image title

Policymakers say Arizona should 'guide the narrative' on blockchain

Arizona policymakers want to be leaders in blockchain regulation.
Expert panel was part of ASU Law's “Blockchain Speaker Series.”
February 21, 2018

Experts at ASU panel discuss role of government to regulate and promote the possibilities of the emerging technology

Republican Rep. David S. Schweikert of Arizona said Wednesday that the state should lead the country when it comes to developing regulation on blockchain applications and businesses and fully embrace the new technology where it concerns commerce.

“This is the future, and there’s a few of us out there that are willing to drag it through kicking and screaming because the revolution is good for all of us and society,” Schweikert said.

He spoke at a discussion on blockchain and the law moderated by Sandra Day O’Connor College of Law second-year law student Eric Cardenas at the Beus Center for Law and Society on Arizona State University's Downtown Phoenix campus.

The Center for Law, Science and Innovation hosted the event, which featured a panel of blockchain industry leaders, legislators and policy experts. The panel discussion included dialogue on the role of government policymakers, how state and federal governments are working to regulate and promote the emerging technology, and the future of blockchain regulation.

RELATED: How blockchain works

“The blockchain is a rapidly emerging technology that will disrupt, in beneficial ways, virtually every business in the United States, including law,” said Gary Marchant, faculty director for the Center for Law, Science and Innovation. “While much of the initial focus has centered on Bitcoin and other cryptocurrencies that are powered by the blockchain, it will have many other applications in finance, health care, real estate, government and business supply chains, to name just a few applications. Because of the transformative legal consequences of blockchain, we are sponsoring these public forums this spring.”

The discussion was the second of four scheduled events for ASU’s “Blockchain Speaker Series” and drew about 120 people: mostly attorneys, coding engineers and entrepreneurs. The first session, held on Jan. 17, provided a general overview of blockchain. 

In addition to Schweikert, a member of the Congressional Blockchain Caucus, Wednesday's panel included Republican state Rep. Jeff Weninger, sponsor of Arizona’s Smart Contracts Law, and Paul Watkins, chief counsel for the Arizona attorney general’s office.

Time for a new framework

In 2014, the Internal Revenue Service classified digital currency as property. That outdated guidance classifies even the smallest of cryptocurrency transactions the same as buying or selling stock. Blockchain is a decentralized, digital ledger system that serves as the foundation upon which Bitcoin and other cryptocurrencies operate.

Schweikert said government policymakers have an important role to play in the success of blockchain by enabling a receptive legal framework and making sure they’re not impeded by obsolete laws and regulations. 

“My greatest barrier is the regulatory world,” Schweikert said. “We’re hunting for freaky-smart people to help guide us through this change.”

Schweikert often works closely with Weninger, who has introduced several bills on cryptocurrency and blockchain regulation. Weninger said his fellow lawmakers are doing their part to keep up with the fast learning curve.

“It is a hard concept to grasp, but most of my colleagues are eager to learn,” he said. “They understand that Arizona being an early adopter of blockchain technology will benefit our state greatly in the future."

Weninger, a restaurateur and small-business owner, said structuring law on blockchain requires striking a delicate balance between common sense and being savvy enough to give entrepreneurs a fighting chance.

“We don’t want to place a burden on this technology during its infancy,” Weninger said. “My goal is to have Arizona guide the narrative on blockchain technology.”

It was a message that resonated with Watkins, who works in the civil litigation division of the Arizona attorney general’s office. He said regulators should prevent wrongdoing without creating barriers to entry.

“The role of regulation is to enhance the role of the consumer experience while protecting consumers and businesses,” said Watkins, who is promoting a “regulatory sandbox” for blockchain and other financial technology innovations to jump-start the beneficial applications of these technologies. “Change is accelerating in this industry, and it’s exciting and it’s scary.”

ASU is also accelerating research in the blockchain industry with a slew of programs and initiatives. The university formed the Blockchain Research Lab in November 2017. Its mission is to further the research and development of blockchain-related technologies for use in business, finance, economics, mathematics, computer science and other areas of potential impact. ASU has partnered with digital currency Dash to accelerate research, development and education, including the Dash Scholars Program, which provides $100,000 in scholarships for undergraduate and graduate research fellowships. 

The Blockchain Speaker Series will continue on March 21 and April 18. It will feature business and legal leaders from Arizona, who will discuss the hottest blockchain entrepreneurs and how attorneys are incorporating blockchain into the practice and business of law. For more information, click here.

Top photo: Arizona Rep. David Schweikert speaks about the importance of blockchain policy in the future of Arizona business at the Sandra Day O'Connor College of Law on Wednesday. Photo by Marcus Chormicle/ASU Now

Reporter , ASU Now


image title

ASU professor believes new bill will accelerate cryptocurrency's acceptance

February 14, 2018

State legislators pushing through a bill that would allow Arizona residents to pay taxes through cryptocurrency

Although known generally for conservative politics and practices, the Arizona Legislature is embracing innovation by welcoming cryptocurrency to its list of cutting-edge technologies.

Thanks to companies like Google/Waymo, LifeLock, Axon and Blackboard Learn, Arizona is a proven hot spot for innovators and entrepreneurs to start, expand and thrive. Now stepping further into the digital realm, Arizona lawmakers have passed a bill in the Senate to make cryptocurrencies such as Bitcoin and Dash an acceptable form of tax payment starting in 2020. The bill now heads to the House for consideration.

To discuss what this means for Arizona residents, ASU Now turned to Dragan Boscovic, an Arizona State University computer science professor and director of the Blockchain Research Lab.

Man in cap smiling

Dragan Boscovic

Question: Why do you think Arizona, a conservative state, has gone down this road?

Answer: Over the past few years Arizona has proactively engaged in becoming a favored partner for the new technologies, deliberately cultivating a live-lab testing environment in which technology innovations can be quickly tested for their latent business potential. This pragmatic approach holds the promise of generating a huge economic benefit to everyone. It is well known that Arizona attracted many autonomous car-driving companies by favoring business opportunities over heavy regulations, and we see the same scenario now being repeated with digital currency and blockchain technology in general. Consequently, Arizona and the Phoenix area in particular have emerged as a hot spot for blockchain service companies.

Q: How will this new development change the research in ASU’s Blockchain Research Lab?

A: This is a hugely positive development for BRL and blockchain-related activities at ASU in general. If the legislation is passed, it will further strengthen the mandate to initiate and perform first-class, quality research and innovations that enable efficient digital currency payment at scales comparable to conventional cashless payments. Furthermore … the demand for blockchain talent will grow exponentially, attracting new students to ASU and BRL to produce a new generation of blockchain application and business developers, and a cohort of blockchain-literate policy makers.

Q: What happens if the value of cryptocurrency changes between when you’ve filed your taxes to the time the state receives payment?

A: This is a small risk to bear for the current volumes of digital currency transactions, and potential economic development benefits outweigh the associated risks. As the volume of transactions grows, the value of digital currency is less prone to large daily changes, lowering the associated exchange risks.

Q: What kind of infrastructure changes will be needed on behalf of the state to start accepting payment, especially since it appears they’ll accept a range of cryptocurrencies?

A: The state will need to build a digital payment gateway to link its existing accounting and payment processing system to the digital currency networks will accept. To start, they will need a payment gateway toward Bitcoin, but the same principle can be used to design and operate payment gateways for other major digital currencies like Dash and Ethereum.

From a user-experience perspective, it can be very similar to the PayPal option we use when shopping online. Instead of PayPal it would be simply Bitcoin, Dash or something else.

Q: If this method is successful, do you think the IRS will follow suit one day?

A: As the volume of digital currency transactions grows, so will their acceptance increase. We are still in very early stages, and the financial regulatory framework will need to evolve in order to support acceptance of digital currencies. It might take a few years and input from early adopters like Arizona to design that framework, but once it is in place my expectation is that the IRS will start accepting digital currency payments as well.