Gov’t-Issued Cryptocurrency Mentioned In NY Bill Would Be Bond-Backed

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February 9, 2018 11:25 PM

A bill submitted to the New York State Assembly would convene a taskforce to explore the ramifications of the state issuing its own cryptocurrency. Through a conversation with the bill’s sponsor, ETHNews has learned that the digital asset described in the legislation would be backed by bonds intended to fund various kinds of expenditures, including infrastructure projects.

A bill introduced to New York’s State Assembly on February 2 would convene a taskforce to investigate the legality and impact of a possible state-issued cryptocurrency. In a recent interview with ETHNews, A09685’s sponsor, Assemblyman Clyde Vanel explained that the digital asset in question would be backed by bonds, which the state would issue in order to fund infrastructure projects, among other efforts.

Assuming that the taskforce recommends issuing the token and that a law authorizing the cryptocurrency is passed, Vanel said that the asset would represent a way of tokenizing “what we already do. New York state already provides bonds. We issue securities and debt for infrastructure projects and other kinds of matters.”

The only difference between his proposed system and the one currently in place, the assembly member posited, is that rather than buying these instruments directly, investors would have the option of acquiring a virtual coin “backed by the debt of a bond.”

“What’s interesting here,” he continued, is the question of how the state can use “blockchain or another similar technology to record [and] transfer these debt-backed securities.”

He was careful to reiterate that before any steps can be taken toward building the token, the taskforce would have to be formed “to work through the potential issues.” According to the bill, these issues include:

“[The] Securities and Exchange Commission’s and the Commodities Futures Trading Commission’s jurisdiction over economic transactions … how local, state, and federal taxation would be affected by such; and the measures other jurisdictions, central banks, international governing bodies, states, or countries, have taken to potentially issue cryptocurrency.”

Vanel said that it was too early to discuss the platforms on which the state might issue the token, though he reported that he and others were looking into the matter. He was similarly coy about discussing the possibility and ramifications of non-New Yorkers, perhaps even individuals or entities from abroad, buying or trading the tokens.

On February 7, Vanel introduced another bill, A09782, authorizing state agencies to accept, through an intermediary, “crytocurrency [sic] as a means of payment of fines, civil penalties, rent, rates, taxes, fees, charges, revenue, financial obligations or other amounts, including penalties, special assessments and interest, owed to state agencies.”

In other news from this week, reports emerged that the City of Berkeley, CA, is mulling the possibility of coming out with a virtual currency of its own. Through a committee that counts Mayor Jesse Arreguín, the UC Berkeley Blockchain Lab, and FinTech startup Neighborly among its members, the city is studying the possibility of holding an ICO to issue tokens that would also be backed by bonds. City leaders have suggested that these digital assets might eventually be accepted as a means of payment by some local businesses.

According to City Council member Ben Bartlett, the idea for the municipal government-issued cryptocurrency came about when President Donald Trump‘s signature Tax Cuts and Jobs Act became law in December 2017. Bartlett contends that the legislation disincentivizes the construction of badly needed affordable housing in Berkeley, and believes that the ICO could provide funding for such building projects. The council member went a step further in saying, “Berkeley is the center of the resistance, and for the resistance to work, it must have a coin.”

A Neighborly cofounder said that the ICO could kick off as early as mid-May. It’s been reported that the debt security-backed tokens will not altogether replace conventional bonds. 

Adam Reese is a Los Angeles-based writer interested in technology, domestic and international politics, social issues, infrastructure and the arts. Adam is a full-time staff writer for ETHNews and holds value in Ether and BTC.

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