The comment period for the NY Department of Financial Services “BitLicense” proposed rules and regulations ends this Tuesday, October 21. The industry is intensely fixated on what this means and if it will become the Bitcoin regulatory structure for NY and around the US. Superintendent Ben Lawsky spoke at Cardozo Law School last Tuesday and said a second BitLicense proposal from DFS is in the works, which would start the comment process all over again. At the exact same time, the British Consulate hosted an event with Hedgeable welcoming Bitcoin startups to the UK. Elizabeth Stark and Austin Walne launched the NY Needs Bitcoin Initiative as one last push to get the community active in the debate. The most difficult detail the industry is grappling with is how to replace government regulation with industry developed technical solutions, when these technical solutions are still be the process of being developed. How to regulate with stifling innovation is the question.
Click on the headlines for links to the full stories.
Summary of Government Related Initiatives
While speaking at Cardozo Law School in New York on Tuesday, Superintendent Benjamin Lawsky clarified that Bitcoin developers and miners would not need a BitLicense. Good news. Furthermore, he revealed that the NYDFS would have a revised BitLicense draft up by the end of the month. While his rhetoric seemed positive, there is still not a technical solution that uses blockchain based technologies to meet reporting requirements or a solution to exempt startups or small businesses, which could stifle innovation.
Ross Ulbricht of Silk Road infamy was scheduled to face trial on November 10, 2014, but Judge Forrest has agreed to his request for a postponement. Drug trafficking and money laundering are just a few of the charges levelled against Ulbricht. Two weeks ago Judge Forrest rejected Ulbricht’s pre-trial motion to dismiss the charges, based on the claim that his Fourth Amendment privacy protections were violated when the FBI “hacked” Silk Road servers without a warrant. The judge ruled that Ulbricht did not sufficiently claim that the server belonged to him, and dismissed Ulbricht’s claim. The trial is now scheduled for January of 2015.
Summary of Industry Initiatives
While the media is fixated on highlighting the nefarious actors in Bitcoin, Chamber of Digital Commerce President, Perianne Boring, was interviewed on Bloomberg TV to talk about the legal issues Ross Ulbricht faces as his trial nears: “I think it’s unfortunate that our Constitutional rights are being decided upon legal technicalities…, but this is just the beginning of regulatory challenges for digital currency business.” See the full interview here.
Popular bitcoin arbitrage service, Bitcoin Trader, is reporting that they have been hacked and lost customer funds. Bitcoin Trader claims they held $2.2 million in customer’s funds on their website, but is unable to give an exact number of how much was actually lost. “All left to do now is to declare bankruptcy with the Panamanian authorities and to hand over all relevant files and information for further investigation,” said John Carley, the company’s owner. It is not clear what actually happened here, customer solvency concerns began being raised back in June leaving the door open for further investigation. Customers are filing criminal complaints.
Last week Coinbase announced that they hired John Collins, Senior Professional Staff Member of the Senate Homeland Security and Governmental Affairs Committee, to join their government affairs team. Collins was the key staffer who spearheaded the first Senate hearing on Bitcoin last November. This is a win for Coinbase, but a loss for the Bitcoin community who now has one less advocate working on the Hill.
Crowdfunding companies such as Kickstarter, and Indiegogo offer the ability for communities to invest in a project through a trusted third party. Utilizing blockchain technology companies such as Swarm, Koinify, and Lighthouse remove the trusted third party, allowing startups to offer digital currencies that act as shares for investors. Swarm, and Koinify have both raised $1 million in funding for startups that work on blockchain technology, while Lighthouse seeks to fund groups for Bitcoin core development, and lobbying efforts. Although this issue may be promising for decentralized funding, there are issues of legality for offering digital tokens of equity with the SEC. Legal issues aside, other companies such as Overstock and Reddit plan on offering similar style tokens to those who invest in their funding.
Tickets to the St. Petersburg’s Bitcoin Bowl went on sale last week in Bitcoin, but won’t be available in other currencies until the first of November. BitPay, bitcoin payment processor and event sponsor, is working to transform the Florida area into a Bitcoin hotspot by recruiting local merchants to accept bitcoin payments. BitPay also partnered with Traveling Coin to arrange their accommodations in bitcoin.
In American Enterprise Institute (AEI) publication, TechPolicyDaily, Bret Swanson outlines that the recent release of Apple Pay illustrates “that banking is ripe for disruption;” especially considering that “Dodd-Frank is dragging the banking industry into highly regulated arms of the government.” However, Swanson says that when Bitcoin is added to the mix, “big things will begin happening fast.” He further goes on to say that a “bit bank” is “coming.” This is significant because AEI is a powerful public policy think-tank in Washington, DC, and has not taken a stance on Bitcoin to date.
Popular Australian Bitcoin service, Living Room of Satoshi, recently announced its closure. The company’s quick end comes as a result of new Bitcoin tax regulations in Australia that essentially charges a Goods and Services Tax twice. The Australian Senate is currently investigating Bitcoin and it is possible that these tax laws will be repealed in the future; however, the unintentional consequences of applying taxes to Bitcoin without an understanding and appreciation for the technology are shaking the industry.
Bitflyer, a Japanese Bitcoin exchange, raised $236,000 from Barry Silbert’s Bitcoin Opportunity Corporation to extend its reach across the globe. Yuzo Kano, Bitflyer’s Founder and CEO says it looks to expand into more friendly regulatory markets such as Singapore, but, he added, “It will have to be somewhere favorable to bitcoin, so probably not the US.” Prime Minister Shinzo Abe of Japan has decided to take a more laissez-faire approach towards Bitcoin in their efforts to increase investment in Japanese companies. Larry Silbert believes that while the United States’ knowledge of Bitcoin is still in its infancy, “Japan will be a large market for bitcoin given the tech savvy, financially sophisticated population.”
BPCE, France’s second largest bank, announced a partnership with Twitter last week. The partnership will allow any French consumer, regardless of which bank they use, to tweet money without the recipient’s banking details being known. “Payment by tweets will be managed via the bank’s S-Money service, which allows money transfers via text message and relies on the credit-card industry’s data security standards.” This service has been enabled in Twitter for several months; however, the formal banking partnership illustrates a deeper move into the payment space.
“Japan is way ahead of other countries when it comes to cooperation between bitcoin operators and regulators, which you don’t see in the U.S., Europe or Singapore,” Yuzo Kano, Japan Authority of Digital Assets
Whether you love or hate Bitcoin, you should oppose the “BitLicense.” It impedes privacy & innovation. https://t.co/0NtcktLC1R
— EFF (@EFF) October 17, 2014