Massachusetts bills for special blockchain commission to review government use

Two bills related to crypto were introduced to the Massachusetts House of Representatives on January 19. The first was related to a new “special commission on blockchain” and the second on “protection of consumers in cryptocurrency exchanges”.

Given the recent publicity received through the FTX collapse, it is not surprising that officials would look to add additional consumer protections. The creation of a “special commission” on blockchain could also be a bullish indicator for the citizens of Massachusetts, provided that the commission receives sufficient information to analyze.

Special Commission

Massachusetts Representatives Josh S. Cutler and Kate Lipper-Garabedian filed the bill titled “An Act establishing a special commission on blockchain and cryptocurrency” on January 19 to create a steering group in the Massachusetts House to look into blockchain technology.

“For the purpose of conducting an inquiry in relation to blockchain technology to develop a master plan with recommendations to promote the appropriate expansion of blockchain technology in the Commonwealth.”

The commission is planned to contain 25 members, including the president of the house, the minority leader and the president of the senate, which suggests that the commission will be taken seriously if passed.

The commission is designed to focus on several key areas

• The Feasibility, Validity, Permissibility, and Risks of Using Blockchain Technology for Public Use in Massachusetts.
• Whether the definition of blockchain is sufficient with regard to enforceable laws.
• The Potential Impact on Massachusetts State Revenue of Digital Assets and Cryptocurrencies.
• Availability of government and business advice, with a focus on cannabis shops.
• How energy consumption may need to be regulated.
• Any additional consumer protections required for retail users of crypto.
• “Best Practices for Enabling Blockchain Technology to Benefit the Commonwealth.”
• Which government entities should be responsible for enforcing blockchain regulations.
• Any other blockchain-related topic proposed by the Commission.

“The commission shall take input from a broad range of stakeholders with a diversity of interests influenced by government policies governing emerging technologies, privacy, business, finance, the courts, the legal community, and state and local governments.”

According to the bill, the commission will report its findings within one year of its approval, as it looks to “promote a positive blockchain technology environment.”

Consumer protection

An additional bill was filed titled “An Act Protecting Consumers in Cryptocurrency Exchanges.” The bill was introduced by Representative Susan L. Moran to “protect” consumers who engage with crypto exchanges.

The bill targets businesses that offer crypto trading or conversion that operate in the state of Massachusetts or with Massachusetts clients.

However, given the specific wording of the bill, the new rules should not apply to decentralized exchanges (DEX) in Massachusetts. The bill describes a Massachusetts customer as “a person using a virtual currency exchange service whose information on file with or available to said exchange service indicates a Massachusetts home address.”

Therefore, any website that can operate in the US without any KYC requirements will not be affected.

An important aspect of the bill is the requirement that crypto exchanges operating in the state of Massachusetts pay the state an annual “registration fee” of 5% of gross revenue.

Furthermore, companies must retain promotional materials used to market crypto for at least seven years. All marketing must also include the business’s legal name and confirmation of registration to operate a cryptocurrency business.

To try to combat events like the FTX collapse from happening again, the bill also requires businesses to “disclose in clear, conspicuous writing all material risks to the person associated with the particular virtual currency business in which it engages.”

Virtual currency insurance fund

The bill also introduced the concept of a Virtual Currency Insurance Fund to protect customers from fraud. The insurance pool will be financed through payments linked to any breaches of the newly proposed regulations. Each violation shall result in a fine of up to $5,000 per violation.

Customers will be able to receive grants from the fund if they have crypto assets held with an exchange “that is unable to meet any monetary obligations to any of its customers.”