Katherine Kirkpatrick Bos
The General Assembly of Illinois has advanced a scanning measure which will have enormous consequences for the technological ecosystem of Chicago and the more than 300 innovative innovative startups and institutions in the blockchain and cryptocurrency in Illinois.
The law on digital assets and consumer protection (DACPA) – sponsored by the Senator of the Mark Walker State of Buffalo Grove – was offered under the cover of consumer protection, but, in reality, would not do much to protect consumers from Illinois. If he is signed, he would impose heavy regulations and a regime for granting heavy licenses to Illinois entrepreneurs and would give a radical regulatory authority to the Department of Financial and Professional Regulation of Illinois (IDFPR), an agency in the midst of the modernization of its processes to minimize license delays.
Let me be clear: the community of digital assets – including blockchain and cryptographic entrepreneurs – supports intelligent and targeted regulations to protect consumers and keep the bad players responsible. But this bill does not realize it, and it will fail for entrepreneurs and consumers in several ways.
First, the bill offers Illinois consumers a false feeling of security against cryptographic fraud and bad players, the majority of which operates in Offshore and will not adhere to the requirements of this legislation. Legitimate crypto companies based in Chicago overall are not those that target elderly consumers, but they will bear the costs of this bill.
Second, the bill would regulate not only centralized exchanges or other companies that hold the crypto for Illinois users, but would potentially extend to a multitude of startups, students and technologists experimenting with means of using blockchain to solve real problems. The result would be a two -level system innovation where well -resourced inherited organizations will be the only ones with capital and resources to navigate licenses. It works against everything that Illinois represents.
In addition, the operating cryptocurrency companies are already subject to a lot of surveillance. The Department of Financial and Professional Regulation of Illinois, the Attorney General of Illinois, the American Commission for Securities and Exchange, the Commodity Futures Trading Commission, and the Ministry of Justice could all bring actions against someone who fraud a resident of Illinois. Beyond that, many companies that interact with the financial assets of Illinois consumers are required to have a silver issuer license issued through the IDFPR, and companies holding cryptographic assets may also need to request an Illinois trust license. The addition of bureaucracy and confusion to this booming industry does not serve anyone.
Also concerning this bill assumes that the IDFPR – which already operates on binding resources – is ready to regulate one of the most complex and fastest sectors in the world in the coming months with just the handful of new employees they would hire. The agency is already responsible for regulating professional licenses for more than 1.2 million residents of Illinois, and it has struggled to keep the pace of existing demand. Last year, Illinois doctors and nurses found themselves at risk of losing their jobs due to delayed licenses.
On its credit, the IDFPR has deployed a new online application system – Core – four months ago. But to date, the agency has only converted three of its more than 300 licenses to the online system and have declared publicly that it would take more than two years to convert the rest. It is irresponsible to assume that it can manage the licenses for the multitude of companies providing cryptocurrency services to residents of Illinois with such a short track.
The Illinois does not have to guess what will happen if these bills are signed. We can simply turn to New York State, which promulgated a similar license regime – the New York Bitlengende – via regulatory advice in 2015. Since then, the state regulation organization has only approved 34 BIT license applications, stimulating many cryptographic companies to residents of Geoblock New York. The version of the Illinois of the license extends a wider regulatory authority than Bitlidense in New York, so it is sure to say that the consequences will be more important.
Currently, we see a substantial number of crypto companies considering reminders in the United States, and with regulations like DACPA, Illinois will continue to fall from the list of realistic places to build technology companies.
Although legislators can believe that they protect consumers, they push innovators, investors and job creators to more friendly jurisdictions. Illinois needs a regulatory structure for cryptocurrency which is closely targeted, functional and manageable. Until the IDFPR is entirely modernized and the law is considerably reduced to scope, the Senate bill 1797 and Bill 742 of the Chamber should not go ahead.
• The Senate bill 1797 adopted the Illinois Senate on April 10. April 17.
• Katherine Kirkpatrick Bos is a Starkware general lawyer, developer of a cryptographic system of proof of zero knowledge who seeks to improve the scalability of blockchains, and a member of the board of directors of the Illinois Blockchain Association.
