Bitcoin core developer Bryan Bishop urges SEC to modernize its methods

21 Sep, 2018
by Joeri Cant
News
Bitcoin core developer Bryan Bishop urges SEC to modernize its methods

In a letter addressed to the SEC, a group of blockchain and cryptocurrency industry professionals, who all have extensive experience in financial services, cryptography, and cryptoeconomics. urged the U.S. Securities and Exchange Commission to modernize its methods.

Bryan Bishop, who is one of the authors, and has been contributing to bitcoin’s core code since 2014, said that 'the biggest change the SEC needs to implement is to partner directly with cryptocurrency engineers to develop new kind of regulations.'

'Bitcoin is fundamentally a technological system with many nooks and crannies. It's the concept that rules can be enforced using software, math and cryptography rather than policy.'

The letter warns that the traditional financial practice of storing customer funds in a single account would undermine some of the core strengths of cryptocurrency.

"Digital assets are natively segregated, and maintaining this natural segregation at all times would best protect investors by conforming to the architecture of digital asset technology," the report states.

To store all funds in a single place could devalue bitcoin by creating more liquidity than there are assets to back it. That very process could recreate some of the very dynamics that led to the financial collapse of 2007 and 2008.

The letter further points out another generally accepted practice called rehypothecation. Which basically means that one organization can claim ownership of an asset in its balance sheet, but then lends the asset to another party that also marks the asset on its balance sheet, and so on.

The authors end the letter by saying that they believe that the current SEC rules surrounding custody do not reflect the risks inherent in managing digital assets and do not use the technical strengths of the technology.

'These technical strengths have the potential to lead to a stronger, more robust custody environment. To better understand these possibilities, to build to strengths of technologies, and to not harm its advantages, we recommend that the SEC engage with those who are experienced with technology, such as cryptographic engineers, software developers, Bitcoin exchanges, smart-contract designers, blockchain developers, and existing digital-asset managers to ensure best practices are implemented.'

Authors of the letter: Christopher Allen, Bryan Bishop,  Angus Champion de Crespigny,  Gavin Fearey, and Caitlin Long.

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Read more about: Bitcoin (BTC)

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