While Wyoming is being cheered on for friendly crypto regulations, Illinois is driving away any chance of crypto innovation.
Illinois Senate Bill 1887 was introduced on Feb. 9. The Digital Property Protection and Law Enforcement Act in the state includes digital transactions and the execution of smart contracts. It notes “provisions concerning protection of digital property and contract rights, security interests, and service of process.”
Illinois and Wyoming Crypto Regulation Bills are Poles Apart
While the bill is still pending in the Senate Assignments Committee, some have identified its flaws. Drew Hinkes, Partner at K&L Gates and Adjunct Professor at NYU School of Law, called the crypto bill a ‘mess.’
He said, “This is a stunning reverse course for a state that was previously pro-innovation. Instead we now get possibly the most unworkable state law related to #crypto and #blockchain I’ve ever seen. A shocking turn of events for the #tech community in #illinois.”
However, he applauded the goal of safeguarding consumers. But, he criticizes the method to do so. He explained, “the manner in which it seeks to protect consumers is to require node operators, miners and validators to do impossible things, or things that create for themselves new criminal & civil liability at pain of fines/ fees.”
According to Hinkes, the Act would enable a court to order any acceptable blockchain transaction for digital property or the execution of a smart contract. It would mandate a blockchain network upon receipt of an order from the Attorney General or State’s Attorney, as per the professional. He underlined, “A court can order a blockchain transaction as a remedy for a lost private key if the owner loses the key or is dead & the key is unknown to the administrator, or order a blockchain transaction to refund a victim in case of fraud/mistake.”
The crypto bill in Illinois contrasts what was passed in the state of Wyoming. The region passed a law prohibiting the forced production of a private key which safeguards other state-granted rights and interests, including digital identities. However, Illinois allows a court to compel a blockchain transaction in response to a “valid request.” Hinkes noted that a secured party would not require a private key in this case.
US Struggles to Find a Sweet Spot
By enforcing tight regulations, the Securities and Exchange Commission (SEC) of the United States is clamping down on web3 businesses. Nevertheless, enforcement takes place as crypto bills remain pending in Congress.
Recently, the agency imposed a $30 million punishment on Kraken and ruled that its staking reward facilities must be shut down. The SEC also warned Paxos about potential legal action for breaking securities law.
Jake Chervinsky, Chief Policy Officer at Blockchain Association, believes the crypto action is an “overcorrection.”
While the executive believes this isn’t the end of crypto in the U.S., the damage could be real. He opined, “The agencies are causing real damage to some parts of the crypto space, primarily to U.S. firms that want a path to compliance and U.S. investors who want access to crypto products and services.”
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.