(Written by @ElliotHill of the Cardano Foundation)
Last week, we shared the news that a group of bipartisan Congressmen in the U.S. had sent a letter to the Internal Revenue Service (IRS), requesting that Proof of Stake (PoS) block rewards not be taxed as income.
The letter, a culmination of the efforts of multiple parties including the Proof of Stake Alliance (POSA), of which the Cardano Foundation is a member, is an important step towards clearer regulation of PoS blockchain infrastructure.
But, our efforts also extend far beyond the U.S., and here we are going to share some of the regulatory work we are involved in throughout Europe and the United Kingdom, including our home nation of Switzerland—where blockchain and distributed ledger technology is being explored by a whole host of industries and government agencies.
We will also be discussing a milestone for the recognition of Cardano as a leading blockchain protocol by the highest levels of Swiss Federal Council lawmakers, a direct result of Cardano’s use of formal methods and offering our expert blockchain advice.
Cardano Foundation’s work with regulatory steering groups
A large part of the Cardano Foundation’s work is dedicated to steering regulation for the good of both the Cardano protocol and the wider blockchain industry as a whole. The process of advising and working alongside regulators and lawmakers is a lengthy task involving multiple stakeholders, and these initiatives often take many years and extensive behind-the-scenes work to reach fruition.
Nevertheless, the Cardano Foundation believes that full legal recognition and adequate regulatory provision for blockchain technology is the single most important key to widespread adoption, which is why one of the Foundation’s missions has always been shaping legislation and commercial standards.
One such initiative is the International Association of Trusted Blockchain Applications, or INATBA, of which the Cardano Foundation is a founding member and participant in five working groups designed to expedite the adoption of blockchain technology.
Formed in 2019, INATBA is a pan-European organization composed of over 170 members, bringing together industry participants, policymakers, regulators, and international bodies to help support and shape blockchain technology at the European Commission level. The Cardano Foundation joined several INATBA groups focused on education, finance, identity, mobility, and privacy—and continues to work to advance these efforts.
Similar initiatives that the Cardano Foundation and their representatives are involved in include the Blockchain for Europe (BC4EU), a Brussels-based organization co-founded by the Cardano Foundation’s Vice Chairperson @Manmeet_Singh.
BC4EU seeks to guide top lawmakers in the European Union towards blockchain-technology, and in early 2020, the Cardano Foundation and other BC4EU members submitted a proposal at the EU-level for better regulation on the EU’s framework for digital assets. BC4EU and its members have recently argued for a pan-European common approach to crypto-assets, making their transfer and handling easier for every participant.
In the United Kingdom, a hub of blockchain activity and innovation, the Cardano Foundation uses its platform as a leading blockchain organization to work alongside Global Digital Finance (GDF), a London-based industry membership body that hosts multiple working groups for regulatory recognition of digital currencies, market integrity, know-your-customer and anti-money laundering requirements, and taxation of crypto assets.
However, it is our recognition by the Federal Council in Switzerland, the Cardano Foundation’s home nation, that has recently made headlines. Let’s explore this development in greater detail below.
Swiss draft law calls Cardano ‘promising technology’
A recently created draft law by Swiss lawmakers has named Cardano among a list of ‘promising’ distributed ledger technology companies, alongside peer protocols such as the permissioned Hyperledger and Corda, and the permissionless Algorand blockchain.
Designed by lawmakers to tailor existing laws to blockchain technology, the draft law states that the Swiss Federal Council wishes to further improve the legal conditions surrounding blockchain so that Switzerland can more effectively leverage digitization.
The Swiss Federal Council also believes that the best possible framework conditions must be created, so Switzerland can establish itself as a leading, innovative and sustainable location for fintech and blockchain companies.
While not deep-diving into specifics regarding any single protocol, the law is clear evidence that lawmakers at the highest levels are taking blockchain—and specifically Cardano—incredibly seriously, identifying DLT as a revolutionary technology worthy of recognition.
The draft law specifically mentions proof of stake (PoS) blockchains for their ability to promote on-chain governance through voting, which brings a higher level of participation in the protocol through weighted staking and delegation mechanisms.
The Swiss lawmakers hope that PoS protocols will establish a ‘unique order’ for consensus and prevent issues associated with proof of work in earlier protocols, and can be used to guarantee data integrity through their immutable nature.
The significance of early regulatory recognition
With such long funnels and scopes of work, it can often be difficult for external participants and our wider community to see where our mission of shaping legislation and commercial standards fits in with the Cardano Foundation’s other roles within the Cardano ecosystem.
When the Cardano blockchain receives recognition from top lawmakers in leading financial jurisdictions such as Switzerland, it is a clear indication that the Cardano Foundation is steering relevant and important discussions on blockchain technology, and promoting Cardano as the most advanced blockchain to date.
As these draft laws and initiatives become active and pushed into law, it is our hope that regulators will remember the Cardano Foundation’s role as an advisor and expert, and look upon the Cardano blockchain favorably for future adoption.
We hope that legal recognition and discussions surrounding blockchain will continue to flourish, and the Cardano Foundation will continue to push for the formal implementation of pro-blockchain laws and regulations worldwide—promoting Cardano as the leading platform for inclusive and equitable growth.
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