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Cryptocurrency to be regulated in Nebraska

Centralized cryptocurrency exchanges use "hot" wallets to facilitate transactions.
Centralized cryptocurrency exchanges use "hot" wallets to facilitate transactions.(Pexels (custom credit))
Updated: May. 26, 2021 at 9:58 PM CDT
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LINCOLN, Neb. (KOLN) - Nebraska Gov. Pete Ricketts approved legislation to allow the state to regulate cryptocurrencies.

According to UNL accountant professor, Dr. Steve Hegemann, cryptocurrencies are a digital substitute of the U.S. dollar that is not regulated by the federal government.

State lawmakers said allowing for regulations of cryptocurrency will make Nebraska more attractive for tech businesses.

Cryptocurrencies, including the most common one, Bitcoin, are relatively new.

They were established in 2009.

Dr. Steve Hegemann says this could be the first problem with cryptocurrency.

“Any time you try and regulate anything like that there’s always going to be unintended consequences that are just unforeseeable,” Hegemann said.

What Nebraska is doing is creating the Nebraska Financial Innovation Act. It essentially allows people to use cryptocurrency in the state and it’ll be regulated by the Nebraska Department of Banking and Financing.

Senator Mike Flood said in a statement this is a historic move by attracting investments and reimagining the way we do business. Accounting experts say there’s no specific answer in regulating it.

“I don’t know how you regulate something that changes value 40 percent in a week,” Hegemann said.

The value of any cryptocurrency is based on the demand at any given time, meaning it changes constantly.

Regulation would allow cryptocurrencies to be within United States banks, but they’ll require notices that these accounts will not be regulated by the FDIC.

“Most investments are insured. I don’t know how you do that with a cryptocurrency,” Hegemann said.

Nebraska regulates one form of currency, but adding cryptocurrencies would put that around 10,000 different kinds.

Dr. Hegemann is also wondering how investments will be insured with cryptocurrency.

The new legislation says cryptocurrency institutes will have federal deposit insurance.

“If your investment doesn’t pan out, you’re going to be in trouble. Big trouble,” Hegemann said.

Hegemann worked in New York City back in 2007. He said the way people borrow money to buy cryptocurrencies is concerning and looks very similar to what happened in 2007.

The new law will prohibit cryptocurrency institutes from lending out U.S. dollars.

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