As the cryptocurrency industry continues to come under increased scrutiny by federal regulators, certain states are working hard to become “crypto friendly” – or at least explore the potential benefits of embracing crypto, blockchain, and decentralized finance.
Texas in particular has been leading the way, and is one of the largest bitcoin mining hubs in the world due to cheap energy and friendly regulations. In fact, late last year it released a report titled “Texas Working Group on Blockchain Matters,” recommending making bitcoin an authorized investment for the state, while giving tax incentives to local BTC miners.
Similarly, Wyoming, Colorado, and Florida have also received attention for their crypto-friendly regulations. Colorado, for instance, is now accepting tax payments in crypto. Florida has launched a pilot program that allows businesses to pay for state fees in cryptocurrency – not to mention Miami’s launch of its own digital coin, MiamiCoin (MIA). And Wyoming has approved over 20 laws to make it easier for crypto businesses to operate.
While we might expect this push from some of the nation’s bigger states, it might be surprising to learn that a small state in the northeast is working its way toward becoming one of crypto’s biggest advocates. However, given that New Hampshire’s state motto is “live free or die,” it’s perhaps not surprising at all.
New Hampshire’s Role In Cryptocurrency
In February 2022, New Hampshire Governor Chris Sununu established a “Commission on Cryptocurrencies and Digital Assets” via an executive order to assess the state’s laws in governing crypto and other digital assets. In it, he charged the commision to assess crypto’s impact on residents and consumers, and make recommendations to the state’s lawmakers on how to keep up with the evolving technology.
Interestingly, this isn’t the first time New Hampshire has been at the helm of financial innovation. The state played a historic role as the host of the Bretton Woods Conference at the Mount Washington Hotel in July 1944, where delegates from 44 Allied nations negotiated and signed the agreement which established critical institutions that formed the foundation of our international economic system for over 77 years.
While met with a vastly different financial landscape today, New Hampshire seems to be playing a similarly historic role in contributing to the progress and innovation of blockchain technology. In fact, in March 2022, a financial reform saw New Hampshire become the first to adopt a draft of the federal Universal Commercial Code (UCC), passing a bill that makes it easier to buy and sell cryptocurrencies.
Governor Sununu’s establishment of a Commission is noteworthy for a number of reasons, perhaps the most obvious being that it demonstrates a willingness to actually take the cryptocurrency industry seriously. After all, Sununu indicates that it’s become increasingly difficult to deny crypto’s potential to transform our financial landscape given that “cryptocurrencies (such as Bitcoin, Ethereum, BNB, Tether and USD Coin) and other digital assets using the rapidly developing distributed ledger/blockchain technologies are gaining momentum, with estimates of total global market capitalization exceeding $3 trillion.”
At the same time, Sununu also recognizes the tremendous responsibility and importance of integrating digital assets in a safe, sound, and effective way. Part of his order read: “[t]he decentralized technological innovations that have fueled the rapid growth of cryptocurrency and other digital asset markets present a challenge to develop and adopt smart and balanced evolutions to existing federal and state regulatory regimes.”
New Hampshire Notes Positive Impact on Bitcoin Mining
The Commission’s final report was released this past January, confirming what many in the crypto space have been saying for a while: that digital assets and the underlying blockchain technology has the potential for many important applications in our society and economy.
As William Ardinger, the Commission chair, wrote in the report’s opening letter to Gov. Sununu: “Blockchain technologies and its applications, including Cryptocurrencies and Digital Assets, are new and evolving, and their uses and opportunities extend far beyond the more well-known popular examples of various forms of ‘crypto’ or ‘NFTs.’”
Accordingly, the Commission concluded that these technologies and applications “offer material opportunities to improve the efficiency and effectiveness of a broad range of human activities, including financial services.”
Furthermore, the Commission's report laid out 12 specific recommendations, urging lawmakers to take a proactive stance on creating new legal frameworks for blockchain technologies. Among the most notable was a recommendation for the New Hampshire Department of Energy to create a public review of how bitcoin mining operations might be integrated into a statewide energy plan. They cited “positive impacts for the electricity system, including contributing to a more stable electricity grid, more sustainable generation projects, and lower costs for consumers generally,” as reasoning for this recommendation.
The Commission also explained that “such a review should include a focus on how New Hampshire law might enable ‘inside-the-fence’ arrangements that would support the development of renewable energy projects within New Hampshire.” Interestingly, in spite of controversy surrounding crypto mining’s energy consumption, the Commission noted that they learned from experts that “the interruptible nature of Bitcoin mining’s electricity demand may offer stabilizing benefits to electricity grids and encourage the development of new energy resources including renewables.”
The Need for Informed Policy Makers
Another key emphasis of the report was the need for educating the public – particularly policymakers – in order to craft policy that is both productive and protective. In fact, the report didn’t shy away from acknowledging the potential for fraud, but notes that this isn’t unique to digital assets and blockchain technology.
Ardinger writes in the opening of the report: “[A]pplications of these technologies in real life, with real people, are subject to the same human frailties (greed, jealousy, arrogance, ignorance, incompetence, carelessness, naivete) that have plagued human communities for centuries; and for which an enormous body of laws has been developed over centuries…to address abuses through a comprehensive system of legal incentives, costs and penalties.”
As such, the commission stressed the importance of educating policymakers and equipping them with a thorough understanding of the activity that is potentially subject to regulation. “Because these new technologies are very specialized and complex, very few policymakers are likely to have the necessary knowledge to develop legal rules that properly balance conflicting goals of society,” the report noted.
Similarly, there exists a great need to educate consumers, local investors, and the public at large. Part of this includes developing a culture that supports complete transparency and disclosure regarding the risks of investing in any crypto-asset, the report said.
Ardinger likened it to the early years of the internet and computer network technology, which were difficult to understand at first, but people eventually learned to adapt. Today, there’s no denying that the internet has fundamentally changed our lives.
The same thing is happening with digital assets and blockchain right now. In an interview with NH Business Review, Ardinger said: “I doubt this blockchain technology will be done in a year or two years. The most utopian, confident supporters of this technology have to admit that right now it’s clunky, just like the original internet was.”
The Bottom Line
The small state of New Hampshire could end up leading the way for Bitcoin adoption across the country if it continues its current trajectory and its legislature follows through with the commission’s recommendations. While a great deal of uncertainty still remains, Minecheck applauds New Hampshire’s continued efforts to support financial innovation and become the leading jurisdiction for the development of sound and effective applications of blockchain technologies.