MONTGOMERY, Ala. — The inaugural meeting of the Alabama Blockchain Study Commission Tuesday saw heads of several industries and regulatory agencies urge caution as the state explores ways to utilize the emerging technology.
“Blockchain, Bitcoin, cryptocurrency has hit national and international news and is being developed and continuing to expand,” said Sen. Greg Albritton, R-Range, the chair of the committee.
“The question that I think this body ought to consider is what is Alabama’s role in that so that we can determine what place, if any, Alabama has as a state to control or regulate that.”
The commission was established through a joint resolution introduced by Albritton earlier this year to research ways the state could best utilize blockchain technology, as well as determine how it should be regulated.
Blockchain technology is the foundation upon which cryptocurrencies like Bitcoin are built, and act as secure public ledgers that records and verifies all transactions. While the emerging technology is secure, it is far less regulated when compared to traditional financial institutions.
Among the commission’s appointees, which included lawmakers, leaders of state agencies and industry stakeholders, was Wade Preston of the Alabama Blockchain Alliance, an organization that advocates for blockchain development and adoption.
Citing a recent adoption of blockchain technology in California in which the state digitized its 42 million car titles, Preston suggested the state could benefit from adopting blockchain technology for its own record keeping to improve both efficiency and security.
“We have a lot of inefficiencies – allegedly – within government structures, especially when it comes to record keeping,” Preston said.
“We also have a lot of vulnerabilities when it comes to servers and the surface area for bad actors to be able to attack, steal peoples’ identities and whatnot, and blockchain offers solutions to these inefficiencies and security issues.”
Amanda Senn, director of the Alabama Securities Commission, shared anecdotes suggesting the industry was fraught with fraud compliance issues, and urged lawmakers to be thorough when crafting regulations for the industry.
“Many of these companies that are popping up around cryptocurrency that are allowing consumers and investors to deposit their assets (or) make loans with these digital assets are not complying with laws that are required of financial institutions in this state,” Senn said.
“Some of the crypto firms are charging fees that would never be allowed by any of our regulated financial entities, and so it’s just not fair for these organizations to pop up and operate like financial institutions to the detriment of our legitimate licensed financial industry. On the consumer/investor side, there’s a whole other host of issues that involve fraud.”
Leaders in banking also expressed caution were the state to adopt blockchain technology, including Mike Hill, the superintendent of the State Banking Department.
“We’re a little concerned if we have an industry operating that somebody has money that they don’t want the government to know they have; with the system that’s out there right now, there’s no way to track it,” Hill told commission members.
“If this committee decides that we want to do something, we need to make sure that, don’t over-regulate it, but we do have to have some regulations if we’re going to allow that in the state of Alabama.”
A balance was reached toward the end of the meeting in which commission member Rep. Mike Shaw, R-Hoover, stressed the need to not disincentivize investments in the state from cryptocurrency and blockchain corporations, while at the same time, establishing a base level of regulation around the industry to protect consumers and investors.
“It’s very important that we work with crypto companies and make sure this is a friendly environment for crypto companies, we want them to stay here,” Shaw said.
“There’s opportunities for our state, for employment, but there’s also just advantages to us being on the forefront of bringing these companies in in a positive way. I want this state to be very friendly to blockchain companies, but I also want to make sure our people are protected too.”
Scott Latham, president of the Alabama Bankers Association, expanded on the concerns from bankers to Alabama Daily News following the meeting.
“I think it’s fair to say that the banking industry works hard every day to protect the interest of our customers in a world that’s filled with fraud and deception,” Latham told ADN.
“There’s a lot that’s unknown about cryptocurrency, and so our industry – which is heavily regulated – wants to make sure that anything that impacts our customers and the transactions that we’re involved in is also regulated, understood and transparent.”
Preston, a strong advocate for the state’s adoption of blockchain technology, compared the current climate of the technology’s usage to that of the internet in the late 1990s, and warned that Alabama could miss out as an early adopter were it not to push forward.
“Blockchain and crypto is a $2 trillion asset class right now; I truly believe within the next ten years we’re looking at it being a $50 to maybe $100 trillion asset class,” he told ADN.
“Right now the question is, is Alabama going to be able to take advantage of this monumental growth in value? Or are we going to let it pass us by?”