Topic: The Warm Fuzzy Feeling Of Too Much Regulation (Read 472 times)

I have a gut feeling that people are stupid and a lot is coming from institutions bringing their BTC back in house so they can say "see we have it, it does exist, and it's not where other people can get to it"

In the end it probably does not matter, there were people putting money into a lot of things both crypto and non crypto that were obviously going to fail. There are people who keep more money then they should in unsafe ways. Lets face it, that box in the attic is safe, well except for fire, water damage, theft, depending on where you are animals nesting in it, but yes people still tell me it's safe.

-Dave

Pretty astonishing that the monetary system of entire nations is so fragile that they have to make it illegal to even suggest that people should own their own money.

I'm not sure so much that we are used to it, but more that the vast majority of people do not understand how banks function. I would bet that >90% of people couldn't explain fractional reserve banking and don't know that when you take out a loan from a bank that is brand new money being created out of nothing and entering circulation.

Bitcoin is different. But centralized exchanges are essentially banks, but without following any regulations or laws.

This is truely the amazing part: with banks, we're completely used to them being insolvent. In my country, it's actually illegal to call for a bank run! You can get up to 4 years in prison if you publicly suggest many people to take "their own" money from the bank. And even worse, even if you can get your money out, all you get is some piece of paper that came out of BRRR.
So we're completely used to banks not having any money. Bitcoin was supposed to be different. The last part is still true: Bitcoin is different. But many users seem to want the same.

Probably, but those figures are still net change. So any new deposits are being cancelled out and more by withdrawals.

Not sure such data exists, but I suppose you could trawl through some Binance or Coinbase withdrawal transactions and see the general trend. I would imagine it would be a mix of both.

It's the amount on the blockchain. If you click on the link on the tweet I shared above, it directs you to the glassnode page where they explain their methodology:


They of course wouldn't be able to have data on how much is in all the accounts on an exchange unless the exchange chose to share those data, and of course no exchange is going to share data which show them to be insolvent.

I saw myself withdraw everything that isn't locked in open trades. I like to keep my small-scale price speculation going.

Wait, what are we looking at here? The graph shows there's about 2.25 million Bitcoin on exchanges. Yesterday, listening to the Cryptocast on the radio, they said FTX had about 18 thousand Bitcoin in user balances, but they didn't have any Bitcoin left to cover them. So this 2.25 million Bitcoin: is that the amount found on the blockchain on addresses known to belong to exchanges? Or is it the amount in all user accounts on those exchanges? Because those two are not necessarily the same! If they have 2.25 million Bitcoin on-chain, it could very well be customers have 3 million "Bitcoins" in their accounts. Or 30 million "Bitcoins".

I'm pretty sure the ones who lost money learned from it, but there are about 8 billion others who haven't lost any money yet. So they haven't learned it "the hard way", and should ideally learn from someone else's mistakes. As they say: "Those who cannot remember the past are condemned to repeat it".

The thing I am looking for about the outflows is, is it 500 individuals pulling out their 0.5BTC or 1 major institution puling out 250BTC?
Same result for the amount moving out, but the way it happens matters.
Also, allowing for shipping and delivery and setup and everything else, how many of those sold hardware wallets are in use?

Individually here we are a small microcosm of the BTC world. I would also like to think that overall as a group we do know more and we try to convince our friends to know more. But, once we get away from that I just can't get a feel for who is doing what.

-Dave

Which is great to see but other exchanges have probably had a influx of new users signing up and depositing money on their exchange. I would love to see more people convert to hardware wallets and take control but I do not think the majority of people will learn their lesson from this. This will be forgotten about in a years time and only referenced in history and in the next couple of years another exchange will go down and we will go through the same cycle every time. Maybe I am pessimistic in peoples ability to learn from their mistakes but this has happened how many times in the past and we are still talking about custodial and non custodial like it is a new concept.

I've never had any funds on centralized exchanges to begin with, so nothing to withdraw. The people I know locally who are involved in bitcoin are people I trade peer to peer with, so we rarely (or indeed never) talk about centralized exchanges. So I suppose the best I can go on is the general feeling on here and on Reddit, and the reports/data about what is happening.

Trezor report a surge in sales of 300% since FTX collapsed: https://cointelegraph.com/news/trezor-reports-300-surge-in-sales-revenue-due-to-ftx-contagion
Large outflows of bitcoin from centralized exchanges, with the amount being stored on centralized exchanges now at the lowest since early 2018: https://nitter.it/glassnode/status/1591943265296998400

So, here we are 3 months later and a really good implosion later. Anybody have any other views?

I still don't have any real funds that I need / count on stored in any exchanges.

At the moment I do have 1.5ETH sitting in coinbase that was paid to me as part of a debt, that I never thought I was getting paid back on so if it goes away I am no worse off then a month ago, I'm waiting for an increase in price have a sell in at $1515 before trading it to BTC and puling it out. But if it was sent to me in some sketchy (IMO) exchange I would have pulled it out in a minute.

But beyond that, probably under $50 total.*

Anybody else seeing anything else. You HEAR about the people pulling funds out, you HEAR about the spike in hardware wallet sales. Is anyone seeing people actually doing it?

-Dave

*Also, I do have a bunch in Gemini from their credit card rewards, but it's not being pulled out for tax reasons will fix that Jan 2nd....

There are actually quite a few banks that don't have FDIC insurance (or the version that credit unions use). They tend to offer better rates on savings / CDs and worse on loans. They also offer loans / other products to people that the FDIC would not allow. Most of them are small and do fail, but they are out there.


Which is done when you want to harvest someones organs for transplant.
It happened a lot in the .com meltdown. The salvageable loans were sold to other banks the bad loans were sold to debt collectors. People with checking / savings / whatever in the bank were getting paid from those funds and then insurance paid out on the rest. BUT that process could take a while so the bank was still operating.
Due to the number of bad loans and everything else that could not happen in 2008.

As a rule banks are stronger now due to tightened regulations by many regulators and oddly enough for the larger ones, the shareholders. The larger more stable investors in banks want long term stable profits, not quick in and out hits. Even if with inflation they are 'loosing' money only making 3.5% dividends per year people want that to be stable. There are more then enough high risk involvements out there that may or may not pay better.

-Dave

10 years ago I might have agreed with you, that the average person isn't going to leave their hard earned money with an uninsured third party with absolutely no ownership rights or no guarantee of getting it back. Then crypto came along, and with that the rise of centralized exchanges, lending platforms, and web wallets, doing exactly that to the tune of hundreds of billions of dollars. All you have to do is totally promise to pay some interest and people will trust you with their money. Insurance is unnecessary for the majority.

Insert quote about if people understood fiat they would revolt.

Why doing BRRR again (that never stopped or slowed down) when they are already working on CBDC that would ''fix'' all the ''problems'' they had with current fiat currencies?
Remove cash, track and trace everything people are doing, automatic tax reduction, send people digital money with expiration dates, etc.
I think all this circus we see in the world for last few years is connected with this.

They did a bail-in in Cyprus in 2013. People complained, so I don't think they'll do that again. Instead, they just went full BRRR and now take much more money through inflation than they ever could from a bail-in.

It more and more feels like fiat money itself is a scam.

Something like that already happened not long ago in 2008 but they had bailout, that is like putting dead patient on ventilator and keeping him alive artificially.
They won't and can't keep doing things like this anymore, so it's just a matter of them for history to repeat itself but with much worse results.

Or they will just take away all your property.
Combination of money printing, huge inflation or hyperinflation and rising prices will make paying taxes, debt and everything else much harder for regular people.
I don't know why else would IRS hire 87000 new IRS agents and teach them to user deadly force 

I assume it will be the same as the bailouts: if tax payers can't pay for it, government debt will just go up and printer goes BRRR. That just means the value of your fiat drops more, but you'll get back the same amount.

That makes me think the "insured amounts" aren't there to protect citizens, it's meant to protect the banks. Without that guarantee, banks wouldn't be trusted.

Which does bring up the point of differences in regulations. Here the FDIC does make sure the bank is stable to some degree. Which is why many times they will step in and close a bank that to outsiders DOES look like all is well and they have enough financial backing. But in reality it was all smoke and mirrors. If enough major banks fail then yes it would be a shitshow, but if Chase / BoA / Citi and so on all started to implode at once there is probably something bigger going on. Keep in mind that even in the 2008 meltdown nobody lost insured money.

IIRC there were people elsewhere whos banking insurance did not cover all losses.

-Dave

In this case, all things being equal, I would choose the least regulated.


In certain countries this guarantee serves the same purpose as WC paper, because if a major bank were to fail, governments would not have the funds to pay everyone. Although I suppose that at EU level if that were to happen some maneuver would be to put accounting entries for such amounts with restrictions on withdrawals and transfers.


I don't trust them, but I try to adapt to their game.


Well, I'll tell you a few. The most recent one that comes to my mind is the regulations on gambling, and the obligation for licensed houses to offer responsible gambling features.

Does anyone believe that the gambling industry would regulate itself in a way that would be beneficial to society if the authorities were not on its back? I don't think so, and in general I am not very much in favor of regulations and taxes, which usually go hand in hand.

But going back a little further, not too far in historical times, the regulations that banned child labor or those that legalized the right to strike seem to me to be good examples.

My point is that I'm willing to do business, exert effort, expand it, comply with regulatory bodies, and so on, but if there are certain countries which are too hard to please and require too much, I'd be more than willing to let go of that prospect and focus my money and effort somewhere else.

Look at Binance, the most licensed crypto exchange in the world. I guess they're also the most investigated and also the most that is ordered to stop operating. It seems they try to negotiate but if the other party is too stern, they pack up and leave, go to other countries and strike a deal.

In terms of business, it oftentimes takes two to tango. Too tight regulatory policies would discourage and keep investors away. Instead of them trying to comply, they'd rather not. So the authorities will have to loosen up a bit and attract them.

That's not good business.
Good business is looking at doing something and seeing if the time & effort & expense is going to generate more money then not doing it.
If you are going to do things based 'to hell with them' you will fail. Because sooner or later everyone will do something that will annoy you.
As a consumer I could be one of your better customers and sooner or later I will do something to piss you off / cost you time or extra effort or money. Do you drop me as a customer because of that? The ONLY answer in business should be only if that the time, effort, money is more then me being a customer has generated and will generate.

-Dave

I might think that it's not really a big deal and would user either of the two. After all, both of them were around for years and has built a good reputation. But if I'm residing in a particular state/country where only one of them is licensed, I'd immediately go for whichever is available.

The key word here is avoiding. But it does not immediately mean that the avoiding exchange is hiding something. Avoidance doesn't automatically signify skeletons in the closet; it could simply mean doing away with all those regulatory hassles. If I were an exchange myself, I think I'd be satisfied operating in some states/countries that are more open and avoid unnecessary headaches in complying extensive requirements from other states/countries. To hell with them!

I was going to end that post with "Be your own bank," but it just sounded so cliché.   

Exchanges want to make money. They do that by attracting more customers. The more places they operate in, the more customers they can attract. So to choose not to operate in some jurisdictions they must have come to the conclusion that either 1) it would cost them more (time, money, effort, staffing, infrastructure, etc.) to meet all the regulations required than they would gain back from users in that jurisdiction, or 2) they cannot comply with the necessary regulations at all. Number 1 is fine - lots of companies don't operate in lots of places for this exact reason. Number 2 is less fine, and suggests that at best there is something they are doing which is less than ideal, and at worst outright illegal in that jurisdiction.

I don't either for most things. But I also trust FDIC insurance on a fiat bank a whole lot more than I trust some random two bit crypto exchange.

That's easy! You choose bitcoin.

It's a fascinating question, and timely in a sense.  The question can really be distilled to simply this: "Do you trust financial institutions more than government regulators?"

Obviously that's a loaded question that requires some background before it can be answered; i.e. which financial institution, and which government?  The government of the most successful country on the planet is nothing but a collection of people who are all subject to corruption and hunger for power.  Even if there are regulations in place to curb corruption, there are plenty of opportunities for the corrupt to cheat the system.

Do I trust banks?  Yes, I do.  Why?  Because they're existence is focused on one thing; making money.  No matter how they advertise their service, no matter what incentives they offer their clients, no matter how many free pens they've given me their reason for existence is transparent.  Pure and simple.

Do I trust governments?  No, I don't.  Why?  For the very same reasons; their goals aren't known, they are not transparent, and their regulations are often meant to serve a purpose other than what they claim.  When was the last time a government regulation actually affected a cause as it was advertised?  It's been my experience that the more regulations a government puts in place to "protect the people" the more likely those regulation will actually protect said government's authority and income.

Now, having said all that; what way to choose when the banks and the governments are in cahoots?  It's a complicated world we live in.

The question is highly subjective depending upon the location of the user. I am from India and as of now, there is no specific law for the crypto exchanges here. They are working in the status of ambiguity, fulfilling the general rules laid down by the central bank for the companies involved in financial services. So, for me the reputation and user-trustworthiness play more importance than number of license or pan-US approval in determining the genuinity of the exchange.

I am fine using the international exchanges working from the small-island countries or not providing services in certain locations to avoid stringent regulations as long as I know that they are not explicitly illegal in my country and users put great trust in those.

The other thing that banks appear to do when encroached by too much regulation is either expand on compliance (which then gets aggressive on KYC, leading up to high incidence of false positives) -- think of PayPal when it was teething in regulations or in jurisdictions where they weren't sure of their footing: constant blocks, account freezes, to the point it was pointless as an instant online payment method.

And in the case of exchanges who probably can't afford or justify compliance expansion, then the obvious route is de-risking -- think of them just closing customer accounts or refusing certain transactions on blanket red flags.

Actually I feel that too much regulation is enroaching.

For example, exchanges are required to have a certain amount of regulation, but some go a bit too far and willingly sell you out to devs for some innocent-looking action such as failing KYC, or even without your knowledge under the guise of "suspicious behavior" (you know which one I'm referring to).

With that logic, pretty much everyone whose not 100% normal has some kind of "suspicious behavior".

As for the license in NY, it seems to me that they have very strict requirements and that many crypto companies avoid them, so I don't see why Stike would be an exception in that case, considering that they are not only available in NY and Hawaii when it comes to US. I don't think this is a reason to distrust a company in the sense that that company is hiding something or that it is more risky than other similar companies.


Of course, the average person mostly bases his trust in someone or something in relation to how far the laws of a country support it in the sense that they say it is good or safe. If the central bank and various financial agencies in a country have an extremely negative attitude towards Bitcoin, this is largely reflected in the majority of people when it comes to their attitude towards Bitcoin.


If both exchanges were similar in what they offer (fees, liquidity, KYC), it would be logical to choose the one that can meet higher standards. in the sense that this exchange is safer from possible hacking and that they have insurance with which they can indemnify clients in the event of the same.

So, expanding the question a bit. Do you think the 'larger well known' exchanges that don't go for the more stringent checks are lazy, or are they lying about something or something else?

I know I said above I don't get a vote, but I would put it under lying about financial stability. I think a lot of these places like to brag how much they do / how large they are and it's not 100% true.


Which does bring up an interesting point about technology. Every once in a while it does not work like it's supposed to.
So, I guess having a more regulated / insured place may actually be good.
I extensively rely on my web browser to let me know when I have misspellings; I can't access here directly from a lot of clients so I am usually remotely on my home or office machine, so it can be a little tough to spell / grammar check with my eyes so to speak due to the screen size downsizing. But a red squiggly line under words is very obvious. However, every once in a while spell check takes a quick vacation.

-Dave

I'm probably the wrong person to answer here since I would never actually use either centralized platform, but putting that aside for a minute then I'm choosing Exchange 1.

If I use a centralized exchange or platform to hold my bitcoin, issue me a card, and convert my bitcoin on the fly so I can use my card to pay in fiat, then I know that:

• 1) I am entirely dependent on that platform for the security of all my coins, and if the platform goes bankrupt, scams, makes bad loans, has questionable employees, etc., then I will lose all my coins
• 2) I will have to complete KYC and therefore I am trusting that platform not to leak or sell my information
• 3) I will have absolutely zero financial privacy from that platform

Given that that is the starting point of using any such platform, then I would obviously choose the one which had passed the more stringent checks and obtained the more strict licenses. No point giving up all the benefits of decentralization and yet receiving none of the benefits of fiat bank regulation/insurance/etc. Just look at how that turned out for Celsius, Voyager, and others.

It will be like Coinbase versus Binance, one that you know where it operates and where it is located and the other one operates either from Malta or Bahamas or somewhere where CZ seems fit to run. Which answers the second row of questions about feeling safer and usage as a simple poll between the two of them here will probably come with 99% for Binance as it's SAFU! I'm pretty sure an overall majority of users don't care about that, they've never read the ToS, they actually don't know anything about the company before depositing money but they go with the wave.

As for myself, I won't trust any exchange no matter the licenses it has with more than a few bucks and I still feel uneasiness when I'm forced to send a larger sum to exchange to either sell or buy coins, a feeling that goes away only when the coins are in my pocket and yeah when the fiat is in my bank account as at least that's, as Loycev covered. The money or coins on an exchange are not covered by anything, no matter the age and the reputation.

It depends. Let's take banks for example: I don't trust them, but they're regulated and government guarantees they'll pay back deposits up to €100,000 if they go bankrupt. That government guarantee means it doesn't really matter if the bank is stable or not. As a consumer, that's easy, and I already know I have no privacy with banks anyway.

I wouldn't trust an exchange that can't spell "Exchange", so both are disqualified.
Jokes aside: I do use regulated exchanges that have been around for years, and I feel pretty safe doing so. I'd love to see a totally anonymous exchange with only a .onion domain and a very good reputation, but unfortunately I don't know any of those. The "less regulated" exchanges I know usually don't have a very good reputation, and worse, many anonymous exchange sites still ask people for their documents, which makes them much worse than the regulated exchange.

Had an interesting conversation last night about Strike's new Visa card: https://bitcointalksearch.org/topic/jack-mallers-strike-lightning-network-app-will-offer-visa-card-5409623

Some basic info:
1) Strike does not operate in NY
2) The person I was talking to is not in NY or any other area that Strike does not operate.

The conversation was more about LN then anything else, but they basically said:

"Strike, is not a offshore crap exchange, and they TRY to make it look like they are a real financially stable company. But, if they can't be bothered getting a bitlicense in NY then either they are not as stable as they claim to be or they are doing something funky that they don't want others to see or they are much smaller then they are showing to be or any combination of the above. No way would I trust an company that claims to have all this backing and support and does not want to operate in NY. They have something to hide"

Now the above is obviously not 100% verbatim what was said, but he did bring up an interesting point. Taking everything else off the table, do people think more regulations / scrutiny of places give people a more secure feeling about them then those that don't.

If there were 2 major players say DaveExcange 1 and DaveExchnange 2 the 1st operated in most states / countries the 2nd was avoiding the ones that required more licensing and financial checks. But outside of that they were both around for years had a good reputation and so on.
Would you feel safer using one over the other?
And the fact that the other one did not operate in places that had more extensive checks / regulations make you less likely to use it?

I'm in NY so I don't get a vote here so to speak, I just never really heard people wanting it before but after sleeping on it I do see the appeal.

-Dave