New legislation could cause Bitcoin major problems in the US
The US Senate’s LAED Act could put a de facto end to Bitcoin use in the US
Last week, a bill was introduced by three Republican Senators called the Lawful Access to Encrypted Data Act of 2020 (LAED). The bill would allow law enforcers to access encrypted data, leading to a potential attack on data encryption. This could also lead to an impact on cryptocurrencies as they use cryptography encryption.
In addition to cryptos, popular encrypted messaging services like WhatsApp, and fully encrypted devices would be required to build a way for the US government to read encrypted data, leading to concerns that a ‘backdoor’ to encrypted devices would make hacking attempts easier.
The effects of the LAED bill would be felt strongly in companies that handle cryptocurrencies. Offshore destinations would likely benefit, as a US law will be unable to end crypto development globally.
What is the LAED act?
In simple terms, the LAED act would be a de facto ban on any technology with encryption that would block the US Government from having oversight. It would also effectively ban the production and development of encrypted devices that could not be accessed by law enforcement.
The ban would include any devices with storage greater than 1GB, ranging from smartphones to computers, or virtually any devices that could hold a hard drive. For a product or service to exist in the US, the company behind it must help law enforcement decrypt the data in its most legible form when asked by the US government.
Bitcoin and other cryptocurrencies may be hit
This new bill could spell trouble for cryptocurrencies and their investors. As decentralised currencies such as Bitcoin have no single individual or a governance body to regulate them, it would be impossible to meet the demands of the LAED act.
Of course, Bitcoin ownership is difficult to track, which makes enforcement more difficult. Workarounds like a VPN would also help crypto owners skirt the law, and make it much harder to establish a chain-of-custody.
A knock to decentralised development in the USA
If the LAED act were to pass into law, it is fair to expect that a majority of upcoming and existing blockchain startups might take their business elsewhere. It would likely be cheaper to go overseas to a nation like Singapore, where compliance would be much easier.