RICHMOND โ Virginia cryptocurrency investors hope lawmakers will consider regulatory policies for the digital asset industry at the 2023 General Assembly, saying a framework is needed with the growing number of investors and recent market volatility.
The FTX cryptocurrency exchange filed for bankruptcy on November 11. It was one of the largest cryptocurrency exchanges, valued at $32 billion in January. FTX founder Sam Bankman-Fried issued a statement on Twitter, saying he was "shocked to see things fall apart the way they did."
The company did not have enough emergency reserves to float the "run on the bank" from customer withdrawals, leading to bankruptcy, according to a statement issued by Rep. Stephen F. Lynch, D-Massachusetts. Lynch is the chair of the Fintech Task Force.
At least $1 billion of FTX client assets are "currently missing," according to the statement, though various reports include that the total could be much higher.
FTX was based abroad, and Lynch noted the need for "careful regulation" to protect US investors and maintain stability in the digital asset industry.
Only a few cryptocurrency-related Virginia bills have been previously introduced. Del. Glenn Davis, R-Virginia Beach, introduced House Joint Resolution 153 in 2018. The measure would have created a year-long subcommittee of 13 members (legislative and non-legislative members) to study potential implementation of the technology blockchain in things like government record keeping, delivery services, and storage, and also to study how blockchain technology could spur growth in Virginia's information technology industry.
Del. Karrie Delaney, D-Fairfax, introduced a bill this year to create a two-year, 20-member subcommittee to identify opportunities and establish a potential regulatory framework for cryptocurrency and blockchain technologies.
The Virginia Blockchain Council is a tax-exempt trade organization based in Central Virginia. Its mission is to build a community through education and blockchain-based web technologies, according to its website. The organization was founded in 2017 by CEO Greg Leffel and has about 1,600 members, he said.
Cryptocurrency trading groups organized in response to the surge in investors, according to Leffel. He said that he would like to see the General Assembly address the regulation of the litter box.
Ultimately, the sandbox regulation provides more consumer protections. It improves business models in a sandboxed software environment like cryptocurrency, according to the Financial Conduct Authority or FCA. The FCA regulates financial services companies and financial markets in the UK
Policies like sandbox regulation help companies to innovate but with supervision. It can lead to cooperation between the regulator and companies, according to FCA.
At least 20 other states, including Maryland, have passed legislation on blockchain technology. Some states, including Nevada, Arizona, and Utah, have put in place a sandbox regulation. It's the newest policy being discussed at the state level, Leffel said.
Two bills were introduced in the last session of the General Assembly to create a Department of Regulatory Innovation that would oversee a "Virginia Regulatory Sandbox Program." The bills did not advance to the legislative floor, though a health care sandbox regulatory agency proposed by Davis managed to pass the House. Davis did not respond to multiple interview requests by phone or email.
The main goal of the sandbox regulation, Leffel said, is to let other businesses and markets know that Virginia is "open for business."
โIt is a sign that we are willing to support your [cryptocurrency] place in the market,โ Leffel said.
The security of cryptocurrencies is important, according to Leffel. Protecting the average investor is what matters most: knowing what the product is and what they're really investing in, Leffel said.
โPeople need to understand that there are scammers, like the possibility of pulling the rug out,โ Leffel said.
Rug pull is a cryptocurrency scam in which people or companies exaggerate the value of the product to attract investors and get their digital coins before going out of business, according to Leffel. โWe want to make sure that there is a framework in there that protects [investors]Leffel said. "I'm also a big advocate of looking at how this technology will affect everyday life."
The Virginia Blockchain Council partnered with the Virginia Commonwealth University Blockchain Club last year, according to Leffel. The VCU Blockchain club is not exclusive to students, according to club president Francesca Bercasio. Bercasio is a senior looking to earn a degree in financial technology.
โI chose to join because I think this technology will revolutionize a lot because of the features it has,โ Bercasio said. โI also believe that the culture that the club promotes is inclusive; I have always felt seen and heard.โ
Cryptocurrencies will affect technologies like engineering, markets, and even art curation that specifically rely on third parties, Bercasio said.
โFor example, financial transactions are now settled in minutes, instead of days,โ Bercasio said.
VCU Blockchain plans to expand and connect with more people off campus, according to Bercasio. She hopes the university will consider teaching blockchain to increase literacy.
โWe want to encourage VCU to add a cryptocurrency curriculum,โ Bercasio said. "And institute a program either at conferences or through the da Vinci Center at VCU."
The da Vinci Center for Innovation at VCU is an academic workshop space that promotes innovation and entrepreneurship through interdisciplinary collaboration. Dave Benz, a Richmond local and VCU Blockchain member, joined VCU Blockchain in 2021, he said. Benz joined because he had been interested in cryptocurrencies for "quite a while."
Benz has learned a lot from his VCU Blockchain members and is grateful that they are adjusting to their lack of knowledge about the new technology, he said.
โThey are very informed and up-to-date people,โ Benz said. โI always learn something new when I go [to meetings].โ
Benz said that he is the oldest member in VCU Blockchain for decades, but he is grateful for everyone's acceptance.
โEveryone has been very kind and helpful with my lack of understanding about certain things,โ Benz said. โThey are also willing to listen to my thoughts and ideas, which is great.โ
Virginia resident and college student Johnnie Walker III invests in cryptocurrency as a "safety net," though he said he has no other investments.
โInvesting slowly over the years and into the future will get me to a certain point where I don't want to work anymore,โ Walker said. "If something comes up, I have that money."
Walker began investing in cryptocurrency during his junior year of high school in 2017, he said.
โI just ride the waves of ups and downs in the market,โ Walker said. โI have made a comfortable amount; It has been well."
Walker wants to see a more preventative and security policy around investing in cryptocurrencies. He anticipates that cryptocurrencies will "take off" in the future, Walker said.
โI feel comfortable as an investor as long as they continue to develop it,โ Walker said. "It would make me more inclined to put my assets in crypto than in banks."
- Capital News Service is a program of Virginia Commonwealth University's Robertson School of Media and Culture. Students in the program provide state government coverage for a variety of media outlets in Virginia.
