Venture capital firm Andreessen Horowitz (a16z) has proposed to the US government a favourable regulation for cryptocurrencies and blockchain.
A16z and the US advantage in the financial sector
He did so by publishing on his website an article, on behalf of Tomicah Tillemann, Miles Jennings and James Rathmell, addressed to the US Senate Committee dealing with the banking system.
A16z is a $4 billion US venture capital firm founded in 2009 by Marc Andreessen and Ben Horowitz, based in Menlo Park, California. Marc Andreessen is an innovation legend, having created the world’s first web browser.
In this proposal, the company argues that, given the pace of innovation in this area, it is difficult for legislators to keep up with the many fast-moving innovations. It also believes it is important for the US to maintain an edge in the financial sector, which requires business leaders and policymakers to work together “to ensure that the private sector can experiment and build” through appropriate regulatory regimes that help manage risks that could harm citizens.
To this end, A16z has sent the committee four proposals, designed to be self-contained, outlining a possible approach to the oversight and taxation of decentralized environments.
US cryptocurrencies regulation: the four proposals of A16z
The first proposal concerns the problem of consumer protection, which is indeed very difficult to achieve in decentralized environments.
The idea is to create a simple supervision regime based on disclosure under the Consumer Financial Protection Act, so as to provide regulatory clarity by standardizing existing disclosures. The aim is to ensure that consumers have the information they need to participate in such projects on an equal footing.
The second concerns Decentralized Autonomous Organizations (DAO), defined as “the cornerstone of a new way to manage and coordinate human activity”.
In this respect, A16z’s proposal is to bring together the already existing laws concerning associations without legal personality, and their tax reporting status, in order to create a lightweight framework covering the off-chain legal status of DAOs.
The third proposal is a comparison of jurisdictional harmonization, SROs and not-for-profit companies.
The aim is to conduct a study comparing the costs and benefits of three different approaches.
The fourth concerns tax reporting and issues related to blockchain-based ecosystems.
The Infrastructure Bill
The fact is that historically, tax and regulatory environments are designed to regulate centralized operations. The current infrastructure bill, which Congress is expected to vote on, imposes tax reporting requirements on too many operators unable to comply.
The new A16z proposal builds on the work already underway on the infrastructure bill, with the aim of creating “sensible rules of taxation as it relates to digital assets”.
It is not possible to know how this proposal will be received by the Senate committee. If nothing else, it seems to have been drafted by someone who really knows these new, completely innovative environments. By contrast, many senators have amply demonstrated that they have no knowledge of what they are being asked to comment on, and this could create a number of problems.
It would be desirable for everyone if the American regulators did not dare to introduce legislation on subjects they do not know at all well, without first consulting the experts. That is why this proposal deserves serious consideration.