GHash.io agrees to cap its hashrate at a recent mining Summit. A New Hampshire gubernatorial candidate believes in the blockchain’s ability to improve voting processes. And one World Bank official suggests that bitcoin is a “naturally occurring” Ponzi scheme. But all eyes are on New York and future gubernatorial candidate Ben Lawsky, who just finally unveiled a strict first draft of his department’s BitLicense proposals…
Folks, those of you who have been reading for a while know I’m pretty passionate about bitcoin and wear my heart on my sleeve. The new BitLicense regs have gotten me pretty angry, so rather than rant counterproductively, I’m going to hit the pause button, collect my thoughts over the next 24 hours and gear up for political battle over the next 45 days.
For today though, I’m thrilled to have Marco Santori, an attorney at Nesenoff & Miltenberg in New York and Regulatory Affairs Committee Chairman at the Bitcoin Foundation (someone who’s pretty close to the action) write today’s guest post on the highlights of the 1.0 version of the BitLicense. Marco will undoubtedly be one of the key contributors to the dialog with NYSDFS over the course of the next six weeks. Here he is…
"Breaking Down the BitLicense" | Marco Santori, Regulatory Affairs Committee Chairman, The Bitcoin Foundation
Hi everyone. I’m Marco Santori. For those of you who don’t know me, I’m a lawyer here in New York City. About 90% of my practice is digital currency clients. My team represents some of the biggest names in crypto, and even more of the littlest names I hope you’ll all have to learn one day. I am also Chairman of the Bitcoin Foundation’s Regulatory Affairs Committee, but the thoughts in this post are my own, not those of the Foundation. Believe me, those are forthcoming.
You’ve likely felt the shockwaves of today’s seismic news: New York’s Department of Financial Services (DFS) has released proposed “BitLicense” regulations. Here is a quick rundown of some of the more interesting terms, along with my gut reactions – in no particular order and with very little filter.
Definition of Virtual Currency: “Virtual Currency” seems to include bitcoin and other convertible currencies, but specifically exclude WOW [World of Warcraft] gold and customer affinity points. Expectedly, there is no carve-out for coins used to track digital assets and there is no specific treatment of branded coins that are quasi-convertible.
Who Requires a License: Surprise! Everyone does. Direct purchasers and sellers, multi-sig wallet providers, merchant payment processors, custodial exchanges, hell, even local wallet software providers probably need one. Payment processors and payment networks all need licenses. Anyone who receives or transmits crypto as a business needs one. This is because the BitLicense language is even broader than the federal language, which only regulates those receiving and transmitting funds.
Identity Verification: If a BitLicense holder “opens an account” for a customer, then that firm must collect and retain the customer’s name and address, check the names against the OFAC SDN lists and retain that information for ten years. It’s difficult to know what “opens an account” means. Even if we figured that out, this is more than even traditional money transmitters are required to do.
Crypto is not a “Permissible Investment”: A BitLicense holder can only invest its earnings in: government securities, money market funds, insured CDs. No investing in Bitcoin. Strange – Moneygram is permitted to invest in dollars…
Full Reserve: A BitLicense holder may not lend or spend bitcoins that it is holding on its customers’ behalf. Those bitcoin “banks” out there promising returns on your “deposits” are going to be “felons”.
State-level AML Reporting: I’ve saved the best for last. NY is taking the first steps to create yet another anti-money laundering program. FinCEN – the federal regulator - already requires reporting cash transactions over $10k. Now, NY is requiring reporting to it for any crypto transactions over $10k. BitLicense holders must also file *state* Suspicious Activity Reports with NY, not just the ones required to file with FinCEN. I wonder how the boys at FinCEN feel about this.
There will be a 45-day comment period beginning on July 23rd. If you disagree with any of these proposals, you should submit comments. If there is anything you agree with, and are happy to see, you should submit comments. If there is anything you don’t understand, and so aren’t sure if you agree or disagree, guess what? You should submit comments. DFS is giving the industry an opportunity to engage in a dialogue that never existed when FinCEN and IRS published their famous virtual currency guidance. We should not ignore that opportunity.
If you’re looking for assistance or just want to talk crypto law, you can reach me at email@example.com.
Back to me…
There is much work to be done with this BitLicense proposal. It will be a defining bit of regulation for the industry, which means that the amount of constructive feedback and proactive effort needed from everyone in this industry must be nothing short of herculean if bitcoin is to evolve unencumbered in the US. This proposal simply cannot survive as is. So if you are an entrepreneur, investor or just general enthusiast, you better step up this summer. If we can make our case effectively, we should be able to keep the sane, legitimizing parts and scrap the stifling, unnecessary parts of the proposal.
Many more of my organized thoughts tomorrow…
Group to WatchCollege Crypto Network (@CollegeCrypto)
Back in February, CCN launched with three student chapters dedicated to promoting blockchain education and development at schools across the globe. Today they have 50 chapters, not to mention some serious corporate sponsors. If you are interested in sponsoring student bitcoin initiatives, let me know. I’m helping these kids fundraise because they are the real deal. Visittheir site
to learn how you can help or check them out at the North American Bitcoin Conference! Today’s Tid BitsGHash Commits to 40% Hashrate Cap at Bitcoin Mining Summithttp://www.coindesk.com/ghash-commits-40-hashrate-cap-bitcoin-mining-summit/
GHash.io organized a summit to address the threat of 51% attacks following CoinSummit’s London Conference. Peernova, KnCMiner, Spoondlies Teach, the Bitcoin Foundation, and other key members of the bitcoin community were all present. All parties agreed upon short term remedies to avoid a 51% attack, most notably GHash.io limiting its share of the bitcoin network to 39.99%. A long-term solution has not yet been put in place, but all summit attendees encouraged the bitcoin mining community, as a whole, to help find a solution to the 51% attack. TradeBlock Raises $2.8 Million From Andreessen Horowitz, Othershttp://blogs.wsj.com/moneybeat/2014/07/16/tradeblock-raises-2-8-million-from-andreessen-horowitz-others/
Online cryptocurrency data provider, TradeBlock has received $2.8 million in funding. The investment was lead by Andreessen Horowitz, but also included Barry Silbert, Devonshire Investors, and FinTech Collective. TradeBlock, which currently only has five employees, works on aggregating data, analyzing price data, and overall market research for its institutional client base. South Africa’s PayFast Incorporates Bitcoin as Payment Optionhttp://blogs.wsj.com/moneybeat/2014/07/17/south-africas-payfast-incorporates-bitcoin-as-payment-option/
Today, PayFast became the first payment processor in South Africa to offer bitcoin as a payment option. PayFast will be partnering with local digital currency exchange company, BitX, to help with bitcoin integration. PayFast has 30,000 merchant customers, who will now have the option to integrate bitcoin, which is currently PayFast’s cheapest payment method. Trucoin Opens MasterCard, Visa Bitcoin Buying Services in UShttp://www.coindesk.com/trucoin-opens-mastercard-visa-bitcoin-buying/
Residents of Florida, Massachusetts, Missouri, Montana, New Jersey, New Mexico, South Carolina, and Texas all now have access to Trucoin. The bitcoin brokerage provider has been attempting to provide services to the US market for three years, but first needed to meet federal and state-specific licensing requirements as a money service business (MSB). Trucoin claims to be “the fastest way to buy bitcoin,” and offers consumers MasterCard and Visa payment options, in an attempt to cater to the “average joe” bitcoin user. New Hampshire Politician Says Blockchain Tech Can be Used for Votinghttp://cointelegraph.com/news/112083/new-hampshire-politician-says-blockchain-tech-can-be-used-for-voting-taxes-should-be-paid-in-btc
Andrew Hemingway, a Republican, running for Governor of New Hampshire believes the technology of the blockchain should be used for political voting, in order to prevent voter fraud. Hemingway also supports allowing taxes to be paid in bitcoin. Hemingway is the first public political figure to come out and favor the idea of utilizing the blockchain for political voting.Low-Cost Wireless Carrier RingPlus Becomes First in US to Accept Bitcoinhttp://newsbtc.com/2014/07/16/low-cost-wireless-carrier-ringplus-becomes-first-us-accept-bitcoin/
RingPlus, a Los Angeles-based, low-cost wireless carrier, now accepts bitcoin, litecoin, and even dogecoin as payment methods for its cellular service. The wireless carrier has partnered with Santa Monica based GoCoin, to help integrate the three crypto-currencies as forms of payment. RingPlus is the first wireless carrier in the US to accept bitcoin. Sandman Hotel Group Accepts Bitcoin for Hotel Reservationshttp://finance.yahoo.com/news/sandman-hotel-group-accepts-bitcoin-162400894.html
Canadian Hospitality Company, Sandman Hotel Group now accepts bitcoin as a payment method. Through a partnership with Coinbase, guests can now make reservations at over 40 hotels across Canada using bitcoin. The Vancouver based firm is the first Canadian hospitality company to accept bitcoin.
Upcoming EventsThe North American Bitcoin Conference (July 19-20 in Chicago)
Following the success of the European Bitcoin Convention and the North American Bitcoin Conference in Miami (I was there; it was awesome), TNABC is doing an encore in Chicago
. Thanks in part to the support of corporate sponsors like Perkins Coie, Blockchain and BitPay, the tickets to this one are only $100 - amongst the most reasonable rates for any of the conferences I’ve been to. Coin Congress (July 23-24 in San Francisco)
I’m heading out to San Francisco on July 23-24 for the Coin Congress
, a digital currency conference which will feature speakers from BitAngels, GoCoin, Blockchain, Coinbase, Gyft and other leading bitcoin ventures. You can use the discount code acom-u2014 for 25% off ticket prices at checkout
and follow @CoinCongress
for real-time updates. Let me know if you are heading out there too, I’d love to meet you!American Banker Digital Currencies Conference (July 29 in NYC)
If you are a Wall Street type or serious investor, this might be the conference for you
. Attendees will include Bitcoin industry representatives from BitPay, Circle, SecondMarket, BitReserve, and DATA, as well as executives from Fiserv, Wells Fargo, the Internet Archive Federal Credit Union and the Massachusetts Division of Banks.