Our Proposed Framework for a Policymaker Education Initiative & Bitcoin as Legal Tender Globally
Workshopping Policy, Panama as Latin America's Technology Innovation Hub, and NYC's relationship with Proof of Work.
Twali Wrapped is a community-driven initiative tracking the most important developments of the past week for policy, regulation, compliance, and legalities, related to web3.
In addition, we speak with experts toiling with how best to implement regulation and policy changes, while prioritizing simplicity in communication to ensure our reader’s complete understanding of the implication of such developments.
We’re always looking for more experts in compliance, HR, legal, tokenomics, governance, accounting, tax, etc) If you know someone who would be interested, please send them the application form, and receive a referral fee in return!
TL;DR
Bitcoin as Legal Tender in Central African Republic and Panama
NY State Block on New PoW Mining
Workshopping Policy: Twali’s Framework Addressing the Urgent Need to Onboard Policymakers
The Docket
by Lucy Pappas
Welcome to the Docket - A Bulletin Board of the most important legislation either proposed, or passed, in the past week.
Passed: BTC as legal tender in the Central African Republic
“Mathematics is the #language of the Universe. #Bitcoin is universal money.” This is the pinned tweet on the account of President Faustin-Archange Touadéra, who made bitcoin legal tender in the Central African Republic this week. Passing unanimously in parliament, the bill was signed into law by President Touadéra on Wednesday.
Takeaway. The Central African Republic is only the second country to make bitcoin legal tender (following El Salvador). Lugano, a city in Switzerland, made bitcoin and other cryptocurrencies legal tender in 2022, while Russia recently proposed similar legislation. While it seems like new regulations of crypto are constantly being proposed in governments around the world, fewer have taken this strong stance on legal tender.
Proposed: Panama’s Crypto Law
Panama hopes to be “technology innovation hub of Latin America,” as Congressman Gabriel Silva said in an interview on Thursday after passing a major crypto regulatory bill. In a landslide vote—with 40 votes for and 0 votes against—Panama Assembly passed a bill that regulates bitcoin and other cryptocurrencies as payment for any legal, civil or commercial operation within their economy. President Laurentino Cortizo has yet to sign the bill into law, but given the strong support seen in the unanimous vote, it seems likely that this bill shall pass.
Takeaway. With crypto adoption, two main legal avenues have emerged across governments: 1) making crypto legal tender and 2) regulating crypto transactions. While Panama did not goes as far to make crypto the legal tender, the majority vote does demonstrate where the country stands, internationally, in the crypto economy.
Proposed: NY State Block on New PoW Mining
A bill imposing a 2-year moratorium on any new crypto mining firms that use proof-of-work authentication methods has passed in the New York State Assembly. The bill stipulates that existing facilities would remain unaffected by the bill, as well as any facilities that tap renewable resources. A corresponding bill is working its way through the state Senate, before it can be delivered to the Governor.
The Takeaway. As is the case for this bill, the environmental effects of PoW mining have become a key talking point for many who oppose adopting crypto. This bill was proposed by NY Assembly member Anna Kelles (D), who has publicly expressed her disapproval of PoW mining in the face of climate justice. The same argument appeared in the EU’s proposal to ban PoW mining, which we saw struck from the MiCA. Will we see a similar push from industry against this bill, as we saw in the EU?
Workshopping Policy: Twali’s Framework Addressing the Urgent Need to Onboard Policymakers
Sharp commentators for the crypto sector have pointed out a potentially massive source of regulatory risk: lack of participation.
If the policy community is not able to participate in decentralized networks and transactions, how can they be expected to have an understanding of how and what to regulate?
Around Washington, DC, I often ask people their perspective on cryptocurrency. A common refrain from across the political spectrum is that cryptocurrency “is not based on anything.” The frame of reference tends to be stocks and other publicly-traded securities, which have established methods for valuation, a longer historical track record, and more extensive transparency requirements.
The problem with the “cryptocurrency to stock” comparison is that it assumes everyone who holds a crypto token is a passive investor. A distinguishing feature of decentralized finance is community input and participation. Protocols and ecosystems are made by developer activity and project launches. But that nuance is hard to understand unless you have interacted with a public blockchain, bought a non-fungible token, or participated in a governance vote.
Crypto bulls are largely inclined to let consumers figure it out at their own pace. Unfortunately, when it comes to the policy community, we do not have that luxury. For decentralized finance to become mainstream, the sector will have to contend with regulatory behemoths in the U.S. and around the globe. The only way is through.
Given that reality, the team at Twali Wrapped is considering the key educational needs for the public policy community. The topic is top-of-mind for community partners like the DeFi Education Fund, too. What follows are some initial ideas from Twali about the key topics that policy professionals need to know. What edits and additions should we be making? We want to hear your feedback!
One: Blockchain Basics
Working knowledge of blockchain and other distributed ledger technology is the foundation for understanding DeFi. That includes some basic understanding of cryptography and cryptographic messaging, complicated as it may be. The key for an introductory session is to expose attendees to on-chain interactions. Creating a wallet or engaging with a testnet in some capacity can help bridge the awareness gap.
Two: Key Regulatory Issues
The policy community wants to understand how DeFi debates square with other issues. Financial services regulations and taxes are the two obvious topics to review. But other issues like financial literacy, internet access, job creation, and employment regulations are also relevant. Of course, DeFi development will also spawn completely new issue sets. For example, how should policymakers evaluate what “decentralized” truly means - and the costs/benefits inherent in protocol design choices?
Three: The View from the U.S.
Twali would envision targeting a largely U.S. audience. For that, a survey of how key regulatory stakeholders in America view DeFi will be critical. The Treasury Department, Securities and Exchange Commission, and Federal Reserve will play instrumental roles. No analysis would be complete without considering the role of Congress as well. But an educational effort would also be wise to provide some degree of state and local government analysis, given the prominent role sub-national actors will likely play in DeFi development and regulation.
Four: The View from Around the World
U.S. policy does not happen in a vacuum. That is why a thorough understanding of the DeFi world must consider developments happening outside of U.S. borders. Major geopolitical forces like the European Union, China, and Russia will play an outsized role in DeFi regulation globally. But smaller financial services hubs, like the United Kingdom, Switzerland, and Singapore, will also contribute their fair share of policy innovation.