
New York to Bitcoin Startups: Get Permission - starkness
http://techcrunch.com/2014/07/21/new-york-to-bitcoin-startups-get-permission-or-get-out/
======
fred_durst
> _1\. Submit fingerprints of all founders (and employees) to the FBI and
> disclose personal financial information of founders and officers to NY
> State._

> _2\. Require them to hold an undetermined amount of U.S. dollar funds in
> bonds or trusts. Startups will not be able to predict the bonding or
> capitalization requirements until after they apply, making it difficult to
> project expenses or raise money._

> _3\. Conduct expensive audits and security testing that no small startup
> could afford._

> _4\. Hand over any untouched user assets to NY State after five years as
> “abandoned property.”_

If these four things deter you, please do everyone a favor and do not start
any company that handles other peoples money.

~~~
xorcist
That would depend entirely of "handle other people's money" actually _mean_.
There's a huge difference between the different players in this space. Just
because they're in the same ecosystem doesn't mean the same regulations should
apply.

I am personally intrigued by point 4, "any untouched asset after five years is
abandoned property". So, if I deposit money in my account, it's not mine after
five years? Where does it work like that?

~~~
fred_durst
#4 does not mean New York State owns it forever. It is intended to prevent
companies from having an incentive to create business practices based on the
hope that people will forget about or abandon funds etc. A customer can claim
those funds by going here:

[https://www.osc.state.ny.us/ouf/](https://www.osc.state.ny.us/ouf/)

Your comment is kind of what I'm talking about. You do not know nearly enough
about this stuff to start a Bitcoin startup judging by the fact that you don't
even know what unclaimed property is. Therefore I hope regulations like this
prevent you and other obviously unqualified people from handling other peoples
money.

EDIT: I came out a bit harsh on this and I apologize. I intended to use it as
an example of you likely having the technical ability for such a project but
not the financial knowledge, which in my opinion is the dangerous situation
these regulations will hopefully prevent.

~~~
markburns
xorcist choosing to question a comment on a website does not necessarily put
him in the same category as people wishing to start a bitcoin startup handling
others money

~~~
fred_durst
That's a valid point. It came out wrong and unnecessarily harsh.

I should have also added that although the person I was replying to(xorcist)
was unqualified in the financial knowledge, I assume by way of being around
HN, that they likely have more than enough technical aptitude for such an
endeavor.

These regulations, in my opinion work to protect the larger markets from
exactly that type of dangerous situation.

------
DickingAround
Does anyone else wonder if this is more of a go-for-it-all-and-negotiate-back-
to-reasonable sort of attack on bitcoin? He can't really want what he's
proposing; banks don't even ask for government approval when they launch new
features. So the only thought is that he either doesn't want bitcoin at all or
he wants to win control of it in NY by proposing unreasonable things. If he'd
wanted real consumer protections, wouldn't he just have asked for them?

~~~
thinkcomp
Lawsky did what makes sense from his perspective: he applied the money
transmission framework to Bitcoin.

The authors of this post are both biased in favor of Bitcoin, and not
particularly careful examiners of the real consumer protection issues at hand.

~~~
starkness
Indeed he's attempting to apply an existing regulatory framework to new
technology, which rarely works well.

The point of the article was not to focus on the consumer protection issues,
but instead to point out how it could kill startups in the name of consumer
protection. We are both in favor of avoiding another Mt. Gox, and the numerous
other cases where user funds were lost, which includes escrow of the funds
held for users. I'd be curious to get your thoughts as to what you consider
the most pressing consumer protection issues, as we're working on another
piece that will focus more on these.

~~~
mbreese
Given the way that some Bitcoin startups have crashed and burned with people's
money, I don't think that it's unreasonable to raise the bar significantly in
the name of consumer protection.

If that eliminates small startups in the space from directly offering services
to consumers, so be it.

~~~
starkness
Part of the problem is that the regulations aren't just seeking to cover
companies that hold peoples' funds (aka private keys), but instead any
technology touching the ecosystem. New York doesn't have to and shouldn't
conflate the two.

It makes sense to regulate and, for example, require escrow for companies that
are holding user funds in order to avoid the exact situation you point out. It
doesn't make sense for a web wallet where the user is storing her own keys
client-side.

------
DINKDINK
These regulations aren't about consumer protections (if they were, companies
would be audited and scored on how well they comply, ala health food scores in
restaurants). If regulators solely marked businesses with the metaphorical
seal of approval, a democratic, economic process would happen in the market
place.

This is entirely about the state inserting themselves between people, their
money, and where they want to spend it. You'd be ignorant to believe that the
Feds wouldn't apply the same, transaction-ending, censorship level of force to
Bitcoin transactions services ("Oh your users are sending money to Wikileaks?
We deem that a risky transaction and now require you to hold 10X funds in
dollars and to buy additional bonds. Oh What a coincidence that's outside of
your financial situation that we have complete privilage to inspect.")

~~~
DINKDINK
Further more, to quote Greg Brockman:

"Second, this model [the Bitcoin ecosystem] unbundles the existing financial
system into layers run by independent companies. To see the value of this,
contrast with the US mobile carriers, who used to own the entire stack. They
owned the handsets, the operating systems, the applications running on the
phone, and the service. This meant that most of the stack never had anything
pushing it to get very good, and there were even incentives to hold it back in
order to preserve legacy revenue-generating facilities like SMS. By enabling
competition at individual layers of the financial system, each one should
improve."

The big banks of NY are threatened by Bitcoin and are working with the same
people/regulators they've rubbed elbows for so long. If regulators really
cared about protecting consumers they would have prosecuted big banks for the
biggest destruction in wealth in human history aka the 2008 financial crash.

------
lectrick
This will only further the ambitious goals of DACs (Distributed Autonomous
Corporations).

This is all kind of amusing. 1) Government architects Internet in a
decentralized fashion so that it survives damage from a nuclear attack. 2)
Government tries to control Internet and fails because Internet, being
decentralized, routes around control because it is seen as damage. 3) Bitcoin
is pure Internet money.

The math isn't that hard here. This should be interesting...

------
Aerospark
Looks like California is about to get a huge influx of bitcoin
entrepreneurs...

