What in the world is an NFT? How did a DAO nearly make off with an original copy of the U.S. Constitution? Why is Elon Musk tweeting about dog coins?
The crypto industry has exploded over the last couple years, leaving most of us scrambling to wrap our heads around the new innovations — not to mention the acronyms. What started with the invention of Bitcoin nearly 15 years ago has morphed into an entirely new ecosystem of products, services, and ways of doing business.
Montana leaders have a choice to make: either welcome crypto entrepreneurs or watch the economic activity generated by this fast growing industry move elsewhere.
One of the most exciting aspects of the crypto industry is the variety of investment and jobs it can bring. One example is cryptocurrency “miners”, who use super-fast computers to solve complex mathematical problems which verify transactions on the decentralized network, or blockchain, and receive lucrative cryptocurrency rewards for doing so. Neighbor states have become a hot spot in recent years for cryptocurrency mining, spurring job creation and significant investment in strengthening state power grids.
But in Montana, miners have been met by hostile regulators. Missoula County, for example, effectively ran cryptocurrency miners out of business with their punitive restrictions. And last year officials in Butte denied a massive solar project intended to power a large-scale cryptocurrency mining operation.
Two Missoula-based entrepreneurs recently announced a $1.9 billion cryptocurrency mining project just across the border in North Dakota, boasting they will operate with a carbon neutral footprint and create 100 good-paying jobs. One must wonder if Montana missed out on the economic activity from this project due to the state’s track record of unfriendly crypto regulations.
However, the economic potential of crypto extends far beyond cryptocurrency mining. Entrepreneurs are also leveraging blockchain technology to create uber-efficient systems of “smart contracts” that could upend whole sectors of our economy.
Take the Missoula Valley Internet Co-op, which is using blockchain technology to build decentralized internet networks where customers are incentivized to act as relays and facilitate internet traffic to their neighbors. Blockchain-based smart contract programs manage the whole system, automatically routing through the best connections and processing payments. Backers of the model contend that blockchain technology makes providing internet to rural communities faster and cheaper than traditional broadband.
Decentralized Finance, or “DeFi”, advocates say they too can use blockchain technology and smart contracts to create more efficient and accessible systems for traditional financial services like lending, banking, money transfers, investment trading, etc.
Despite the potential benefits, some states are targeting DeFi by forcing businesses to comply with rigid, old-school financial regulation or face lawsuits. The looming threat of misguided federal and state regulation also poses a major barrier to the growth of businesses built around blockchain-based smart contracts like the Missoula Valley Internet Co-op.
Wyoming has led the way in welcoming the crypto industry, updating their laws to allow new business models and attracting millions of dollars in investment to the state as a result. Other states are creating regulatory sandboxes, inviting crypto entrepreneurs to test new products and services in their market under more flexible regulation.
As other states compete to attract the growing crypto industry, Montana simply can’t afford to fall behind. Montana leaders should understand that unfriendly crypto regulations will simply mean entrepreneurs will move to states that are more welcoming. By affording this budding industry a light regulatory touch with flexibility for new ideas, Montana could become home to the next world changing innovation.
Kendall Cotton is the president and CEO of the Frontier Institute, a Helena think tank dedicated to breaking down government barriers so that all Montanans can thrive.
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