NH panel seeks to ‘separate the wheat from the chaff ’
Bill Ardinger, who heads up the tax practice group at Rath, Young and Pignatelli in Concord, chairs the Commission on Cryptocurrencies and Digital Assets, created by Governor Sununu in February to study and recommend policy dealing with a financial entity that is not well understood by most people.

A commission impaneled by Gov. Chris Sununu seeks to throw light on some of the mystery and misunderstanding of cryptocurrency, a seemingly murky medium of monetary exchange through a computer network.

In doing so, the commission’s chairman, Concord attorney Bill Ardinger, hopes the committee will recommend policies to the governor, Legislature and regulators that strike a balance between making New Hampshire crypto-friendly and crypto-cautious.

“Every regulator, every legislator, every executive branch official is really coming to the table with the same question: What are these things? How do they work? How can I invest in them?” said Ardinger, chair of the Commission on Cryptocurrencies and Digital Assets. “We’re starting first and foremost with what are the natures of these assets? And what is the status of commercialization efforts?”

For some 30 years, Ardinger has headed up the Tax Practice Group at Rath, Young and Pignatelli in Concord. In February, Sununu named him as chair of the 12-member committee, with instructions to develop “cryptocurrency and digital asset economies and appropriate regulatory regimes” for the state.

Even with its most simple definition, cryptocurrency can be baffling to people. It is an encrypted data string that denotes a unit of currency. It is monitored and organized by a peer-to-peer network called a blockchain, which also serves as a secure ledger of buying, selling and transferring the currency.

So, how can something that isn’t tangible, that isn’t tied to a standard of value, even have value?

“This crypto currency asset — digital currency — has a lot of similarities,” said Ardinger. “The asset is represented, not by a shiny rock as gold is, but by passwords and the private one that you keep on your computer or on a thumb drive.”

Among the best known examples of cryptocurrency are Bitcoin, Ethereum, XRP and Tether. Digital assets can also be non-fungible tokens, or NFTs.

Ardinger says he is in a good position as chair for two reasons: He comes to the task not fully understanding the world of digital financial assets, but he comes from a background of helping the state in the early 2000s create policy around trusts, a legal entity used to protect property and other assets that was also not fully understood in terms of its implications at the time.

Trusts weren’t fully understood then, as crypto isn’t fully understood now, said Ardinger.

He noted the recent revelations in the Panama Papers, the leak in 2016 of 11.5 million financial files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. The papers showed how the rich and powerful can exploit secretive offshore tax regimes and trusts. The papers revealed how Delaware, Nevada and Wyoming made it easy for corporations to create shell companies there to avoid higher taxes in their own states, basically creating a stateside version of the Cayman Islands, a well-known tax haven.

“When they looked around, they said, ‘Where are the jurisdictions where we might locate?’ And they said, ‘Let’s go to Wyoming or Nevada where regulation is so much less, and let’s not go to New Hampshire.’ In my view, that shows an exceptional policy balance,” said Ardinger. The policies he helped establish, he added, created a regulatory climate “that doesn’t invite into the New Hampshire stream of commerce potential actors who don’t have the best interests of the public at heart.”

He hopes he and the Commission can do the same for crypto.

Panel members

The commission is made up of the following members, per guidelines established by the governor:

• Kevin P.J. Scura, designee of the state Attorney General’s office

• Raeleen Blaisdell, state commissioner of the Bank Department designee

• State Sen. Gary Daniels (R-Milford), as recommended by the Senate president

• State Rep. Keith Ammon (R-New Boston), as recommended by the speaker of the House;

• Angela Strozewski, representative of the New Hampshire Bankers Association

• David Araujo, representative of the Cooperative Credit Union Association

• Andrew Schwab, member of the public appointed by the governor

• Nick Slaney, member of the public appointed by the governor

• Meltem Demirors, member of the public appointed by the governor

• Craig Stevens, member of the public appointed by the governor

• Matt Higginson, member of the public appointed by the governor.

Higginson, a partner at McKinsey & Company, recently replaced Vikram Mansharamani on the Commission. Mansharamani, a Lincoln investor and entrepreneur, is a Republican candidate for the U.S. Senate and resigned as a commission member. According to Ardinger, Mansharamani will continue to offer his insights to the board but not as a member.

Strozewski in April was appointed as executive vice president and chief operating officer of NH Mutual Bancorp, a shared service organization that provides services to Savings Bank of Walpole, Merrimack County Savings Bank and Meredith Village Savings Bank, as well as their sister organization NHTrust, a full-service trust and investment management firm.

Ammon is considered an expert on cryptocurrencies in the state Legislature. He is the lead sponsor of a bill — House Bill 1503 from this year’s session — that seeks to exempt the developer, seller or facilitator of the exchange of an open blockchain token from some state securities laws. To be exempt, the developer, seller or a person who facilitates the exchange of an open blockchain token must file with the secretary of state.

During its journey through the Legislature, an amendment was added to HB 1503 to require the use of American-made steel products in all public works projects where the state administers the contract and the contract involves at least $1 million in state funds.

That bill is currently awaiting action by the governor.

As of this writing, the Commission has met twice — once on April 1 to get to know each other and again on May 27 to receive some background information on the subject at hand.

Ardinger was scheduling another meeting in early June, where he plans to hear from a representative of the National Conference on State Legislatures on what other states might be doing about cryptocurrency regulation. Meetings are in person, with an online remote option for members, at the NH Department of Business and Economic Affairs offices in Concord.

He expects a commission website will be active soon that will include, among other features, links to meeting minutes and background information on cryptocurrencies, blockchains and the like.

The Commission, created in February, was given 180 days to do its work to make, as the governor said, “findings and determinations regarding the role and effectiveness of current state laws and regulations governing cryptocurrencies and other digital assets and the reasons why modifications and improvements to such laws and regulations are necessary.”

‘Something new here’

Ardinger is well aware of the suspicions associated with cryptocurrency. One critic is U.S. Sen. Elizabeth Warren, a Democrat from Massachusetts who has warned in media interviews that crypto exposes consumers to fraud.

Most recently, a group of pioneering technologists, computer scientists and software engineers wrote to congressional leaders and described cryptocurrencies as being “poorly suited for just about every purpose currently touted as a present or potential source of public benefit.” The more likely outcomes, they said, include “threats to national security through money laundering and ransomware attacks, financial stability risks from high price volatility, speculation and susceptibility to run risk, massive climate emissions from the proof-of-work technology utilized by some of the most widely traded cryptoassets, and investor risk from large-scale scams and other criminal financial activity.”

Last year, New Hampshire Democratic U.S. Sen. Maggie Hassan, a member of the Homeland Security and Governmental Affairs Committee, called on multiple federal agencies to address current aspects of the cryptocurrency market that allow for criminal usage. That action followed a cyberattack against the town of Peterborough, which resulted in the theft of $2.3 million in taxpayer dollars, almost all of which was converted into cryptocurrency, rendering it nearly impossible to recover.

On the other hand, Ardinger noted, investment giant Fidelity Investments has announced creation of a Digital Assets Account, which will allow individuals to have a portion of their retirement savings allocated to Bitcoin through their 401(k) plan.

“There’s something new here, and our job is to separate the wheat from the chaff in terms of what is new and useful,” said Ardinger.