USA Law and Practice Contributed by: Gregory Strong, Sarah W. Chen, Brian Farber and Amil Sumaiya Malik, Cahill Gordon & Reindel LLP
As discussed in 1.1.1 Evolution of Uses of Block- chain , the current regulatory posture reflects a greater willingness to provide clarity and support innovation, while continuing to pursue enforcement where con- duct falls within existing statutory frameworks. With respect to blockchain technology used with- out crypto-assets, there is no dedicated regulatory framework. Its use is governed through existing legal regimes – including those relating to outsourcing, operational risk, cybersecurity and third-party service providers – under a technology-neutral approach. Data privacy laws are enacted at the state level in the USA. There are differing obligations in each state with respect to data privacy. Practically speaking, this means that companies with a national footprint will seek to comply with the most robust state-level data privacy law. The California Consumer Privacy Act (CCPA) is one of the most robust state data privacy laws, and became effective in 2020. Among other things, the CCPA provides consumers with the following rights: • the right to access data collected about them by covered businesses; • the right to delete that data; and • the right to opt out of data collection altogether. Covered businesses also need to provide consumers with a privacy notice, with two or more methods to opt out of the sale of personal information, and are pro- hibited from using opt-out mechanisms that make it difficult for a consumer to execute and have the effect of subverting the consumer’s choice to opt out. The CCPA does not directly implicate blockchain, but any covered business using blockchain to gather, store or refer to customer information should have compliance with the CCPA in mind. These requirements can create tension with certain features of blockchain systems – particularly immutability – where deleting or modify- ing data may not be feasible, requiring firms to adopt architectural or compliance-based workarounds (such as off-chain storage or data minimisation). Similar data protection laws have been passed in oth- er states including Virginia, Connecticut, Texas and
• tokenised real world assets; • payments; • trade finance; • logistics and tracking goods; and • self-sovereign identity. 1.1.2 Regulatory Sandbox
There are currently no regulatory sandbox pro- grammes in the USA specifically geared towards blockchain projects at the federal level. However, the SEC Crypto Task Force has indicated that it is evalu- ating whether to develop sandbox-type frameworks or other forms of tailored regulatory relief for limited, experimental blockchain and tokenisation use cases. At the state level, several states – including Wyoming and Utah – have implemented regulatory sandbox programmes that expressly permit testing of block- chain-based products and services under modified regulatory requirements. Other states, such as Arizo- na, Kentucky, Florida, West Virginia and Nevada, have adopted broader sandbox frameworks for emerging technologies generally. 1.1.3 Regulation of Blockchain Technology There is not yet a single, comprehensive regulatory regime applicable to market participants using block- chain technology or digital assets. Instead, a variety of traditional regulatory regimes may apply depending on the activities and the relevant facts and circum- stances. Recent legislative developments – particularly the passage of the GENIUS Act, which establishes a fed- eral framework for payment stablecoins, and ongo- ing efforts in Congress to advance broader market structure legislation – indicate that a more defined federal regulatory framework is beginning to take shape. At the same time, US regulators continue to exercise oversight through existing authorities, reflect- ing an approach that seeks to balance innovation with risk mitigation rather than prohibit blockchain-based activity outright. For an overview of the regulatory agencies in the USA that are relevant to the use of blockchain technology or digital assets, please refer to 2.1 Regulators and International Alignment .
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