Topic: NY regulator memo: Notice of Inquiry on Virtual Currencies - page 3. (Read 14681 times)

You don't start dialogue with subpoenas. This is clearly an attack on bitcoin, an attemtp to drive bitcoin companies away

As innovative products emerge, it is critical to take steps that allow new technologies and industries to flourish, while also working to ensure that consumers and our national security remain protected.
...
As such, the Department of Financial Services (DFS) has launched an inquiry into the appropriate regulatory guidelines that it should put in place for virtual currencies.

Someone over at Hacker News said something very smart on this subject.  Quoted here in its entirety:
...1. Software using encryption is protected speech (http://en.wikipedia.org/wiki/Bernstein_v._United_States). Regulating bitcoin as in bitcoin the software would be a form of censorship.

2. Bitcoin uses many of the standard principles of cryptography we already use in e-commerce. Banning cryptography would have enormous consequences for the economy of the internet in general.

3. Banning or regulating p2p would cause an uproar.

4. If buying bitcoins in exchange for dollars is really exchanging a string of bits for money, then if this is banned or regulated, would it also ban buying software or other digital goods for money?

5. The regulations can't be too broad, but can't be too narrow. Would the laws restrict only bitcoin as a currency or other applications of bitcoin as well? If too broad, then they will unintentionally restrict other uses of bitcoin too. If too narrow, a new system will pop up again.

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You don't start dialogue with subpoenas.
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I spoke to a few of the served entities tonight, and I know a few of them aren't even operational yet. This is clearly an attempt to start a dialogue.

I am however worried for the likes of BitInstant because I believe they have been operating in NY without a license. I may be wrong about that. Otherwise people should have nothing to fret over.

Dear Benjamin Lawsky,

Transparency is a two-way street.

If you desire transparency of Bitcoin companies, please reveal:

1) When your central bank will stop printing money and debasing the currency used by millions of retirees for their savings.

2) Why nobody at HSBC was criminally charged with money laundering, despite their recent case which represented the largest money laundering scandal in history.

3) Whether you believe two consenting adults, in an allegedly free country, having been found guilty of no crime, have the right to do business privately between themselves.

Of course, you don't have to respond to these questions, and you won't. Yet, you'll force other people to respond to your questions with threats of theft (fines) and or kidnapping (imprisonment). How civilized.

Second, don't imagine you have jurisdiction to make meaningful impact on the use of virtual currency. Bitcoin, for example, being a decentralized global currency extends beyond any one U.S. state, and indeed beyond the U.S. itself.

In a way, bitcoin itself is not really a currency, or money, it's more like an idea for exchanging messages. Bitcoin is really a decentralized messaging system which relies on cryptography and proof-of-work to maintain integrity. Should exchanging messages in the form of "I owe you x amount" over a p2p network be regulated or be made illegal?

However, The fact that it's used as a form of currency is just an interpretation of what Bitcoin is. There can be other interpretations for what bitcoin-type system can be used for, for example Namecoin is used for name registrations. The judge declared that bitcoin is money by making an interpretation.
If anything, Bitcoin is just software. It will be very difficult to regulate.

1. Software using encryption is protected speech (http://en.wikipedia.org/wiki/Bernstein_v._United_States). Regulating bitcoin as in bitcoin the software would be a form of censorship.

2. Bitcoin uses many of the standard principles of cryptography we already use in e-commerce. Banning cryptography would have enormous consequences for the economy of the internet in general.

3. Banning or regulating p2p would cause an uproar.

4. If buying bitcoins in exchange for dollars is really exchanging a string of bits for money, then if this is banned or regulated, would it also ban buying software or other digital goods for money?

5. The regulations can't be too broad, but can't be too narrow. Would the laws restrict only bitcoin as a currency or other applications of bitcoin as well? If too broad, then they will unintentionally restrict other uses of bitcoin too. If too narrow, a new system will pop up again.

The foundation is welcome to begin by publishing accounts of all the BTC it scammed out of members of the community, and by separating the treasurer and the executive functions. Ideally five minutes after it quits posturing as if it had any sort of relevance whatsoever.

The gall of the MtGox-BFL pushers, incredible.

Ehhhh.... you and your country's national security - ever lasting excuse for anything; from dropping atomic bombs to fighting cryptography.

Montana & SC. New Mexico is sorta-kinda free of extra MSB registrations unless there's a "negotiable instrument" involved.

I'm not sure how many states still don't consider online doing businesses in their state to be regulated by their laws - but that's probably substantial, too. Still, unless you're going to discriminate by state (which is totally valid), the costs for getting all states' MSB licensing is quite a few million. Just for my little state of MI, it's >$500k in bonds and fees, >$500k for CA, and it's probably similar in other states.

There might be a transcript, but I don't know where. LTB makes its content available in an open source way, and I thought they mentioned someone making transcripts once...

Yes, you're correct about partnering with a licensed company as a cost effective option. That was one of the things discussed. There are a lot of cost saving considerations to be compliant which is what surprised me most. Like you I had the ballpark 1M dollar figure as the starting point. Actually, registering at the federal level is not so costly. From there a business would also need licensing for the 50 states, but there is more to that. For example, whether or not a state requires a license if a business is not physically located there can be different. Some states, at least two, if I can remember being Montana and New Mexico I think, don't require additional license.