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BitLicense Part 1 - Can Poorly Thought Out Regulation Drive the US Economy Back into the Dark Ages?

Reggie Middleton's picture




 

An Op-Ed piece penned by Veritaseum Chief Contracts Officer, Matt Bogosian

This past weekend (despite American Airlines' best efforts), Reggie and I made it to the Second Annual North American Bitcoin Conference in Chicago. While there were some very creative (and very ambitious) ideas on how to try to realize the disruptive Bitcoin protocol, one of the predominant topics of discussion was New York Superintendent of Financial Services Benjamin Lawsky's proposed Bitcoin regulations (the BitLicense proposal) - percieved by many participants at the event as an apparent attempt to regulate Bitcoin out of existence.

Even assuming that the entities sought to be regulated under the (seemingly draconian) BitLicens[ing] proposal qualify as "financial services institutions" (which I think is tenuous and highly debatable), to say that the proposal is in violation of New York's statutory mandate, "[t]o encourage, promote and assist ... other financial services institutions to effectively and productively locate, operate, employ, grow, remain, and expand in New York state ... [and] ... [t]o establish a modern system of regulation, rule making and adjudication that is responsive ... to the needs of the state's consumers and residents," (NY Fin. Svcs. Law, § 102(a)emphasis mine), is not only an understatement, it's probably totally irrelevant. Courts typically (and perhaps frustratingly) don't second guess legislators and regulators on whether their laws have any correlation to any stated goals, even if those laws have the exact opposite effect of what was alleged as intended. Instead, courts leave that to the voters, effectively saying, "If you don't like the law, change the legislator," and we all know how effective that is.

In other words, Orwell was (still) right. The stated purpose of BitLicenses is not corollary to the apparent purpose - which is to maintain the status quo. Status quote doesn't contemplate disruptive innovations like the blockchain. Unless and until a higher authority intervenes (with higher authority potentially defined as you - the reader, the consituency and particularly the avid and concerned social media user) Lawsky's proposal, if achieved, will quite likely end (or at least drive underground) the most significant economic and technological breakthrough known to this century, not only in New York, but very likely the United States.

Imagine if Lawsky had been Superintendent in 1994. Imagine that (for whatever reason) Lawsky felt compelled to frustrate the dissemination of another set of disruptive innovations known as the Internet Protocols.

 

World Wide Web timeline

By analogy, imagine that he proposed a regulatory scheme known as "PacketLicense", wherein anyone routing IP packets that arrived at or passed through devices located in or belonging to residents of New York had to acquire a PacketLicense (unless they were a New York bank, or a retailer incorporated in New York), which (in small part) involved fingerprinting everyone employed by the owner of the device, or any affiliate of that owner. In retrospect, we would laugh at its absurdity, and likely recoil in horror imagining the economic Armageddon such a regulation would cause.

World Wide Web timeline as per Lasskeys Vision

But that is precisely what Lawsky is trying to do with the blockchain. Others have provided extensive treatment on various parts of the proposal. Over my next few posts, I will add my voice to that chorus by providing detailed analysis (and possible fixes) for some of the requirements that I find particularly bothersome. Stay tuned.  

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Fri, 07/25/2014 - 15:47 | 5004893 Bear
Bear's picture

Reggie has moved from Analysis to Marketing ... Good luck to you

Sat, 07/26/2014 - 12:52 | 5007319 shouldvekilledthem
shouldvekilledthem's picture

You made me facepalm sir.

Bitcoin does not equal to mtgox (or any companies dealing with bitcoin)

It's funny that the rebellious ZH community is so easily brainwashed by MSM.

Fri, 07/25/2014 - 15:10 | 5004708 Jack Sheet
Jack Sheet's picture

who actually gives a toss?

Fri, 07/25/2014 - 14:51 | 5004596 Seer
Seer's picture

Been a long time since I kicked Mr. Hung-Up-On-Himself in the nuts...

The "US Economy" is based on the IMPOSSIBLE: perpetual growth on a finite planet.  No fucking duh it's going to go back to the "Dark Ages."  Peak electricity, step away from the addiction to cornucopianism.

Humans are deceptive.  And your continued distractions are proof of that.  Chastising other non-producers- hypocrite.

Fri, 07/25/2014 - 14:50 | 5004588 Toolshed
Toolshed's picture

"one of the predominant topics of discussion was New York Superintendent of Financial Services Benjamin Lawsky's proposed Bitcoin regulations (the BitLicense proposal) - percieved by many participants at the event as an apparent attempt to regulate Bitcoin out of existence"

"Lawsky's proposal, if achieved, will quite likely end (or at least drive underground) the most significant economic and technological breakthrough known to this century, not only in New York, but very likely the United States."

Holy crap!!! Who could have possibly seen this coming!!!! ROFLOL!!!! Oh wait........only anyone with a clue about how the real world works.

I especially enjoyed this witless crybaby analogy:

"By analogy, imagine that he proposed a regulatory scheme known as "PacketLicense", wherein anyone routing IP packets that arrived at or passed through devices located in or belonging to residents of New York had to acquire a PacketLicense (unless they were a New York bank, or a retailer incorporated in New York), which (in small part) involved fingerprinting everyone employed by the owner of the device, or any affiliate of that owner. In retrospect, we would laugh at its absurdity, and likely recoil in horror imagining the economic Armageddon such a regulation would cause."

Oh my, the poor little bitcultists are in tears over the banksters, as expected, trying to steal their punchbowl and spoil the party. Too funny!

 

Fri, 07/25/2014 - 15:39 | 5004840 Reggie Middleton
Reggie Middleton's picture

Wait a minute. Didn't you say Bitcoin was a scam? Why would $400M in venture capital and some of the smartest guys in room crowd into it as NYS, the home of Wall Street attempt to legitimize the scam by licensing it? I didn't know the domicile of the worlds largest financial institutions gave out scam licenses (or did I? Wait a minute:-))

Fri, 07/25/2014 - 16:37 | 5005167 Toolshed
Toolshed's picture

What I have said repeatedly, is that if btc gained any significant traction, it would promptly be destroyed by the banksters and their sock puppets on a leash legislators. Any attempt to twist what I have said many times in the past only reflects negatively on you Reggie. I have also said repeatedly that you are a brilliant analyst, and should stick to what you are actually good at. You are quite welcome.

Fri, 07/25/2014 - 15:42 | 5004858 crazytechnician
crazytechnician's picture

Tooly will still be calling it a scam when he's paying for breakfast in bitcoin. His theory is that if he says it enough times it WILL become true.

Fri, 07/25/2014 - 16:38 | 5005173 Toolshed
Toolshed's picture

Except that what I actually said is coming true mad boy.

Fri, 07/25/2014 - 15:40 | 5004768 crazytechnician
crazytechnician's picture

Hi Tooly , the Fiat system has an absolute mathematical certainty of failure. Not sure if you have spotted it yet or not but the future of money for 10 billion people will not be gold buried in some random lake or un-audited flakes of microscopic gold / silver units floating around and being used to pay for stuff.

Fri, 07/25/2014 - 16:38 | 5005180 Toolshed
Toolshed's picture

You are correct about the fiat system, but if you think btc is the answer........you will be sadly disappointed.

Fri, 07/25/2014 - 18:42 | 5005636 crazytechnician
crazytechnician's picture

Okay Tooly , of course , you are the Expert in these matters. So - please enlighten us lesser fools into what you think will be the actual currency system / ie The Future of Money for 10 billion humans. Gold Flakes or Crypyo - - -

Fri, 07/25/2014 - 14:49 | 5004586 shouldvekilledthem
shouldvekilledthem's picture

Bitcoiners couldn't care less about Lawsky and his pathetic regulations.

Similar to torrent, bitcoin is above artificial constructs like country borders or jurisdictions.

Fri, 07/25/2014 - 16:06 | 5004972 mtl4
mtl4's picture

Bitcoins have absolutely no real value whatsoever, they do no work, you can't eat or live under them, they aren't backed by anything, but they do have something unique.  What has given them percieved value is that you can use it as a shield and give the finger to the government when it tries to confiscate money from it's debt serfs.  The biggest problem I see now is how they get converted to/from actual currency/goods (this is where regulators could do the damage IMHO) because if yo can't trade them for anything once again they are worthless.  Torrents is a great example of the collective will exercising it's capabilities and I wouldn't be surprised at all if bitcoin evolved in similar fashion.  The governments have tried to bring down the torrent network since the demise of Napster but it will always fail because the collective will always find a way around any legal roadblocks.  

 

No way Ultracoin will survive.......the overcomplication (read greed) will be its demise for sure.

Sat, 07/26/2014 - 12:49 | 5007313 shouldvekilledthem
shouldvekilledthem's picture

Everything has value as soon as people assign value to it. Try educating yourself before you arrive at conclusions.

Also, you could lend me your crystal ball for the weekend.

Imbecile.

 

Fri, 07/25/2014 - 16:54 | 5005233 Toolshed
Toolshed's picture

I actually think Reggie's idea is a good one. However, his implementation, as in the names of the various components such as ultracoin and veritaseum, already being in wide use, seems self-defeating. And his decision to exert his energies on a btc based concept, with btc clearly doomed if it begins to succeed, well that seems greatly out of character.

Fri, 07/25/2014 - 14:41 | 5004537 bitterwolf
bitterwolf's picture

wild woolly web will soon host every living person on earth assigned the unique identifier of an ip address vis a vis ip6 protocol capability. The hive mind monitored and prodded by your master_______________ (fill in the blank.)

yaaay

Fri, 07/25/2014 - 14:33 | 5004493 DoChenRollingBearing
DoChenRollingBearing's picture

I'll stick to regular Bitcoin, thank you.  It is hard enough to understand.

Fri, 07/25/2014 - 15:35 | 5004824 Reggie Middleton
Reggie Middleton's picture

This is regular Bitcoin! Bitcoin is programmable, which is what makes it so unique!

Fri, 07/25/2014 - 14:29 | 5004471 doctor10
doctor10's picture

"Goldman Sachs & JP Morgan would be controlling your ability to read this post right.."

 

Somehow I truly suspect that was the original plan for the interwebs all along

Fri, 07/25/2014 - 10:49 | 5003437 williambanzai7
williambanzai7's picture

Lawsky should focus on the main attraction...

 

Fri, 07/25/2014 - 15:27 | 5004781 crazytechnician
crazytechnician's picture

I know Banzi is fucking sick of me but maybe Banzi should try to look around the corner and see that The Future of Money will not be gold buried in a lake and eating prepper food - but Crypto ........

Fri, 07/25/2014 - 16:43 | 5005193 Toolshed
Toolshed's picture

You really are sounding like a broken record made by a person with a very limited vocabulary. I wonder why ZH keeps banning you?

Do NOT follow this link or you will be banned from the site!