Insights from Sherry Dudley Nickerson, Government Affairs Director
Recently, billionaire entrepreneur Elon Musk hosted Saturday Night Live. During the course of his monologue, where his mother joined him on stage, a joke was made about Dogecoin. For those who do not know what Dogecoin is, it is a cryptocurrency that was created for fun using the face of the Shiba Inu dog from the “Doge” meme as its logo. Since being introduced in 2013, Dogecoin has fluctuated, mainly as a result of a mention by celebrities such as Elon Musk, Snoop Dogg, Gene Simmons, and Mark Cuban. Many investors bought Dogecoin in the days leading up to the SNL appearance expecting a bump as has previously happened when Musk mentioned the cryptocurrency. However, the result of the SNL monologue was a sharp decline of 40% in the value of Dogecoin and then a slow climb back up within 24 hours of the show’s airing. I use this example to illustrate the risk and volatility of all cryptocurrencies that have been created since the inception of Bitcoin in 2008.
Cryptocurrency is a decentralized digital currency designed to be used over the internet. Cryptocurrencies make it possible to transfer value online without the need for a middleman like a bank or a payment processor allowing value to transfer globally, almost instantly for low fees. Cryptocurrencies are not issued or regulated by governments or banks. Instead, they are managed by peer-to-peer networks of computers running free, open-source software and security vetted by a technology called Blockchain. Blockchain acts like a bank’s ledger except with more transparency and less human involvement, and is mathematically verifiable. Therefore, it has been deemed to be more secure than typical financial transactions where personal information is stored.
As blockchain and cryptocurrencies become more prolific, federal and state governments are beginning to take notice and discuss options for regulating these financial vessels. In 2021, legislation was introduced in seventeen states relating to blockchain and/or cryptocurrency. Many believe that cryptos have revolutionized the way we do business and are the currencies of the future. If that is the case, is it government’s responsibility to protect investors?
The Securities Act of 1933 was passed into law to protect investors after the stock market crash of 1929. As a result, the Securities Exchange Commission (SEC) was created to regulate the financial industry in an attempt to provide transparency and restore investor confidence. Should our governments wait for when/if the crypto-bubble bursts to get involved or should they begin acting now to prevent that type of occurrence?
Our team here at Old Line Government Affairs is staying on top of this and other relevant topics given the impact on our constituents, clients and companies across the country and here in Maryland.