Cryptocurrency fraud a 'call to action' for NH, commission says

Jan. 19—CONCORD — A massive fraud allegedly masterminded by cryptocurrency magnate Sam Bankman-Fried is a “call to action” for New Hampshire policymakers to update rules and laws covering the use of bitcoin and its alternatives, according to a new report.

In a 67-page report released Thursday, a 12-member commission appointed by Gov. Chris Sununu spelled out 12 specific steps that legislators and state agency heads should take to make New Hampshire more attractive for cryptocurrency investments while simultaneously doing a better job of protecting the public.

“This report is comprehensive and timely, providing specific recommendations that would establish New Hampshire as a leading jurisdiction for the development of sound and effective applications of blockchain technologies, including proposals to clarify current laws and to support law enforcement in its efforts to protect New Hampshire consumers and investors,” Sununu said in a statement.

Blockchain technology allows users to make encrypted transactions.

Chairman Bill Ardinger, a lawyer and lobbyist with extensive experience in taxation and finance law, said the commission met a dozen times with state and national experts on the topic.

In the midst of drafting its final report, Bankman-Fried, a founder of major cryptocurrency company, was charged with securities fraud, wire fraud, conspiracy, money laundering and violating campaign finance rules in connection with collapse of his company.

Prosecutors accuse Bankman-Fried of siphoning billions of dollars in digital currency from customers and investors and using it to prop up his affiliated hedge fund, Alameda Research.

He entered pleas of not guilty to all charges on Jan. 3.

The global value of cryptocurrencies has fallen from about $3 trillion in November 2021 to about $850 billion currently, according to the commission.

“It is safe to say that many of the same human frailties that led to the myriad of other human speculative boom and bust cycles will turn out to be present at the core of the current Crypto industry uncertainty,” Ardinger wrote in his introduction to the commission’s report.

Need for regulation

In fact, Ardinger said a lack of robust regulation at the federal and state levels likely contributed to the extent of the alleged fraud.

“Indeed, certain aspects of these technologies, including some of the aspects that make them potentially useful and important, may also render them particularly effective vehicles for fraud, although that behavior is not unique to these technologies,” he said.

The report states the current level of oversight of cryptocurrencies in New Hampshire is “unclear and therefore unsatisfactory.”

“But this uncertainty is no reason to fail to pursue necessary clarification; in fact, it is a strong call to action by policymakers,” the commission concluded.

Steps recommended by the commission include:

—Creating a “blockchain dispute docket” in the Superior Court to handle legal fights over the value of crypto assets.

—Enacting legislation providing both transparency and limited liability to decentralized autonomous organizations that trade in these currencies.

—Making clear that these cryptocurrency traders would be eligible for business tax breaks that are available to “qualified investment companies” under current law.

—Establishing a Blockchain Quality Assurance Center at the University of New Hampshire Interoperability Laboratory.

—Enhancing existing communications infrastructure in the state to improve access to cryptocurrency within state borders.

—Improving law enforcement training in this emerging field to better protect the public against fraud and scams.

A state law (HB 1503) that took effect in June, authored by Rep. Keith Ammon, R-New Boston, exempts the sellers of open blockchain tokens from certain securities laws.

Sununu signed an executive order creating the crypto review commission. The panel included Ammon, state agency heads and financial industry executives.