Republic on the Future of Blockchain Tokens
According to the new “Blockchain Payments Tracker®,” Republic Crypto’s Jon Knipper tells PYMNTS that crypto has other advantages, including resistance to censorship as well as a regulatory advantage in balancing security and innovation.
One of the most significant ways cryptocurrencies have changed electronic transactions is through decentralization, according to Jon Knipper, senior director of crypto treasury management at crypto investment firm Republic.
While consumers have long been able to make payments or transfer funds electronically using a variety of providers such as Venmo and PayPal, the presence of a third party has always meant that these transactions are subject to whatever restrictions those third parties may impose.
“Now your asset is transferable and, importantly, censorship-resistant,” he said.
Whether that means restrictions set by a company or a government, cryptocurrencies and stablecoins allow transactions to be conducted largely independent of third-party interference because transactions do not rely on third parties for completion.
However, blockchain technology brings much more than just a new type of currency, Knipper said. While use cases like stablecoins serve the traditional role of money as both a means of payment and a store of account, blockchain tokens can serve so much more. From cryptocurrencies serving a role similar to securities to non-fungible tokens (NFTs) tied to digital artworks, the uses are potentially endless, he said.
“Money is just one thing you want to transfer, but you can also transfer ownership of art, you can transfer the deed to a house, you can transfer stock representations like a Tesla tracker or an S&P 500 tracker,” he said. “You can transfer a bitcoin or shares in the underlying blockchain itself.”
Defining the future of regulation
A third party that can never be completely left out of transactions is the authorities. Sales tax was once completely absent from most online transactions, but now even small businesses collect sales tax from customers in different states. Likewise, as regulations catch up with cryptocurrencies, some change is inevitable.
“It’s a delicate balance between catching up to make the space safer, but also not stifling the innovation there,” Knipper said.
Adding to the complexity of regulating blockchain tokens is the variety of ways these tokens are used. A strong case can be made to consider some blockchain tokens as securities and bring them under the purview of the Securities and Exchange Commission, Knipper said. Other tokens may just as easily fall under the Commodity Futures Trading Commission as commodities.
“And then there are a lot of tokens that are neither,” he said. “It’s a fundamentally new technology that doesn’t have a natural home in the regulatory landscape.”
Knipper said he believes it is possible to find that home for blockchain tokens, but it will require cooperation and collaboration between regulators and the industry. In particular, it will be important for those in the industry to help educate regulators about the technology involved.
Transparency and accountability
One aspect of the technology that may elude some regulators is the transparency inherent in blockchain transactions, Knipper said. While stablecoins and other cryptocurrencies eliminate the need for a third party and are therefore less vulnerable to censorship, this does not make them a good choice for illegal activity.
“If you use your US digital coin to do something shady, it’s an open blockchain. Anyone can see it,” Knipper said. “It’s a really terrible way to launder money or do something illegal.”
Cryptocurrency also has the potential to restructure monetary power dynamics, Knipper said. On the one hand, a refugee fleeing an oppressive regime can do so without the regime confiscating their assets. On the other hand, if that same regime used cryptocurrencies to carry out illegal transactions or undermine sanctions, the whole world could see that those funds were being used and who they were going to. That’s a feature that CBDCs — blockchain-based currencies issued by central banks — are unlikely to have, Knipper said.
CBDCs, like stablecoins, will have a place in the future of payments, but so will cryptocurrencies, Knipper said. It is possible that stablecoins and CBDCs, due to the familiarity of trading with something tied to a fiat currency, may gain prominence as a means of conducting everyday transactions. However, the use of blockchain tokens for cryptocurrencies and cryptoassets is in its early stages, and the full potential of the technology is still being explored.
