5 ms·

Is the SEC Forcing Crypto Devs into Illegality and Anonymity?

33 points by timdaub 5y ago

AmericanBlarney 5y ago
The author seems naive to think that being "cyber" somehow justifies immunity to regulation by any country. As the Internet has already shown - it doesn't exempt you, if anything it makes you subject to every legal jurisdiction under the sun (at least any where people reside who interact with your system).
toomuchtodo 5y ago
Regulators are requiring financial technology to support existing laws and regulations. What’s strange is that it seems the author of this post never contemplated this would be the outcome of DeFI or crypto. > If crypto and DeFi are truly that great for innovation now, isn't it kind of ironic that after nine months of work, I'm starting to realize that my project's challenges don't lie within technology but are made of legal uncertainty?
- klyrs 5y ago
  It certainly is ironic that somebody put nine months of work into a financial product before they considered the legal complexities that might arise. I suspect that I'm missing the trees for the forest in saying so.
  - porknubbins 5y ago
    The business model of companies like Uber and AirBnb is based on becoming so big and popular they can’t regulate you out of existence so crypto is far from the first to try this.
    - vineyardmike 5y ago
      Unfortunately, finance is a "ask permission" not "ask forgiveness" kinda regulation.
      - LurkingPenguin 5y ago
        Not really. If you do it right, it's a "steal $100 million and pay a $10 million fine" kind of business.
nwah1 5y ago
No. They were largely already enthusiastically engaging in illegality and criminality, it is why they signed up.
- tata71 5y ago
  If you had said "many were" I'd have been inclined to support your truthful statement. Why be spiteful?
  - GauntletWizard 5y ago
    the difference between "Many" and "Largely" in rhetoric is... pretty trivial, especially in something that can't be accurately counted - Since it's almost tautological that criminal activity will try to hide or disguise itself.
- b0tzzzzzzman 5y ago
  This is inflammatory and incorrect, you just called all people working on blockchain DeFi criminals.
  - deleted 5y ago
    [deleted]
megameter 5y ago
The hypothesis of the "blockchain startup" rests on the idea that this tech can succumb to the standard platform monopolization plays and ultimately see a new "big tech" company emerge. A lot of the market action to date is driven by this: capital pouring money down a chute to create a dog and pony show of heavily hyped tokens. There's still smoke in the air from all the action, but the picture is getting clearer. By building it as a company, you're taking a fundamental disadvantage to anonymous competitors, because the anonymous act as a sovereign micronation and can make the rules for themselves, while you are just another striver within the state, forced to compromise and not step on toes. I wouldn't rule out tokenization as a company, but I sense it existing in a separate, collaborative niche from the anon projects.
gitfan86 5y ago
It is almost like 99% of the 'pro crypto' people don't understand that a distributed database is interesting, but not world changing technology.
- vineyardmike 5y ago
  A "distributed database" is a willfully naive approach to understanding crypto. Most people frankly probably hype crypto as a get rich quick scheme. They see a green pasture with a lack of established players and hope they can be the next "Wolf of Blockchain Street" (or at least make some more modest profit). Many people hyping the tech on less greedy grounds see it as a way around governments. And it is.. sorta. You still need to follow laws, but now the government has a weaker arm to enforce them against you since you don't need big financial firms. On the flip side, Crypto also is potentially more egalitarian since you don't need big financial firms to do financial stuff - anyone can mine (at a small scale at least) to potentially make some small income, and certain complex financial actions can be done for "free-ish" in smart contracts (conditional swaps/lending, escrow, multi-sig transactions). Obviously you're not doing "real world" items in escrow like a house, but many financial transactions that are done in complex trades and wall-street type activities often require underwriting from big banks. This is good and bad. Take flash loans: > Flash loans are uncollateralized cryptocurrency loans structured so that they must be paid back instantly using smart contracts, making them attractive for things like arbitrage across exchanges. If the loan isn’t paid back, then it never happens, because both occur in the same transaction. The good: You can't do such transactions as a regular person in the real world, because most banks would never talk to you if you asked for such uncollateralized loans for trading. The bad: https://news.ycombinator.com/item?id=29033024 https://news.ycombinator.com/item?id=29033024
  - gitfan86 5y ago
    Are you saying that it impossible to loan someone money in the real world without a bank being involved?
    - vineyardmike 5y ago
Jasper_ 5y ago
> Couldn't we consider a nation-state "illegally leaving its sovereign territory" if it started policing a globally distributed project in cyberspace? Oh my god it's the 90s peer-to-peer information super highway argument. It's back all over again, with the same complete unwaivering faith that adding the word "computers" to something means that all the existing laws are now invalid. Go read up about what happened to Napster. It's not even 20 years old... it's not ancient history...
- teclordphrack2 5y ago
  napster had central servers that allowed it to be shutdown with legal proceedings.
- timdaub 5y ago
  yeah it's the same argument. In fact I used the EFF Independence of Cyberspace idea.
cinquemb 5y ago
One seriously expects an industry with captured and revolving door of regulators from big banks will make it easy (not to mention so far up the assess of politicians around the world)? Creating a centralized corporate entity and centralized operating protocols is like painting a huge target on your back that screams: "Here big banks and captured gov, come screw me and all the users over please!" No need to be strictly anon, just don't play the same game… if you really want to build, what you build needs to be "metadata drone strike" proof…
duskwuff 5y ago
> Is the SEC Forcing Crypto Devs into Illegality and Anonymity? No, cryptocurrency developers were doing that on their own long before the SEC got involved.
rPlayer6554 5y ago
> Couldn't we consider a nation-state "illegally leaving its sovereign territory" if it started policing a globally distributed project in cyberspace? If this were true then criminals could setup a globally distributed database of child prn or something else illegal. The "cyberspace" isn't just some magical place with no affect on the real world. It has real consequences on real people's lives.
Cypher 5y ago
The solution is to move it to El Salvador and geo block the US

33 points by timdaub 5y ago

The author seems naive to think that being "cyber" somehow justifies immunity to regulation by any country. As the Internet has already shown - it doesn't exempt you, if anything it makes you subject to every legal jurisdiction under the sun (at least any where people reside who interact with your system).

toomuchtodo 5y ago

Regulators are requiring financial technology to support existing laws and regulations. What’s strange is that it seems the author of this post never contemplated this would be the outcome of DeFI or crypto. > If crypto and DeFi are truly that great for innovation now, isn't it kind of ironic that after nine months of work, I'm starting to realize that my project's challenges don't lie within technology but are made of legal uncertainty?

klyrs 5y ago
It certainly is ironic that somebody put nine months of work into a financial product before they considered the legal complexities that might arise. I suspect that I'm missing the trees for the forest in saying so.
- porknubbins 5y ago
  The business model of companies like Uber and AirBnb is based on becoming so big and popular they can’t regulate you out of existence so crypto is far from the first to try this.
  - vineyardmike 5y ago
    Unfortunately, finance is a "ask permission" not "ask forgiveness" kinda regulation.
    - LurkingPenguin 5y ago
      Not really. If you do it right, it's a "steal $100 million and pay a $10 million fine" kind of business.

nwah1 5y ago

No. They were largely already enthusiastically engaging in illegality and criminality, it is why they signed up.

tata71 5y ago
If you had said "many were" I'd have been inclined to support your truthful statement. Why be spiteful?
- GauntletWizard 5y ago
  the difference between "Many" and "Largely" in rhetoric is... pretty trivial, especially in something that can't be accurately counted - Since it's almost tautological that criminal activity will try to hide or disguise itself.
b0tzzzzzzman 5y ago
This is inflammatory and incorrect, you just called all people working on blockchain DeFi criminals.
- deleted 5y ago
  [deleted]

megameter 5y ago

The hypothesis of the "blockchain startup" rests on the idea that this tech can succumb to the standard platform monopolization plays and ultimately see a new "big tech" company emerge. A lot of the market action to date is driven by this: capital pouring money down a chute to create a dog and pony show of heavily hyped tokens. There's still smoke in the air from all the action, but the picture is getting clearer. By building it as a company, you're taking a fundamental disadvantage to anonymous competitors, because the anonymous act as a sovereign micronation and can make the rules for themselves, while you are just another striver within the state, forced to compromise and not step on toes. I wouldn't rule out tokenization as a company, but I sense it existing in a separate, collaborative niche from the anon projects.

gitfan86 5y ago

It is almost like 99% of the 'pro crypto' people don't understand that a distributed database is interesting, but not world changing technology.

vineyardmike 5y ago
A "distributed database" is a willfully naive approach to understanding crypto. Most people frankly probably hype crypto as a get rich quick scheme. They see a green pasture with a lack of established players and hope they can be the next "Wolf of Blockchain Street" (or at least make some more modest profit). Many people hyping the tech on less greedy grounds see it as a way around governments. And it is.. sorta. You still need to follow laws, but now the government has a weaker arm to enforce them against you since you don't need big financial firms. On the flip side, Crypto also is potentially more egalitarian since you don't need big financial firms to do financial stuff - anyone can mine (at a small scale at least) to potentially make some small income, and certain complex financial actions can be done for "free-ish" in smart contracts (conditional swaps/lending, escrow, multi-sig transactions). Obviously you're not doing "real world" items in escrow like a house, but many financial transactions that are done in complex trades and wall-street type activities often require underwriting from big banks. This is good and bad. Take flash loans: > Flash loans are uncollateralized cryptocurrency loans structured so that they must be paid back instantly using smart contracts, making them attractive for things like arbitrage across exchanges. If the loan isn’t paid back, then it never happens, because both occur in the same transaction. The good: You can't do such transactions as a regular person in the real world, because most banks would never talk to you if you asked for such uncollateralized loans for trading. The bad: https://news.ycombinator.com/item?id=29033024 https://news.ycombinator.com/item?id=29033024
- gitfan86 5y ago
  Are you saying that it impossible to loan someone money in the real world without a bank being involved?
  - vineyardmike 5y ago

Jasper_ 5y ago

> Couldn't we consider a nation-state "illegally leaving its sovereign territory" if it started policing a globally distributed project in cyberspace? Oh my god it's the 90s peer-to-peer information super highway argument. It's back all over again, with the same complete unwaivering faith that adding the word "computers" to something means that all the existing laws are now invalid. Go read up about what happened to Napster. It's not even 20 years old... it's not ancient history...

teclordphrack2 5y ago
napster had central servers that allowed it to be shutdown with legal proceedings.
timdaub 5y ago
yeah it's the same argument. In fact I used the EFF Independence of Cyberspace idea.

cinquemb 5y ago

One seriously expects an industry with captured and revolving door of regulators from big banks will make it easy (not to mention so far up the assess of politicians around the world)? Creating a centralized corporate entity and centralized operating protocols is like painting a huge target on your back that screams: "Here big banks and captured gov, come screw me and all the users over please!" No need to be strictly anon, just don't play the same game… if you really want to build, what you build needs to be "metadata drone strike" proof…

duskwuff 5y ago

> Is the SEC Forcing Crypto Devs into Illegality and Anonymity? No, cryptocurrency developers were doing that on their own long before the SEC got involved.

rPlayer6554 5y ago

> Couldn't we consider a nation-state "illegally leaving its sovereign territory" if it started policing a globally distributed project in cyberspace? If this were true then criminals could setup a globally distributed database of child prn or something else illegal. The "cyberspace" isn't just some magical place with no affect on the real world. It has real consequences on real people's lives.

Cypher 5y ago

The solution is to move it to El Salvador and geo block the US