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This is why there is regulation of the finance sector, and exactly what happens when companies and individuals try to pretend the regulation doesn't apply to th

This is why there is regulation of the finance sector, and exactly what happens when companies and individuals try to pretend the regulation doesn't apply to them. If you want to start an online financial services business, the first thing to do is start researching the legal requirements for doing so, both where your business is located and where most of your likely customers will be. Not looking at them doesn't mean the rules don't apply, it's just grossly—potentially criminally—negligent. In fact, that's the case for anyone starting almost any business. You need to examine the legal and regulatory environment in which you'll be operating as the very first step of your due diligence. Anything else is negligent.

Steko 13y ago
A few weeks old but saw this earlier today via Brad DeLong: Who’d have thought that there might be an incentive for operators in a totally unregulated market to take people’s assets and run? Or that self-regulation would be so lacking in a market that purposefully concocts information asymmetries that benefit money creators/the tech-savvy…. or that the Bitcoin system was only recreating and replicating all the bad incentives we know and love in our current system, which are now being curbed by intensified post-crisis regulation? Irony of irony, Bitcoin Magazine concludes that since it is unfortunately the case that many bitcoin businesses must use escrow accounts to hold people’s bitcoin, the only solution to the problem is moving towards a quint-party agreement to manage unauthorised liability creation in the system... But you mustn’t confuse this with some sort of recommendation to forge a Federal Bitcoin Reserve system. It’s a “Five Parties Model” system. Entirely different... All in all, it would be NOTHING like the Federal Reserve System we have already arrived at thanks to decades of collective trial and error, and acquired wisdom from the countless bank collapses and system crises that have come before us. Except, of course it would be exactly like the Fed. And where it wasn’t yet exactly like the Fed, it would soon be, because exactly the same human processes, incentives and behaviours would govern its evolution and development. Proving the point yet again that there is nothing new under the sun, and that bitcoin is more of a replication of the old unregulated past, under a new technological order, which society collectively refined and regulated until it created the system-stabilising framework we know today, than a golden era of finance no-one had yet been smart enough to discover beforehand. ftalphaville.ft.com/2014/03/03/1787992/magic-the-undercapitalised-gathering-online/
- thinkcomp 13y ago
  The e-mail I just sent to the author of that post: "Ms. Kaminska, In your recent post (http://ftalphaville.ft.com/2014/03/03/1787992/magic-the-undercapitalised-gathering-online/ http://ftalphaville.ft.com/2014/03/03/1787992/magic-the-unde...), which I found via Brad DeLong’s web site, you described Bitcoin as "totally unregulated" and "completely unregulated" a number of times. Such characterizations are completely erroneous, and you should probably correct your post. Unfortunately, many people are under the impression that Bitcoin is unregulated because its various proponents (such as Marc Andreessen, the Bitcoin Foundation, etc.) have done an excellent job convincing the world that it’s so new and supposedly novel that no regulations could possibly apply. That’s not even close to true. In the United States, numerous Bank Secrecy Act statutes, 18 U.S.C. § 1960, and a state money transmission framework involving 47 different state laws all apply. The problem is that the state laws are hugely problematic, the regulators are bumbling fools, the entrepreneurs and their venture capitalist backers are exceptionally cunning in their efforts to evade regulatory scrutiny, while the press utterly refuses to write about what is actually going on. My company is the plaintiff in two federal lawsuits over the issue, one of which has set the record for the most-delayed, non-stayed motion to dismiss in California federal judicial history (764 days and counting): http://www.plainsite.org/dockets/index.html?id=716056 http://www.plainsite.org/dockets/index.html?id=716056 http://www.plainsite.org/dockets/index.html?id=2434524 http://www.plainsite.org/dockets/index.html?id=2434524 If you’re interested in the issues, I would suggest that you read my recent comment letter to the Consumer Financial Protection Bureau, which can be found here: http://www.thinkcomputer.com/20140214.cfpbcomment.pdf http://www.thinkcomputer.com/20140214.cfpbcomment.pdf You may also find this article on my personal web site about Mt. Gox specifically and the role of Iowa’s state regulators of interest: http://www.aarongreenspan.com/writing/essay.html?id=101 http://www.aarongreenspan.com/writing/essay.html?id=101 Feel free to let me know if you have any questions. Aaron"
  - ghshephard 13y ago
    While you may take issue with coinbase, or MtGox, can you accept that a cryptographic proof-of-work solution to the byzantine general's problem, that implements a general consensus ledger of forth-like script applications, is not a "currency" per se, but a mechanism in which currencies can be implemented upon? I.E. Regulate the companies that are engaging in currency like transactions on top of the bitcoin ledger, but don't be too quick to attempt to regulate bitcoin itself.
wyager 13y ago
>This is why there is regulation of the finance sector This is why there are bailouts of the finance sector. A bank loses this kind of money, they get it back for free.
- etherael 13y ago
  Silence infidel, pro state circle jerk in progress.
- glesica 13y ago
  Just because the regulation and political system failed doesn't mean they must fail. Iceland did pretty well for itself in the aftermath, even having let the bad behavior slip past them. And Canada apparently never let the bad behavior begin in the first place. Another thing to keep in mind, the people who got the bailouts are a subset of the people who claim unfettered capitalism will cure all ills.
  - mseebach 13y ago
    Just because MtGox failed doesn't mean unregulated Bitcoin businesses must fail. Iceland is a pretty poor posterboy for your point: their banks failed even more spectacularly than other countries', their cleanup effort was just much more ruthless. Essentially your argument in favour of regulation is that we now sort-of know how to clean up after it fails spectacularly. Indeed, other exchanges and other Bitcoin businesses don't appear to suffer from the gross incompetence that brought down MtGox. > Another thing to keep in mind, the people who got the bailouts are a subset of the people who claim unfettered capitalism will cure all ills. Is that so? In that case they are paying the same kind of lip service to that point as a kleptocratic dictator on his private jet is to socialism.
  - hnnewguy 13y ago
    >Iceland did pretty well for itself in the aftermath, even having let the bad behavior slip past them. And Canada apparently never let the bad behavior begin in the first place. Iceland did it by stiffing creditors. That's a short-run gain, long-term pain solution. With regards to Canada, there are specific laws that have inhibited a housing crisis, but we don't know if we have avoided anything yet. Our housing in major centres is as frothy as the peaks of almost anywhere else in the world who suffered a bust. It's too early to say.
clienthunter 13y ago
Regulation enables this kind of thing systemically. Let this happen a few times without regulation and the market will demand trustworthy solutions, not some politician waving a magic wand and declaring something safe. As we've seen recently that system doesn't work too well. Everyone who lost money in this knew the risks. Nobody is calling for accountability beyond the guy that actually is accountable. How refreshing is that? How refreshing is it to actually have a name of the person who fucked up, instead of a stream of pseudonymous apologetic soundbites from banks/regulators/politicians? Not to mention the fact this whole problem is completely self contained. There is no talk of rescuing MtGox with tax money, or the need for a "national debate" on how to run this shit in the future. If you didn't run MtGox or have money in MtGox or don't outright choose to be involve yourself in some other way then you can go to bed at night and sleep well knowing it is absolutely not your problem. This, friends, is one example of the many long forgotten benefits of private trade.
- vidarh 13y ago
  There's no talk of rescuing MtGox with tax money because the size of MtGox is small enough that the losses are pocket change in the great scale of things. There's no risk of a new global recession over MtGox. I think you'd find the debate would have been entirely different if the scale of it wasn't such that most people, if asked, would go "MtGox? What's that?"
infra178 13y ago
MF Global.
higherpurpose 13y ago
If we can build a P2P decentralized exchanges (which we will soon), all of that "regulation" (at least from the government side) won't be needed.
fnordfnordfnord 13y ago
>If you want to start an online financial services business, the first thing to do is start researching the legal requirements for doing business... This is a bit naive isn't it? Imagine contacting FINCEN, or whatever other appropriate regulatory agencies at the time of MtGox's founding when Bitcoin was a novelty and worth practically nothing. Imagine trying to explain to them what a "Bitcoin" is. Imagine being thrown out of their offices "Go away kid. Grown-ups are working here." Even if you did find some reasonable solution, compliance would have probably made the proposition unprofitable. Bitcoin might never have got off the ground if your advice were followed rigorously. OTOH, it is certainly unforgivable for Kerpales to have continued in shooting from the hip after becoming a millionaire; and after MtGox was raking in the kind of fees that would have supported hiring legal staff, building a robust trading engine, and implementing some sane practices for data protection.
- dragonwriter 13y ago
  > This is a bit naive isn't it? Imagine contacting FINCEN, or whatever other appropriate regulatory agencies at the time of MtGox's founding when Bitcoin was a novelty and worth practically nothing. Imagine trying to explain to them what a "Bitcoin" is. Much of the financial regulation that exists that would apply to MtGox has nothing to do with Bitcoin per se, it has to do with keeping customer accounts denominated in fiat currency and disbursing funds at customer direction from those accounts to accounts of other customers.

Steko 13y ago

A few weeks old but saw this earlier today via Brad DeLong: Who’d have thought that there might be an incentive for operators in a totally unregulated market to take people’s assets and run? Or that self-regulation would be so lacking in a market that purposefully concocts information asymmetries that benefit money creators/the tech-savvy…. or that the Bitcoin system was only recreating and replicating all the bad incentives we know and love in our current system, which are now being curbed by intensified post-crisis regulation? Irony of irony, Bitcoin Magazine concludes that since it is unfortunately the case that many bitcoin businesses must use escrow accounts to hold people’s bitcoin, the only solution to the problem is moving towards a quint-party agreement to manage unauthorised liability creation in the system... But you mustn’t confuse this with some sort of recommendation to forge a Federal Bitcoin Reserve system. It’s a “Five Parties Model” system. Entirely different... All in all, it would be NOTHING like the Federal Reserve System we have already arrived at thanks to decades of collective trial and error, and acquired wisdom from the countless bank collapses and system crises that have come before us. Except, of course it would be exactly like the Fed. And where it wasn’t yet exactly like the Fed, it would soon be, because exactly the same human processes, incentives and behaviours would govern its evolution and development. Proving the point yet again that there is nothing new under the sun, and that bitcoin is more of a replication of the old unregulated past, under a new technological order, which society collectively refined and regulated until it created the system-stabilising framework we know today, than a golden era of finance no-one had yet been smart enough to discover beforehand. ftalphaville.ft.com/2014/03/03/1787992/magic-the-undercapitalised-gathering-online/

thinkcomp 13y ago
The e-mail I just sent to the author of that post: "Ms. Kaminska, In your recent post (http://ftalphaville.ft.com/2014/03/03/1787992/magic-the-undercapitalised-gathering-online/ http://ftalphaville.ft.com/2014/03/03/1787992/magic-the-unde...), which I found via Brad DeLong’s web site, you described Bitcoin as "totally unregulated" and "completely unregulated" a number of times. Such characterizations are completely erroneous, and you should probably correct your post. Unfortunately, many people are under the impression that Bitcoin is unregulated because its various proponents (such as Marc Andreessen, the Bitcoin Foundation, etc.) have done an excellent job convincing the world that it’s so new and supposedly novel that no regulations could possibly apply. That’s not even close to true. In the United States, numerous Bank Secrecy Act statutes, 18 U.S.C. § 1960, and a state money transmission framework involving 47 different state laws all apply. The problem is that the state laws are hugely problematic, the regulators are bumbling fools, the entrepreneurs and their venture capitalist backers are exceptionally cunning in their efforts to evade regulatory scrutiny, while the press utterly refuses to write about what is actually going on. My company is the plaintiff in two federal lawsuits over the issue, one of which has set the record for the most-delayed, non-stayed motion to dismiss in California federal judicial history (764 days and counting): http://www.plainsite.org/dockets/index.html?id=716056 http://www.plainsite.org/dockets/index.html?id=716056 http://www.plainsite.org/dockets/index.html?id=2434524 http://www.plainsite.org/dockets/index.html?id=2434524 If you’re interested in the issues, I would suggest that you read my recent comment letter to the Consumer Financial Protection Bureau, which can be found here: http://www.thinkcomputer.com/20140214.cfpbcomment.pdf http://www.thinkcomputer.com/20140214.cfpbcomment.pdf You may also find this article on my personal web site about Mt. Gox specifically and the role of Iowa’s state regulators of interest: http://www.aarongreenspan.com/writing/essay.html?id=101 http://www.aarongreenspan.com/writing/essay.html?id=101 Feel free to let me know if you have any questions. Aaron"
- ghshephard 13y ago
  While you may take issue with coinbase, or MtGox, can you accept that a cryptographic proof-of-work solution to the byzantine general's problem, that implements a general consensus ledger of forth-like script applications, is not a "currency" per se, but a mechanism in which currencies can be implemented upon? I.E. Regulate the companies that are engaging in currency like transactions on top of the bitcoin ledger, but don't be too quick to attempt to regulate bitcoin itself.

wyager 13y ago

>This is why there is regulation of the finance sector This is why there are bailouts of the finance sector. A bank loses this kind of money, they get it back for free.

etherael 13y ago
Silence infidel, pro state circle jerk in progress.
glesica 13y ago
Just because the regulation and political system failed doesn't mean they must fail. Iceland did pretty well for itself in the aftermath, even having let the bad behavior slip past them. And Canada apparently never let the bad behavior begin in the first place. Another thing to keep in mind, the people who got the bailouts are a subset of the people who claim unfettered capitalism will cure all ills.
- mseebach 13y ago
  Just because MtGox failed doesn't mean unregulated Bitcoin businesses must fail. Iceland is a pretty poor posterboy for your point: their banks failed even more spectacularly than other countries', their cleanup effort was just much more ruthless. Essentially your argument in favour of regulation is that we now sort-of know how to clean up after it fails spectacularly. Indeed, other exchanges and other Bitcoin businesses don't appear to suffer from the gross incompetence that brought down MtGox. > Another thing to keep in mind, the people who got the bailouts are a subset of the people who claim unfettered capitalism will cure all ills. Is that so? In that case they are paying the same kind of lip service to that point as a kleptocratic dictator on his private jet is to socialism.
- hnnewguy 13y ago
  >Iceland did pretty well for itself in the aftermath, even having let the bad behavior slip past them. And Canada apparently never let the bad behavior begin in the first place. Iceland did it by stiffing creditors. That's a short-run gain, long-term pain solution. With regards to Canada, there are specific laws that have inhibited a housing crisis, but we don't know if we have avoided anything yet. Our housing in major centres is as frothy as the peaks of almost anywhere else in the world who suffered a bust. It's too early to say.

clienthunter 13y ago

Regulation enables this kind of thing systemically. Let this happen a few times without regulation and the market will demand trustworthy solutions, not some politician waving a magic wand and declaring something safe. As we've seen recently that system doesn't work too well. Everyone who lost money in this knew the risks. Nobody is calling for accountability beyond the guy that actually is accountable. How refreshing is that? How refreshing is it to actually have a name of the person who fucked up, instead of a stream of pseudonymous apologetic soundbites from banks/regulators/politicians? Not to mention the fact this whole problem is completely self contained. There is no talk of rescuing MtGox with tax money, or the need for a "national debate" on how to run this shit in the future. If you didn't run MtGox or have money in MtGox or don't outright choose to be involve yourself in some other way then you can go to bed at night and sleep well knowing it is absolutely not your problem. This, friends, is one example of the many long forgotten benefits of private trade.

vidarh 13y ago
There's no talk of rescuing MtGox with tax money because the size of MtGox is small enough that the losses are pocket change in the great scale of things. There's no risk of a new global recession over MtGox. I think you'd find the debate would have been entirely different if the scale of it wasn't such that most people, if asked, would go "MtGox? What's that?"

infra178 13y ago

MF Global.

higherpurpose 13y ago

If we can build a P2P decentralized exchanges (which we will soon), all of that "regulation" (at least from the government side) won't be needed.

fnordfnordfnord 13y ago

>If you want to start an online financial services business, the first thing to do is start researching the legal requirements for doing business... This is a bit naive isn't it? Imagine contacting FINCEN, or whatever other appropriate regulatory agencies at the time of MtGox's founding when Bitcoin was a novelty and worth practically nothing. Imagine trying to explain to them what a "Bitcoin" is. Imagine being thrown out of their offices "Go away kid. Grown-ups are working here." Even if you did find some reasonable solution, compliance would have probably made the proposition unprofitable. Bitcoin might never have got off the ground if your advice were followed rigorously. OTOH, it is certainly unforgivable for Kerpales to have continued in shooting from the hip after becoming a millionaire; and after MtGox was raking in the kind of fees that would have supported hiring legal staff, building a robust trading engine, and implementing some sane practices for data protection.

dragonwriter 13y ago
> This is a bit naive isn't it? Imagine contacting FINCEN, or whatever other appropriate regulatory agencies at the time of MtGox's founding when Bitcoin was a novelty and worth practically nothing. Imagine trying to explain to them what a "Bitcoin" is. Much of the financial regulation that exists that would apply to MtGox has nothing to do with Bitcoin per se, it has to do with keeping customer accounts denominated in fiat currency and disbursing funds at customer direction from those accounts to accounts of other customers.