WASHINGTON — Rep. Tom Emmer took to the idea of digital currency several years ago, saying it “appealed to the libertarian in me.”
Now, the Minnesota Republican wants to wake colleagues to the prospect of folks buying and selling — even giving to political campaigns — with intangible money backed by the full faith and credit of the cyberworld.
The plain-spoken, hockey-playing conservative from the small community of Delano has carved himself a niche with the high tech crowd in Congress. He co-chairs the bipartisan Congressional Blockchain Caucus. The caucus, according to its website, tries to keep the government up to speed on “blockchain technology” that drives cryptocurrency and Congress’ role in its development.
Its members believe “this technology will best evolve the same way the internet did; on its own.” Indeed, proponents such as Emmer believe cryptocurrency and blockchain could do to check-writing and cash what internet search engines did to the Encyclopedia Britannica.
“This is a disruptive force in the financial industry,” Emmer told the Star Tribune in an interview. “It has huge impact.”
Emmer said he “would love to see cryptocurrency treated as a currency” in a more universal sense. So he wants to make sure that it “is not overregulated so it drives people elsewhere” to other countries.
Emmer’s conversion to digital defender came after reading a book titled “The Age of Cryptocurrency.” He liked the idea of reevaluating “exchanges of value” based on digital agreements for which there was no hard currency.
He asked the Trump administration, and is now asking the Biden administration, to issue rules that describe how cryptocurrency will be treated for tax purposes. It currently can be seen as a currency, a commodity or a security. Emmer says his initial goal is “to do no harm” to a futuristic form of finance and computer processing.
Cryptocurrency relies on computing power racing to verify transactions across a decentralized network, or “blockchain,” meant to insure both security and anonymity. The digital currency is “mined” by those operating the computers and exchanged for goods and services between like-minded buyers and sellers. Bitcoin is the most familiar cryptocurrency, but there are others. So far, frequent up and down swings of tens of thousands of dollars per coin presently make bitcoin more of an investment tool than a means of payment.
Emmer has introduced a number of bills aimed at getting clearer definitions for classifying and taxing cryptocurrency. Without them, those who develop and participate in the technology can face taxation on multiple fronts. His Securities Clarity Act seeks to remove regulations that “hinder the progress of blockchain-based technologies.”
Blockchain technology that powers cryptocurrency also has applications that can improve financing, health care, agriculture and a host of other endeavors. Emmer says the technology can process mortgages several times faster than is currently available. Walmart uses private blockchain technology to instantly trace the path of perishable produce from farm to market.
Cryptocurrency emerged in large part from technologists who believed that people who wanted both digital tools and privacy needed those tools to have protections that were free of corporate and government influence. In the late 1980s and 90s, engineers, academics and software coders joined in the “cypherpunk” movement to drive that idea as the internet and digital gadgets became part of everyone’s lives, said Vivian Fang, who teaches a graduate course on bitcoin at the University of Minnesota.
“Topics discussed range from mathematics, cryptography, computer science, and even politics and philosophy,” Fang said. “The goal of this revolution is to protect cypherpunks and their interests from government interference and intervention. In other words, they want a virtual society with complete freedom. And of course, this society needs a decentralized currency.”
This was the libertarian piece that helped spark Emmer’s interest. Since then, his interest evolved to wider applications. In 2018, he offered legislation “to support blockchain technology and digital currencies.” In 2019, Emmer became ranking minority member on the House Financial Services Committee’s Task Force on Financial Technology.
During a 2020 hearing on the digital dollar, Emmer said he is looking for “ways the federal government can better utilize technology to increase efficiency and delivery of government services, and the concept of a centrally backed digital currency.”
That desire thrusts Emmer into a key debate: is government equipped to pick a winner among cryptocurrencies, or should it let many bloom and leave consumers to absorb the risk of choosing which to use? That validation battle is playing out in the market already as financial institutions develop ways for people to invest in digital currencies, such as via index funds, without owning them.
Emmer, the fourth ranking Republican in the House, has started accepting campaign contributions in cryptocurrency to raise awareness of the technology. Emmer’s congressional campaign has received dozens of deposits through a system called BitPay, a spokesman said.
Emmer said he wants to make cryptocurrency a “good force for change,” despite its anti-government connotations and some history of criminal abuse. For instance, the Silk Road online black market involved criminals hacking bitcoins from cryptocurrency companies and using them to pay for drug deals.
Experts say cryptocurrency’s usefulness as a generally accepted form of financial exchange awaits advances that overcome its complexity, stability and traceability.
Marketing professor Marat Bakpayev of the University of Minnesota Duluth studied the acceptance of cryptocurrency among consumers. Bakpayev says public acceptance is not there yet and will not be until currencies like bitcoin stabilize.
The recent purchase of $1.5 billion in bitcoin by entrepreneur Elon Musk, as well as Musk’s decision to accept bitcoin from buyers of his Tesla vehicles, moves cryptocurrency in the direction that Emmer envisions.
“More players joining the activity, that’s how [bitcoin] stabilizes,” Bakpayev said.
Fang agrees that more mainstream investors, such as Musk and Mass Mutual insurance, inspire trust in digital transactions. But the professor remains convinced that making cryptocurrency a ubiquitous form of national or international financial exchange depends on government backing, the very thing that cryptocurrency’s creators wanted to avoid.
In addition to figuring out how to classify, value and tax it, Emmer hopes the U.S. government will give developers of intangible money the innovative freedom to provide people fast, efficient and safe access to financial transactions.
“That,” the congressman believes, “is where the technology is headed.”
Jim Spencer • 202-662-7432