and Blockchain were not going to be looked into by authorities. He said: “We think it is very real, it is fundamental. We have got some extremely interesting early stage developments how clearing currency pairs with disrupted technology. “The cryptocurrencies themselves I imagine will find themselves quite regulated.” The crypto community will be watching on as world

leaders discuss 'The Crypto-Asset Bubble' at Davos today. The Speakers are expected to tell the audience that regulation is needed to stop money laundering, terrorism and cyber-crime. The speakers are Jennifer Zhu Scott, Neil Rimer, Cecilia Skingsley, Yang

Yanqing and, Nobel-prize winning economist Robert J. Shiller, who has made his position quite clear in the past.

Counterplan solvency advocates Counterplan text: the United States federal government should give federal agencies jurisdiction over crypto currency spot markets and online platforms used to trade digital coins. The counterplan is necessary to maintain investor confidence.

Bloomberg 18 (Bloomberg, “Bitcoin regulations” Bloomberg. 5/20/18. https://www.bloomberg.com/crypto , CG) The U.S.’s top market cops on Tuesday identified gaping holes in regulators’ ability to police cryptocurrencies, opening the door for Congress to tighten oversight of what’s become a global investment craze.

Lawmakers may need to to pass legislation that gives federal agencies jurisdiction over Bitcoin’s spot market and the online platforms that digital coins trade on, Commodity Futures

Trading Commission Chairman J. Christopher Giancarlo and Securities and Exchange Commission Chairman Jay Clayton said during a

hearing before the Senate Banking Committee. The regulators said the first step was for federal and state watchdogs to work together to come up with a coordinated plan for monitoring crypto exchanges, which have been beset with trading disruptions and thefts of coins that have rattled investor confidence. “We may be back with our friends from Treasury to ask for additional

legislation,” Clayton said during the hearing. Ramped up oversight and tough words from regulators have taken a toll on Bitcoin, the biggest digital currency. It has tumbled for five-straight days, and dropped below $7,000 on Tuesday for the first time since November. Giancarlo said the falling price reflects regulatory actions taken in recent weeks. But there are limitations to the SEC and CFTC’s reach. To the extent that virtual currency exchanges are policed at all in the U.S., they are governed by state rules designed for money transmission services. Authorities have become increasingly concerned in light of recent events such as the admission by a Japanese exchange that it had been robbed of more than $500 million in digital tokens. Giancarlo and Clayton, Trump administration appointees who took office with mandates to dial back regulation, are trying to balance a desire to promote the kind of innovation that blockchain technology represents against the need to protect investors. At Tuesday’s hearing on virtual currency oversight, they sought to assure lawmakers that they’re doing both. The SEC has been focused on so-called initial coin offerings,

which Clayton has said are often securities offerings that should be registered with his agency. To date, none have completed that process, Clayton said. He added that he believes many ICOs are done illegally. In the offerings, companies sell digital coins that investors are supposed to be able to eventually redeem for

goods and services. ICOs raised an estimated $3.7 billion last year. ‘Off the Grid’ The CFTC identified Bitcoin as a commodity in 2015 and has used its anti-fraud authority to bring enforcement cases against platforms offering Bitcoin trading. The agency is also charged with overseeing Bitcoin futures contracts after two exchanges brought them to market last year. Giancarlo said the CFTC’s authority is largely limited to derivatives markets. He noted that spot market exchanges, where much of the trading occurs, doesn’t fall under any federal regulators’ jurisdiction. “There was this perception that Bitcoin was off the regulatory grid,” Giancarlo said during Tuesday’s hearing. “One of the things that Chairman Clayton and I have been working so hard to do is disabuse that notion. We are limited in our regulatory authority to set regulatory standards on these underlying platforms. But, when it comes to

enforcement, when it comes to ICOs, we’re using core authority to drive the message.” Giancarlo added that the CFTC is preparing to bring more enforcement actions against fraudsters who have raised money from investors through digital coin scams.

Counterplan Text: the United States Security and Exchange Commission should clarify the criteria used to differentiate between securities and crypto tokens. Regulation is coming now – that’s good it creates a slight cooling of the market and certainty for investors.

Cuen 18 (Leigh, Apr. 24, Fear and HODLing at MIT: Blockchain Experts Weigh Impact of SEC Action” https://www.coindesk.com/fear-hodling-mit-blockchain-experts-weigh-impact-sec-crackdown/, twm)

Regulation: It's good for you, but it's going to hurt. That seemed to be the main takeaway for the cryptocurrency industry from Monday's Business of Blockchain conference at the Massachusetts Institute of Technology (MIT).

On the one hand, the event was clouded by speculation that the U.S. Securities and Exchange Commission

(SEC) may go as far as to classify two of the top three coins by market cap, ethereum and Ripple's XRP, as securities. Such a determination could subject a wide swath of industry

members to legal penalties - far beyond the promoters of recent initial coin offerings (ICOs) who were already on alert the

last few months.

Those fears were reinforced late in the day when Gary Gensler, an old lion of financial services regulation,

confirmed for the crowd that in his view, bitcoin's two largest rivals may fit the description of securities in U.S. law. "Ripple Labs sure seems like a common enterprise, or the Ethereum Foundation in 2014," said Gensler, a former chairman of the Commodity Futures Trading Commission. "Ripple is doing a lot to advance

the value of XRP."

(The so-called Howey test says something is a security under U.S. law if it is an investment in a "common enterprise" offering an expectation of profits from the efforts of others.)

Yet, on the other hand, the general sentiment at the event was optimistic about regulators' growing involvement in the space. Neha Narula, director of the Digital Currency Initiative at MIT Media Lab, for example, told CoinDesk insufficient regulation can actually stifle innovation by deterring honest players because rampant scammers undermine market integrity. And aligning with Gensler, Narula said, there need to be more honest conversations about the fact that many emerging cryptocurrencies are actually securities. However, there may not be a bright line separating the two. As Narula said: "We're realizing money versus equity isn't a binary choice. It's a spectrum." Coming pain And that realization could have a serious impact on the cryptocurrency industry.

Patrick Murck, counsel at Cooley LLP and fellow at Harvard's Berkman Klein Center for Internet & Society, told CoinDesk the token economy could be on the verge of a dramatic shift if the SEC agrees with Gensler.

If ether and XRP are deemed securities, cryptocurrency exchanges and general industry promoters or foundations, or anyone who sold or evangelized projects like ethereum to the general public, could be subject to legal penalties. "It would be like shooting fish in a barrel," Murck said, adding: "There's nothing magical about the blockchain that absolves you from investor protection regulations if investors have to trust you to deliver something." Driving that point home, Gensler in his talk cited several reasons that the way ethereum and XRP were issued and traded seemed to meet the definition of securities. For example, the 2014 ethereum crowdsale would have created an expectation of profit for the people who purchased tokens before the network went live. "The Ethereum Foundation offering had a 50 percent appreciation right in the first 42 days written into the offering," Gensler said on stage. (The industry think tank Coin Center in Washington, D.C. promptly issued a statement that "ether is not a security," rebutting Gensler's argument.) Meanwhile, for issuers of new tokens, it's almost impossible to walk the line, even with more feedback from regulators and lawyers.

For example, so-called airdrops, once viewed as a way to avoid breaking securities laws by simply sending free tokens to people who already have some type of cryptocurrency wallet, are instead creating a damned-if-you-do, damned-if-you-don't situation.

If issuers fail to collect information about recipients of airdrops, they may inadvertently violate international sanctions (what if that wallet belongs to someone in Iran?). On the other hand, if they do collect such information, the airdrop may start to look like an investment in regulators' eyes, according to Murck.

"The SEC has interpreted the first prong of the Howey Test broadly," Murck told CoinDesk. "The collection of information may be enough to fit the first prong" - pegging an airdrop as "an investment of money." Long-term gain?

Counterplan Text: The United States federal government should cooperate with the Virtual Commodity Association to facilitate self-regulation of cryptocurrency exchanges. Self-regulation is effectively used by the CFTC and SEC to craft the best policies.

Glazer 18 (Phil, April 1, https://hackernoon.com/cryptocurrency-regulation-update-april-2018-9778df2b6eac, “Global Cryptocurrency Regulation Update (April 2018)”, twm)

The Winklevoss Twins have submitted a proposal to create the Virtual Commodity Association, an industry non-profit focused on self-regulation amongst exchanges (March 13th, 2018): This is a step that has already been taken in Japan following the hack of CoinCheck (review the March Update for more details). In the US, there is meaningful precedent for this; as explained by Bloomberg, “Regulators including the CFTC and U.S. Securities and Exchange Commission heavily rely on self-regulatory organizations, or SROs, to help them monitor trading in everything from obscure swaps to shares in the biggest U.S. companies. The Financial Industry Regulatory Authority, which is funded by the industry, is the front-line regulator for Wall

Street brokerages. Currently, no federal regulator has direct authority over the cadre of exchanges that trade cryptocurrencies in the spot market. Instead, there’s a patchwork of state laws serving as the legal framework that critics say invites abuse and potential

manipulation.” Overall, a move towards self-regulation would likely improve the standards held by exchanges while also helping regulators better understand the industry’s issues to craft better policy going forward.

Counterplan text: the International Monetary Fund should lead the G-20 in a coordinated response to crypto-currency regulations. Worldwide cooperation is necessary to effectively regulate cryptocurrency to harness the benefits and avoid terrorism and money laundering.

Lagarde former French Finance Minister 18 (Christine, Managing Director of the International Monetary Fund, former French Minister of State for Foreign Trade, Former partner with the international law firm of Baker & McKenzie, degrees from Institute of Political Sciences (IEP) and from the Law School of Paris X University, March 13, https://blogs.imf.org/2018/03/13/addressing-the-dark-side-of-the-crypto-world/, “Addressing the Dark Side of the Crypto World”, twm) Indeed, the same innovations that power crypto-assets can also help us regulate them. To put it another way, we can fight fire with fire.

Regulatory technology and supervisory technology can help shut criminals out of the crypto world. More broadly, we are seeing crypto-asset exchanges in some countries that are subject to know-your-customer requirements.

These advances will take years to refine and implement. Two examples highlight the promise of this approach over the long term:

Distributed ledger technology (DLT) can be used to speed up information-sharing between market participants and regulators. Those who have a shared interest in maintaining safe online transactions need

to be able to communicate seamlessly. The technology that enables instant global transactions could be used to create registries of standard, verified, customer information along with digital signatures. Better use of data by governments can also help free up resources for priority needs and reduce tax evasion, including evasion related to cross-border transactions.

Biometrics, artificial intelligence, and cryptography can enhance digital security and identify suspicious transactions in close to real time. This would give law enforcement a leg up in acting fast to stop illegal transactions. This is one way to help us remove the “pollution” from the crypto-assets ecosystem.

We also need to ensure that the same rules apply to protect consumers in both digital and non-digital transactions. The U.S. Securities and Exchange Commission and other regulators around the world now apply the same laws to some initial coin offerings (ICOs) as they do to offerings of standard securities. This helps to increase transparency and alert buyers to potential risks.

But no country can handle this challenge alone. Indispensable international cooperation To be truly effective, all these efforts require close international cooperation. Since crypto-assets know no borders, the framework to regulate them must be global as well. The successful closure of AlphaBay, for example, involved the cooperation of Europol and law enforcement agencies in the United States, Thailand, the Netherlands, Lithuania, Canada, the United Kingdom, and France.

Countries will have to decide collectively that this path is worth pursuing. Promisingly, the Group of Twenty (G-20) has agreed to put crypto-assets on the agenda of its November 2018 summit in Argentina.

The IMF will play its part in this effort. With our near-universal membership and expertise, including in battling money-laundering and terrorist financing, we are uniquely situated to be a forum for helping develop answers in the evolving crypto-asset space. What comes next for crypto The volatility of crypto-assets has prompted an intense debate about whether they are a bubble, just another fad, or a revolution equivalent to the advent of the internet that will disrupt the financial sector and eventually replace fiat currencies. The truth is obviously somewhere in between these extremes. As I have said before, it would not be wise to dismiss crypto-assets; we must welcome their potential but also recognize their risks.

By working together, and leveraging technology for the public good, we can harness the potential of crypto-assets while ensuring that they never become a haven for illegal activity or a source of financial vulnerability.

Appendix 3 Responses to concerns of the 2017-18 subcommittee

This section focuses on addressing concerns from last year that resulted in tabling of the cryptocurrency paper to give us the opportunity to create a more fully developed paper. The committee’s notes are highlighted in red and the topic papers writer’s responses in black. Proposed Wording of Resolution: Resolved: that the United States Federal Government should substantially reduce its regulation of cryptocurrencies. -Narrow topic area Resolved: that the United States Federal Government should substantially reduce its regulation of blockchains. -Broad topic area We believe the second topic is way too broad. Blockchain is the foundation on which cryptocurrencies rest but blockchain can be used for many, many other things. There are very few advocates for overarching regulation of blockchain. As explained by Kinsey Grant in 201822 “According to Estes, most regulation will be use-based for blockchain applications. It's not likely there will ever be one overarching, omnipotent regulator with all of blockchain's vast applications in its purview. Instead, Estes noted, "it very much depends on how you apply the technology." "Blockchain has broad applicability and potential, which the cryptocurrency issuers are applying in different ways. Few are in mass use today," said Mark Testoni, president and CEO of SAP National Security Services, a technology-driven security advisory firm. "In ten years, we'll look back at blockchain as important to our next generation of processes, but we don't know which will be most significant yet," Testoni said.”

The best areas for debate are the ones that the cryptocurrency topic allows for. Grant continues, “As we attempt to uncover that previously unknown significance, regulation has come out of the woodwork. Regulation is inevitable as these assets scale, particularly those focused on financial and banking processes," Testoni said. The financially-inclined use cases for blockchain garner the most attention both from the media and from possible regulators because of the nature of big wins and big losses: people simply talk about them a lot.”23

22 Kinsey Grant, “Blockchain Regulation Is Inevitable, But It's Also Good for Business” The Street, https://www.thestreet.com/story/14471935/1/blockchain-regulation-is-inevitable-but-it-s-also-good-for-business.html, February 10, 2018. 23 ibid

Envision blockchain development like the app store on your phone. It can create new currencies or financial investment vehicles (what the narrow resolution creates debates about) but it can also be used in a wide variety of other applications. Edmund Mokhtarian a technology advisor with a JD from Harvard and Alexander

Lindgren list a few of the possibilities,24

“Other cryptocurrencies support decentralized applications built on top of such

cryptocurrency's blockchain. For instance, the Ethereum blockchain is open source,

meaning the underlying code is freely available and licensed to the public for use in

[*123] applications created by the public. n41 It thus supports a variety of applications,

including prediction markets (Augur n42 , Gnosis n43 ), banking services (Humaniq n44 ),

investment or venture capital (DAO Tokens n45 ), and web browsing (Mist n46 ). Ether, the

primary cryptocurrency token issued on the Ethereum blockchain, can either be used either directly within such applications or indirectly as payment for other cryptocurrencies built on the Ethereum blockchain that can be used in such applications.”

Neg Ground in relation to cryptocurrencies (too much CP ground?) The topic does create a significant amount of counterplan ground. However, the relevant competitive counterplans are in direct opposition to the affirmatives. In juxtaposition to the 2017-18 topic which saw massive overuse of the ultra generic states counterplan. This topic will encourage the negative to increase regulations. Appendix 2 identifies multiple counterplans but note how all of them are about ways to improve regulations or advocacy for increasing regulations. Note the counterplan solvency evidence (Appendix 2) from Bloomberg that directly answers an affirmative’s investor confidence advantage by saying clear regulations are necessary to spur a more predictable investment environment. Why are USFG regulation reductions needed? Core Advantage areas Can the wording be revised to address concerns so far? Contain fair Aff/Neg ground without making the topic too broad (compare wording A to B) The core affirmative areas are privacy and anti-statism. While there are many advantages that stem from these areas the core reason there needs to be less regulation are legitimately intrinsic advantages that counterplans can’t solve. This is an incredibly rich area for debate because the thesis of both sides arguments, are in direct opposition. Advocates for crypto currency want the government out of the currency

24 Edmund Mokhtarian Technology Advisor; J.D., Harvard Law School and Alexander

Lindgren, Partner at Lindgren, Lindgren, Oehm, & You LLP; J.D., University of

Minnesota Law School, “Rise of the Crypto Hedge Fund: Operational Issues and Best

Practices for an Emergent Investment Industry”, Stanford Journal of Law, Business &

Finance, 23 Stan. J.L. Bus. & Fin. 112, 2018.

business because they see the dangers in centralized currency control (monetary supply, inflation, taxation) the opponents see those features as benefits to the current system. As a quick repeat from our affirmative ground section: “Blockchain technologies can also provide a more efficient and secure securities market, by enabling both automatic settlement and clearance by peers, without a centralized clearinghouse.”25 Paradoxically, security regulations like KYC (which require users to turn over personal information as if at a traditional bank) may actually undermine the innovative cybersecurity provided by cryptocurrencies, instead creating old-fashioned databases of hackable information.”26

If you believe government monopoly control of securities markets and currency is a good thing then you want the federal government to strictly regulate cryptocurrency if you believe that the problem is government intervention in these areas then you want less regulation. Unlike many topics circa 2017 education topic the harms area is very much in dispute. Few people think that having an uneducated citizenry is a good idea. So, the focus of the topic becomes a question of the best mechanism to achieve an educated citizenry. On this topic the critical question is state control. The aff says state control bad, the neg says it’s good and the counterplan becomes a complementary tool to make state regulation better but not advocacy for less state control. This is explained by IMF Managing Director Christine Lagarde in March of this year,27 “Whether Bitcoin’s value goes up or Bitcoin’s value goes down, people around the world are asking the same question: What exactly is the potential of crypto-assets? The technology behind these assets—including blockchain—is an exciting advancement that could help revolutionize fields beyond

finance. It could, for example, power financial inclusion by providing new, low-cost payment methods to those who lack bank accounts and in the process empower millions in low-income countries.

The possible benefits have even led some central banks to consider the idea of issuing central bank digital currencies. Before we get there, however, we should take a step back and understand the peril that comes along with the promise. The peril of crypto-assets

The same reason crypto-assets—or what some people call crypto-currencies—are so appealing is also what makes them dangerous. These digital offerings are typically built in a decentralized way and without the need for a central bank. This gives crypto-asset transactions an element of anonymity, much like cash transactions.

25 De Filippi. 26 Brady Dale, “The Man Who Wrote the Book on Bitcoin Calls ‘Know Your Customer’ Dangerous 'Ridiculous and disastrous,'” http://observer.com/2016/05/andreas-antonopoulos-kyc-bitcoin/, May 27, 2016. 27 Christine Lagarde, former French Finance Minister former French Minister of State for Foreign Trade, Former partner with the international law firm of Baker & McKenzie, https://blogs.imf.org/2018/03/13/addressing-the-dark-side-of-the-crypto-world/, “Addressing the Dark Side of the Crypto World”, March 13, 2018.

The result is a potentially major new vehicle for money laundering and the financing of terrorism. One recent example reveals the scope of the problem. In July 2017, an international operation led by the United States shut down AlphaBay, the largest online criminal marketplace on the internet. For more than two years, illegal drugs, hacking tools, firearms, and toxic chemicals were sold all over the world through AlphaBay. Before the site was taken offline, more than $1 billion had been exchanged through crypto-assets.

Of course, money laundering and terrorist financing is only one dimension of the threat. Financial stability is another. The rapid growth of crypto-assets, the extreme volatility in their traded prices, and their

ill-defined connections to the traditional financial world could easily create new vulnerabilities.” Notes from wording committee on 8/4/17: Inherency for federal government regulations coming now Anthony Fata and Brian O’Connell writing for the Chicago Bar Association Record in 2018 clarify some of the more recent regulatory developments28 “The CFTC's Regulation of Cryptocurrencies and Related Futures Products under the Commodity Exchange Act The Commodity Exchange Act ("CEA") governs transactions involving the future delivery of commodities. The CEA covers a wide array of "commodities," such as agricultural products (e.g., wheat and cotton), natural

resources (e.g., gold and oil), traditional currencies (e.g., yen, euros), and interest rates (e.g., LIBOR). It has a catch-all for "all services, rights, and interests...in which contracts for future delivery are presently or in the future dealt in." 7 U.S.C. §

1a(9).Cryptocurrencies fell under the auspices of the CFTC in September, 2015. The CFTC commenced an enforcement action against Coinflip, Inc., an entity that facilitated cryptocurrency swaps without having registered as a swap execution facility or designated contract market pursuant to the CEA. The CFTC referenced the catch-all and concluded that "Bitcoin and other virtual currencies are encompassed in the definition and are properly defined as commodities."

In the underlying spot market for cryptocurrencies, "[t]he CFTC's jurisdiction is implicated . . . if there is fraud or manipulation involving a virtual currency traded in interstate commerce." CFTC Primer on Virtual Currencies. In the futures markets (like those for CME and CBOE Bitcoin futures), and in the markets for swaps and other derivatives involving cryptocurrencies, the CFTC will regulate all transactions.

The SEC's Regulation of ICOs and Cryptocurrency-Related Products Although the CFTC has determined that it will regulate cryptocurrencies as "commodities," the SEC is also overseeing various aspects of the cryptocurrency market. For example, 2017

brought an influx of initial coin offerings ("ICOs"). These are similar to initial public offerings ("IPOs") for stocks. According to the SEC, an ICO is a fundraising event in which an entity offers participants a unique digital "coin" or "token" in exchange for consideration, such as other cryptocurrencies or government-backed currencies. The company issues the tokens using block-chain technology. These tokens are then often subsequently listed and traded on separate online platforms, called "virtual currency exchanges," in exchange for other cryptocurrencies or government-backed securities such as U.S. Dollars. Rather than publishing a prospectus, ICO promoters generally publish a "white paper" that details what purchasers expect to receive for their investments in coins.

On December 11, 2017, SEC Chairman Jay Clayton issued a statement of caution on ICOs and cryptocurrencies generally. Statement on Cryptocurrencies and Initial Coin Offerings. The Statement

28 Anthony Fata and Brian O’Connell, Chicago Bar Association Record, Jan., “MARKETPLACE OVERVIEW AND REGULATORY DEVELOPMENTS: THE BLOCKCHAIN BANDWAGON: CRYPTOCURRENCY ON THE MOVE”, 32 CBA Record 26, 2018.

emphasized that some cryptocurrencies and ICOs could constitute securities under the federal securities laws. Simply calling a cryptocurrency a "currency" or a "token" does not immunize it from the securities laws. Before launching a cryptocurrency, or cryptocurrency-related

instrument, its promoters must either register the product as a security or be able to demonstrate that it is not a security. Many ICOs meet the definition of a security pursuant to the "investment contract" test announced in the Supreme Court's decision, S.E.C.

v. W.J. Howey Co., 328 U.S. 293, 298 (1946). Under Howey, an instrument is a security if it constitutes an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.

In its July 25, 2017 report on Decentralized Autonomous Organization, the SEC concluded that the initial coin offerings at issue were securities. Similarly, on December 11, 2017, the SEC ordered Munchee, Inc., a restaurant review company, to cease and desist for failing to register its ICO with the SEC. The company had issued 225 million "MUN" tokens using Ethereum blockchain technology. The SEC concluded that MUN tokens are investment contracts under the Howey test because ICO purchasers expected a profit on their interest in the restaurant review company based on the efforts of Munchee's promoters.

The SEC has not yet approved exchange traded instruments (such as ETFs) related to cryptocurrencies, although companies have filed applications unsuccessfully with the SEC. Chairman Clayton also warned that cryptocurrency exchanges could be operating unregistered Securities Exchanges or could

constitute unregistered broker-dealers in violation of the 1934 Securities Exchange Act. Finally, it should be noted that hedge funds and other entities investing in portfolios of cryptocurrencies or cryptocurrency-related products should consider registration under the Investment Company Act, also overseen by the SEC.

The IDFPR's Regulation of Cryptocurrency Transactions The IDFPR indicated that it will not regulate a transaction consisting exclusively of cryptocurrency (which it refers to as "digital currency"), such as the exchange of one cryptocurrency for another, or the exchange of a cryptocurrency for a good or service. If, however, the transaction also involves government-backed currency, the IDFPR will regulate the transaction pursuant to the Illinois Transmitters of Money Act ("TOMA"). IDFPR, Digital Currency Regulatory Guidance. TOMA-covered transactions include trading cryptocurrencies for U.S. dollars through a website or app that operates as a third party exchange, taking the cryptocurrency buyer's government-backed currency and transmitting it to the cryptocurrency seller. Entities facilitating such transactions are required to register with the IDFPR if they meet certain net worth thresholds. IDFPR recommends that all such entities seek a licensure determination before participating in a transaction that involves both government currency and cryptocurrency. The IRS View: Realized Cryptocurrency Gains Are Taxable

In 2014, the IRS stated that cryptocurrency constitutes property for tax purposes. Realized gains from the sale of cryptocurrencies (such as those realized by many in 2017 from the meteoric rise in Bitcoin)

are taxable. See IRS, Virtual Currency Guidance: Virtual Currency is Treated as Property for U.S. Federal Tax Purposes; General

Rules for Property Transactions Apply. In addition, payments to employees and contractors in cryptocurrencies are taxable events. Further, [*31] taxpayers who earn cryptocurrency through mining (i.e., helping the network validate transactions) must report their compensation as income.” There are both significant regulations now and substantial proposed regulations both administratively (SEC, IRS, DHS) and in Congress. Phil Glazer, an investor in Maschmeyer Group Ventures a Venture Capital and Private Equity firm, summarizes the most recent regulatory changes each month. Here is a sampling of his report from April 201829

29 (Phil Glazer, https://hackernoon.com/cryptocurrency-regulation-update-april-2018-9778df2b6eac, “Global Cryptocurrency

Regulation Update”, April 1 2018.

“As covered in the January piece, many predicted that 2018 would be the year that significant new regulation comes to cryptocurrencies and in the past few weeks that process has begun.”

United States The SEC issued a warning to cryptocurrency exchanges that facilitate transactions of unregistered securities (March 7th, 2018): The SEC made explicit that exchanges are responsible for activity that they facilitate, including the exchange of coins that originated through an ICO process that qualify as a security but solicited investment from unaccredited investors (read this piece for an overview of United States ICO regulation). As explained in the

statement, “A number of these platforms provide a mechanism for trading assets that meet the definition of a “security” under the federal securities laws. If a platform offers trading of digital assets that are securities and operates as an “exchange,” as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration. The federal regulatory framework governing registered national securities exchanges and exempt markets is designed to protect investors and prevent against fraudulent and manipulative trading practices.” This statement means that, going forward, US exchanges will likely be more conservative in which projects they decide to list. Additionally, US exchanges may delist projects that likely qualify as securities to avoid legal consequence.

The SEC announced a probe to examine more than 100 cryptocurrency hedge funds

(March 22nd, 2018): The SEC announced that it is evaluating more than 100 cryptocurrency hedge funds to ensure that funds are treating investors properly. The key concerns for the SEC in this probe are making sure that funds market themselves properly and only to eligible investors and that the funds are executing the strategies and exposure they have promised in fund documents. In the past year, there has been an explosion in the number of new hedge funds registered in the space.

A note from FinCEN written in February but released in early March suggests that ICOs will be held to higher standards of Know Your Customer (KYC) and anti-money laundering (AML) laws (March 6th, 2018):

ICOs will be held to the standards outlined in the Bank Secrecy Act which would require offerings to register with FinCEN and take an active role in investigating customers and reporting suspicious transactions to authorities. The change would qualify the ICO process as a “money

transmitter” and introduce a host of obligations meant to prevent facilitation of criminal activity. This hurdle will likely further cool ICOs. The Winklevoss Twins have submitted a proposal to create the Virtual Commodity Association, an industry non-profit focused on self-regulation amongst exchanges (March 13th, 2018): This is a step that has already been taken in Japan following the hack of CoinCheck (review the March Update for more details). In the US, there is meaningful precedent for this; as explained by Bloomberg, “Regulators including the CFTC and U.S. Securities and Exchange Commission heavily rely on self-regulatory organizations, or SROs, to help them monitor trading in everything from obscure swaps to shares in the biggest U.S. companies. The Financial Industry Regulatory Authority, which is funded by the industry, is the front-line regulator for Wall Street brokerages. Currently, no federal regulator has direct authority over the cadre of exchanges that trade cryptocurrencies in the spot market. Instead, there’s a patchwork of state laws serving as the legal framework that critics say invites abuse and potential manipulation.” Overall, a move towards self-regulation would likely improve the standards held by exchanges while also helping regulators better understand the industry’s issues to craft better policy going forward.

Global Developments The UK government is launching a cryptocurrency task force (March 22nd, 2018): The purpose of the

initiative is to create a formal government organization responsible for assessing the risks and potential benefits of cryptocurrencies. One optimistic angle of the announcement focuses on the potential to leverage the underlying blockchain technology to help financial firms meet regulatory requirements. As explained in the statement, the “pilot schemes to help new fintech firms, and the financial services industry more widely, comply with regulations by building software which would automatically ensure they follow the rules, saving them time and money.” Overall, the statement strikes a cautious tone with respect to cryptocurrencies themselves but a general acknowledgement of the potential for blockchain applications to improve financial transparency and compliance adherence.

The Brazilian National Bank for Economic and Social Development (BNDES) is tokenizing the country’s national currency through ethereum’s public blockchain to increase transparency (March 6th, 2018). As explained by Suzana Maranhão, a leader on the BNDES project, “Any Brazilian can see the

companies involved in the transaction and the transactions carried out. Critical information will not be stored in a database within

BNDES. They will be public in the blockchain.” The project will run as a proof of concept until May and, if successful, may lead to adoption through similar projects in other countries (a related

program is being piloted in Canada). Overall, it is exciting to see governments experimenting with blockchain

technology as a way to increase transparency and trust.

The IMF reiterated its concern regarding the potential for cryptocurrencies to be used for money laundering (March 13th, 2018): In a post on the IMF’s blog titled “Addressing the Dark Side of the Crypto

World,” author Christine Lagarde makes clear that the IMF worries deeply about the potential for cryptocurrencies to enable bad

actors. As she says, “The same reason crypto-assets — or what some people call crypto-currencies — are so appealing is also what makes them dangerous. These digital offerings are

typically built in a decentralized way and without the need for a central bank. This gives crypto-asset transactions an element of anonymity, much like cash transactions. The result is a potentially major new vehicle for money laundering and the financing of terrorism.” However, the piece goes on to acknowledge that while cryptocurrencies may pose significant risks, the underlying technology may be the solution to mitigating the risks created. The author suggests that these mitigating solutions would take the form of distributed ledger technology (DLT) that works as a permissioned blockchain to keep financial institutions and regulators

coordinated along with biometrics and artificial intelligence to improve digital security and identify suspicious behavior. The piece concludes with a call for global, coordinated efforts to understand and regulate the cryptocurrency space. Overall, this piece is in line with statements made by the IMF in recent months expressing

concern for cryptocurrencies but optimism for the underlying technology.”

International aspect (it does impact other parts of the world) The international regulatory environment in more detail as explained by David Kariuki in September of 201730

Cryptocurrency regulation in different countries It is not illegal to trade or use cryptocurrencies in many jurisdictions in many countries around the world as it is now due to scanty legal frameworks or due to existence of favorable legal frameworks in many countries. Argentina, Bulgaria, South Korea and Croatia and Japan have legalized use of Bitcoin for instance. Those deemed as having most favorable legal frameworks include Singapore, Hong Kong, Taiwan, Ireland, Portugal, South Korea, Stovenia, Denmark while those having just favorable legal frameworks include United States, Australia, Canada, Luxembourg, Spain and Belgium. Iceland, Vietnam, Bolivia, Kyrgyztan, Ecuador, China and Bangladesh have banned use of Bitcoin while it is accepted as a mode of payment in many other countries such as Australia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Lithuania, Poland, United Kingdom, Luxembourg, Slovenia, Hong Kong, India, Indonesia, Israel, Malaysia, Norway, Singapore, Switzerland, Taiwan, United States, Canada, Argentina, Brazil, Mexico and New Zealand. Those with most unfavorable regulation include Italy, Slovak, Brazil, Chile, Thailand, Cyprus and Estonia. Unfavorable ones include Iceland, China, Lebanon, Colombia, Romania On the other hand, so many countries have announced measures to regulate cryptocurrencies including Australia through a proposed regulation or from this link

30 David Kariuki, “When does a cryptocurrency become a security?” CryptoTomorrow, http://www.cryptomorrow.com/2017/09/19/cryptocurrency-becomes-security/, September 19, 2017.

posted on August 17 this year. Singapore is working on creating the National Payments Council and legal frameworks for licensing the circulation of cryptocurrencies. China is walking on two paths: it is the leading crypto mining country in the world and has been vocal about banning cryptocurrencies. Only private individuals (and not organizations) are allowed to deal with cryptocurrencies. Taiwan financial organizations are not allowed to work with cryptocurrency businesses. Pakistan is awaiting to build some regulation before allowing crytpocurrency operations. Mokhtarian and Lindgren31 identify current cybercurrency hedge fund regulation

“II. The Current State of Hedge Fund Regulation Having addressed the treatment of the financial instruments that crypto funds trade, this Part now proceeds to discuss and compare the regulations that traditional hedge funds and crypto funds face.

This Part specifically focuses on four of the most significant areas in which traditional hedge funds

are regulated: anti-fraud and non-solicitation provisions under the Securities Act and

Exchange Act; investment activity regulation under the Investment Advisers Act of 1940 (the

"Advisers Act") and the Investment Company Act of 1940 (the "Investment Company Act");

taxation under various statutes; and regulation by the Commodities Futures Trading

Commission (CFTC). In contrast to the extensive regulations governing traditional hedge funds, many of these regulations do

not apply to crypto funds. While crypto funds face similar regulation under the Securities

Act, Exchange Act, and certain taxation statutes, they need not comply with any of

the same investment activity regulations or CFTC regulation.”

Would it be better to postpone for fully developed paper and international aspect? Similar to surveillance topic, how much power does the USFG, nature of cryptocurrencies is to occur on the dark web Lack of time for research necessary for it, topic has a lot of potential We don’t want to screw it up Withdrawn this year and represented next year as an international with a list of questions answered Subject of blockchain hot in education, but we need to have well vetted and extensive paper The time is now. Please let us know if you have other questions. As the section on the regulatory environment should make clear this is a formative time for cryptocurrency regulation. This topic area gives students and coaches a rare opportunity to research and debate about an incredibly current topic that has a rich literature base. How is it appealing for novices? Fascinating topic area Is it too difficult?

31 ibid

To a certain extent, the topic authors believe that getting novices interested in a topic is about coaches finding ways to make the topic interesting. Many coaches are interested in this area and it’s one of the few international relations/social science areas that coaches don’t already know a lot about. We believe that this will spur increased coach interest which will spill down to debaters at all levels. It’s also at the intersection of several areas so students should be able to find something about the topic that interests them: terrorism, money laundering, finance, currency manipulation, international relations, climate change, black markets, etc. Cryptocurrency is like most good debate topics. There are core issues that can be introduced to novices simply but can evolve into very complex knowledge about an incredibly exciting industry. Know your customer laws and the need to stop money laundering because of its implications for crime and terrorism are pretty straight forward concepts. So is the need for poor people around the world to have access to mechanisms of currency exchange that don’t rely on centralized banks. Paper written discussing things like statutory regulation (clearly an issue) does not really say much about regulation (technical), CFR, etc. banking regulations, need to know what some of those are, knowing scope of, common law (cases) contract law, it could impact the directionality of the topic, federal courts will not have jurisdiction for contractual disputes funded in cryptocurrency, etc. If courts told to disavow authority to regulate that would kill business use of cryptocurrency that would kill the currency itself, can you delineate what is cryptocurrency and what is going to impact other areas The case law is primarily relevant to the Initial Coin Offerings (ICO) literature and the Howey test as described in Appendix 1 solvency advocate 3. There is a huge spectrum of cryptocurrencies with a large variety of purposes from coins intended to replace centralized currencies (Bitcoin), coins intended to be used as investment vehicles (Braid), coins intended to facilitate the creation of other coins (Etherum) and coins that are pure scams. The complexity arises when the lines blur. In theory, Bitcoin is a decentralized currency alternative to state based currencies. However, it’s rapid rise in price spurred massive speculative investment. Etherum is used to facilitate the creation of other coins like Braid created explicitly to create an investment structure, in this instance to fund a film project. The need to prevent pure scams is certainly a common justification for government involvement like the SEC. Here is an excerpt from a Joan Solsman article about the funding of the movie Braid “Mitzi Peirone thanks God for cryptocurrency.

Peirone's Braid, a psychological horror flick screening at the Tribeca Film Festival this week, touts itself as the first feature-length film funded by cryptocurrency.

She considered more traditional ways of raising her budget on her own: pleading with family and friends for donations (and feel guilty about it, she said), or pitching a traditional studio, which requested she "dumb it down."

"I was facing either seeing my creative freedom taken away and having to compromise on the story, or not having enough money to make it," Peirone said at a festival panel Monday discussing

blockchain and cryptocurrency in film.

So she instead offered blockchain-based tokens that promise a slice of the film's future profits. "Thank God we did," she said.

Blockchain is an encryption technology best known for underpinning bitcoin and other cryptocurrencies, like Ethereum -- the crypto platfrom that Peirone's team used to raise money.

By selling tokens with the goal of raising at least $1.4 million for their production budget, the filmmakers gave token investors the right to a proportional share of 30 percent of the film's future profits.

Peirone said Monday that the campaign hit its goal in two weeks. Braid's token offering occurred in June, which mostly predated the latest explosion of cryptocurrency hype. For context, Braid's campaign reached its goal a month before Floyd Mayweather was bragging about how he was going to make a "$hit t$n of money" with a token sale on his Instagram account. Bitcoin's trading value had yet to crack about $3,000 but would go on to top $19,000 in December.

But the idea, the filmmakers have said, is to create a profitable indie filmmaking industry, where creators can finance their films outside the studio system and retain artistic independence.

"If we can enable independent artists to truly follow their hearts ... instead of having to fall back into pre-established algorithms of storytelling that we've heard and seen over and over, we can establish an entertainment industry that we want to see," Peirone said Monday.”32

In this instance a filmmaker, Mitzi Peirone, used Etherum to create a platform to make her token (coin) which was functionally the same as buying stock in the film including the requisite return on investment. The distinction is that the entire process is incredibly short compared to a traditional investment vehicle using stocks because it operates outside the purview of the SEC. Obviously, the SEC is concerned about this type of fund raising because of it’s potential for ponzi schemes and for more traditional regulatory purposes. Additionally, the Internal Revenue Service would want to ensure appropriate taxes are paid on the revenues generated but that is virtually impossible given the ease of coin creation. Etherum (ETH) is an even more complex example. In theory, it’s primary purpose is to facilitate the creation of other coins as Mitzi Peirone did. However, there is also speculative investment in Etherum. During the Bitcoin boom many other coins also saw a significant increase in their dollar value. So while ETH may fall outside the current scope of SEC regulation if someone buys 100 ETH coins at $100 and the price of ETH goes up and those coins are sold for $300 each the IRS would view that as a $20,000 gain and is going to want their piece of the action. Again, this highlights the fertile ground for debate; both the government interest in regulatory oversight and the user interest in avoiding such oversight. The Howey test is the current framework used by the courts and the SEC to try and put various coins clearly in the category of security but as described previously in multiple citations cryptocurrency doesn’t fall neatly into these parameters.

32 Joan Solsman, “Will cryptocurrency fund the next indie film hit?” https://www.cnet.com/news/will-the-next-indie-film-hit-be-brought-to-you-by-blockchain-like-braid/, April 23, 2018.

Research areas to work on subsequent to wording committee on 8/4/17: Points from Dr. Glass’ emails: What will definitely come up is the directionality of the proposed topic - how much defendable aff ground will there be around decreasing regulations on bitcoin et al. There is plenty of aff ground and, if you are concerned about the negative having too many counterplan options remember the ability of the government to effectively regulate is seriously in doubt. Jon Martindale explains, “Beyond the difficulties presented by the decentralization of bitcoin itself, governments and

regulatory bodies have shown they lack understanding of technological topics, and bitcoin is one of the most complex. As governments struggle to ban technologies like Tor and

encryption, it seems impossible to imagine them gaining the ability to truly impact bitcoin – and its alt-coin contemporaries – in a way that could impede its progress. ….In December 2013, the Chinese government banned financial institutions from using bitcoin, causing a downturn in the cryptocurrency’s value that would set a precedent for its worth over the coming years. … Yet loopholes in the crackdown meant many exchanges stayed in business, and bitcoin’s price rose some 25 percent in the 10 days that followed. The U.S. has made localized attempts to regulate specific aspects of bitcoin. New York State requires a “BitLicense” for bitcoin related businesses, with specific rules for employee vetting and identification. Just last month, the IRS won a landmark ruling to gain access to information about 14,000 historic Coinbase accounts, in an attempt to gather back taxes from owners. While some of those instances are more concerning than others, none of it has stopped bitcoin’s growth. That reveals the flaws of any future attempts to crack down on bitcoin’s use.”33 Since Tim, as one of the topic authors, wants to go in this direction, it would be important to explore advantage ground etc.... from the paper one wonders why the neg couldnt just fiat developing blockchain tech , arguing cryptocurrencies in particular are destabilizing... (for the reasons given in the paper)

33 Jon Martindale, “Go ahead, pass laws. They can’t kill bitcoin, even if they try”, https://www.digitaltrends.com/computing/dont-worry-about-bitcoin-regulation-it-cant-be-stopped/, December 19, 2017.

One part of the aff ground, as illustrated above, is government fails to effectively regulate merely causing artificial price bubbles without effectively resolving law enforcement goals. It would be good to know if there are any advantages to different levels of dereg, as opposed to just banning all regulation (again thinking of the breadth of the topic)... There will be a wide variety of aff options from full deregulation referenced by Martindale “in a recent report of bitcoin owners claimed they didn’t want any regulation of cryptocurrency in the coming years”34 to the relatively minute “exempt crypto transactions of up to $600 from capital-gains tax reporting.” referenced in Appendix 1.

'In De Filippi’s words, “it is important to remember that the real innovation of Bitcoin is not the currency itself, rather than its underlying technology —the blockchain, a decentralized trust platform … In particular, the blockchain gives rise to new possibilities that were previously impossible – or impractical – and are therefore not fully accounted for in the current regulatory regime … Blockchain technologies can also provide a more efficient and secure securities market, by enabling both automatic settlement and clearance by peers, without a centralized clearinghouse.”8 ' ...that makes it sound like it's possible to dissect the use of cryptocurrencies from the underlying goal of developing blockchain technologies... if it were possible to do so, the disadvantages to cryptocurrencies would seem to make such an approach advantageous as a counterplan - especially if it's the blockchain tech which is the real reason to deregulate cryptocurrencies... This is illustrated in the “Braid” story above but it’s complex and so we can try another explanation. It might be better to start with the definition of blockchain used in the Potential Resolutional Wordings section of this paper.

Blockchain: A blockchain is a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network.

Creating cryptocurrencies is only one use of a “decentralized, distributed and public digital ledger”. That clarifies why the “blockchain topic” is huge and the crypto currency topic is a small subset of it. But not too small by any means. One affirmative area of the topic is currency. The value of a decentralized currency and its ability to facilitate the exchange of goods and services. Know your customer laws inhibit this innovation. The counterplan to only remove KYC laws on the blockchain doesn’t solve this aff –

34 ibid

anonymity is the point. Another affirmative area of the topic is investment. The Braid anecdote illustrated this pretty well. In the status quo producing coins is a much faster, much easier way of setting up an investment opportunity because it avoids SEC regulation. If the SEC were to remove regulations on the blockchain but keep them on the coin that advantage is gone. So, again, the counterplan doesn’t solve. I’m happy to provide more examples but remember each of these areas has multiple potential specific affirmatives none of which the “blockchain counterplan” would solve. We would be remiss if we didn’t include a potentially overly complex explanation of why the blockchain/coin distinction isn’t as clear cut as the topic committee comment envisions. This is basically irrelevant to anything but the most complex debates and it’s use in actual rounds seems a stretch but here it goes. Feel free to stop reading if you were convinced by the ground arguments above and don’t need any more technical cryptocurrency knowledge…ok now here we go…Etherum is often called gas. The analogy being that the blockchain needs “fuel” to run. No fuel, no coins. For a variety of reasons not the least of which is spam prevention, fuel is critical. Because the peer to peer network is public any computer can theoretically “join”. That means any computer could be used to overwhelm the network/blockchain by sending it millions of messages (spam). To preclude this a very, very small transaction fee is charged every time a “message” is sent to the blockchain. No fuel (etherum) no message. This makes the price of spamming the network unduly high. Etherum is not the only “gas” but it is a pretty popular one. So Etherum is not just a coin - it’s a coin that makes the blockchain work and, hence, leads to the creation of other coins. When the Solsman article says Braid tokens were built on Etherum it’s really saying that Etherum is the gas used to fuel the blockchain necessary to make the Braid coins. The rest of this is previous dialogue we had with the committee Points from Mahoney’s emails: Our suggested wording is at the top of the paper: Resolved: that the United States Federal Government should substantially reduce its regulation of cryptocurrencies. We thought that giving the aff the "state bad" ground and the neg the "law enforcement/crime prevention good" ground makes for the best division. There are certainly some terms of art that could be used to create a higher level of specificity: Anti-Money Laundering (AML), Know Your Customer (KYC), and PATRIOT ACT are all possibilities. However, the topics that end up on the ballot and end up winning don't usually use that type of language so we avoided it. I'm happy to put in some more research time to address concerns with this particular wording. Just let me know if you have any. Could you explain your thoughts about the neg "fiating blockchain development"?

Given that a large section of the crypto/blockchain literature is about decentralized solutions I'm not sure having a governmental entity develop it's own blockchain is responsive to most of the aff's I see being chosen. But I also may be misunderstanding your comment. Cryptocurrencies are a subset of blockchains. http://www.electronicdesign.com/embedded/what-s-difference-between-blockchains-cryptocurrency-audit-trails-and-databases “Alright, blockchains are a bit more complicated than that–and more useful than they might sound. Most will know blockchains from BitCoin, one of the many cryptocurrencies based on them. But cryptocurrencies are only one use for blockchains. Before getting into applications, let’s take a look at what a blockchain system looks like and how it operates.” If any of you are looking for a bit more background on this area that url above has a pretty good breakdown of what we are talking about. Frankly, this topic would be gigantic. Blockchains are being used for many, many things from marriage contracts to decentralizing identity. So, we chose the subcategory of cryptocurrencies. Ok, now to the specifics of Dr. Glass's question. Counterplans to have a government entity develop blockchain won't solve very many of the aff's - the main advantage areas are decentralizing and reducing government control. Counterplans to have the government deregulate blockchain will only be competitive against poorly written plans and/or won't solve the aff. Plan: the USFG should end know your customer regulations on Bitcoin. Counterplan: the USFG should end know your customer regulations on the Bitcoin blockchain. If the neg claims this is a PIC then it doesn't solve the aff because it doesn't do enough. If I want to buy a bitcoin I currently have to provide a set of information so the entity I buy from "knows their customer". Unregulating the underlying technology doesn't solve the problem of forcing a customer to provide this information. Of course, that information is what law enforcement needs so it's both the solvency deficit and the DA link. Which is why it creates good ground for both sides. As a side note, I do want to mention that one of the reasons Seth and I chose this area is that it will force debaters to learn about something that is really in its infancy and that has hardly been debated about before. If this is chosen as the topic most debate coaches will show up at summer institute knowing very little about the mechanics of the area. For many of them it will be the first time in a very long time they have had to really

learn about the mechanics of a topic area. While many of the impact areas will be similar - aren't they always - the internal links will be quite different.

Appendix 4 Responses to outside review from June 11.

There were two primary concerns. First, was a suggested list of novice cases. Second, was a concern about aff solvency advocates being available from non paid sources.

Novice cases If the NFHS/NSDA wanted to create a novice resolution to narrow the areas for debate we would suggest, Resolved: that the United States Federal Government should substantially reduce its know your customer regulations of cryptocurrencies. Or Resolved: the United States federal government should clarify that cryptocurrency is classified as a currency if it is freely transferable and supported by a blockchain that records each transaction. The first suggested resolution is the narrow topic we introduced in the Potential Resolutional Wordings section. It reduces the topic from three substantial areas to one. Know your customer regulations is still “at the heart” of the core controversy. One of the primary benefits of cryptocurrencies is anonymity. Know your customer regulations are the opposite of that. The second suggestion is an even more narrow approach. One of the primary regulatory issues facing cryptocurrencies is the issuance of ICO’s (Initial coin offerings). Those who support regulations fear that ICO’s are being used to circumvent traditional SEC regulation. Those who want deregulation see ICO’s as a method of providing more efficient and effective corporate financing arrangements. Also, regulatory approaches tend to be too sweeping. Coins that fall in a grey area between currency and security are going to be overregulated because current regulations don’t recognize the nuances of cryptocurrency. This is a small area but one with a deep literature base.

Solvency Advocates and Depth of Literature The concern about solvency advocates being only available to those with Lexis/Westlaw is overstated. All of the solvency advocates in Appendix 1 are available on google. As was correctly noted by the reviewer there are millions of hits on google. Almost any legal topic is going to give an advantage to schools with access to Lexis. However, that advantage is getting smaller and smaller as more and more publications become open source. There are many more solvency advocates easily accessible without Lexis. We just didn’t include them for brevity’s sake.

Tyler Cowen directly responds to this concern, “It is striking that crypto learning and debate really has not occurred through books much at all, nor in the mainstream media. It has been through white and yellow papers, various on-line fora, Medium essays, Twitter, Reddit threads, and a variety of other venues. I believe this is a paradigmatic example of how knowledge spreads these days

and it should be studied very seriously as such, because it is the most extreme case of the new methods I know.“35

35 Tyler Cowen “Blockchain and the Law”

June 15, 2018 https://marginalrevolution.com/marginalrevolution/2018/06/blockchain-and-the-law.html