Regulation
the new cryptocurrency regulation bans CBDCs
The US state of Louisiana has issued a new cryptocurrency regulation that, among other things, bans the use of central bank digital currencies (CDBCs).
The new regulation also introduces rules for crypto miners and node operators.
Louisiana’s new crypto regulation against CBDCs
The new crypto regulation in Louisiana is the so-called Blockchain Fundamentals Actdefinitively approved on 19 June. It will actually come into force from August.
Technically this is a modification to a previous regulation that did not specifically concern the crypto and blockchain sector, while obviously the Blockchain Basics Act concerns precisely this sector.
The text of the new law explicitly mentions both digital assets and cryptocurrencies.
Among other things, the same text also explicitly states that government authorities will be prohibited from requesting the use, payment or testing of the central bank’s digital currency.
For the specific precision that “central bank digital currency” means a digital currency, a digital means of exchange or a digital monetary unit of account issued by the Board of Governors of the Federal Reserve System (Fed) or by a federal agency , and which are made directly available to the consumer by such entities, or which are processed or validated directly by such entities.
From this definition the text excludes digital versions of existing legal tender money, or those issued by private entities.
Louisiana: CBDC ban in new cryptocurrency regulation
The paragraph dedicated to CBDC is actually rather sparse.
In fact, it only states that the use and testing of central bank digital currency by government authorities is prohibited.
Additionally, please note that in the State of Louisiana, government authorities will not accept or solicit payments using central bank digital currency, and may not participate in any testing of central bank digital currency of the Fed or any branch or agency of the federal government .
It would seem like a definitive statement from the masses banning the US CBDC even before its creation, but the fact that it was previously specified that digital versions of existing fiat currencies should be excluded from the definition of CBDC perhaps leaves some room for maneuver.
Obviously this exception refers to the current digital currency, which is nothing more than a digital version of the normal fiat currency that has already been in use for a very long time.
In this text, central bank digital currency actually means a new one, that is, a natively digital version that is not collateralized in dollars. Instead, the current digital versions of US legal tender are for all intents and purposes collateralized in dollars.
This difference, however, may seem subtle, so it cannot be ruled out that in the future a solution may be found to allow Louisiana to also adopt the digital dollar.
Extraction
Another topic addressed by the Blockchain Basics Act is cryptocurrency mining.
In particular, the State of Louisiana does not like mining companies owned by foreign entities. In fact, this new regulation prohibits foreign entities from acquiring or maintaining any participation in cryptocurrency mining operations conducted within the State.
So cryptocurrency mining is accepted, as long as it is done by US companies.
To achieve this goal, he expects that, starting August 1, mining companies currently engaged in the extraction of cryptocurrencies in Louisiana, and controlled by foreign companies, will have a one-year window to get rid of foreign partners, who will have to completely transfer their shares to U.S. companies.
To achieve this, the Blockchain Basics Act provides significant fines that can be up to $1 million or 25% of the foreign entity’s stake.
The knots
The Blockchain Basics Act also legislated blockchain node owners.
First of all, the text defines who the so-called node operators are, and what their role is within a blockchain network. It also specifies that although nodes play a crucial role in maintaining a blockchain, they do not have the authority to alter or decide the outcome of transactions initiated by users.
Blockchain nodes are defined as computational devices that communicate with other similar devices or with participants in the blockchain ecosystem to maintain the consensus and integrity of that blockchain by creating and validating blocks of transactions.
So in reality the new law says little about it, except that nodes do not exercise discretion over user transactions.
This in fact clarifies that if within a blockchain there are nodes capable of altering or deciding the outcome of user transactions, the network cannot be defined as a true blockchain.
The consequences
The only concrete and immediate consequence of this law appears to be the obligation for foreign companies to sell all their shares of crypto mining companies operating in Louisiana to US entities.
Furthermore, in the event that the Fed were to actually launch the project of a natively digital dollar, Louisiana would initially be completely excluded from it.
It should not be forgotten that Louisiana is certainly not one of the most advanced states in the USA, and it is also one of the poorest.
Furthermore, he is also one of the most traditionalists and linked to his origins.
Finally, in November there will be elections, with which not only will the new president of the United States of America be chosen, but part of the congress will also be renewed. It is certainly likely that this law issued at this time also has a strong propaganda component.