Earlier this week, the Conference of State Bank Supervisors (CSBS) issued its long-awaited regulatory framework for the digital currency industry. The CSBS sought to create this framework for states to use in the development and implementation of their individual regulatory requirements. We recommend that state regulators ignore it!
The framework, which is unnecessarily rigorous, intrusive, and utterly impractical, bears a striking resemblance to the BitLicense. Perhaps members of the CSBS task force will go start their own consulting firm. But we digress. Among other provisions, the CSBS recommended that state regulators implement net worth or capital requirements, require surety bonds and proof of insurance, as well as separate consumer protection and cyber security policies/procedures. Moreover, the CSBS used vague language that appeared to extend blanket coverage to include non-custodial business models and innovations. Perhaps most alarming however, the CSBS devoted significant energy to rebuffing industry requests for a probationary period or “on ramp” during which certain regulations could be relaxed so as to accommodate innovation.
Mercifully, the CSBS can only make recommendations via a model framework. State governments are not mandated by law to adopt such proposals, though they do carry some degree of weight. It will be interesting to see which states, if any, use the CSBS framework as justification for the implementation of onerous regulatory requirements.