
An act to amend Financial and Corporations Codes relating to digital currency - KeatonDunsford
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160AB1326
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verisimilidude
Some meat from page 30 about the definition of "digital currency business" for
the purposes of this act...

(d) “Digital currency business” means the business of offering or providing
the service of storing, transmitting, exchanging, or issuing digital currency.
“Digital currency business” does not include the following:

(1) Transmission of digital currency where the transaction is undertaken for
non financial purposes and does not involve the transfer of more than a
nominal amount of digital currency necessary to complete the transaction.

(2) Online games or gaming platforms that use digital currency that (A) have
no market or application outside of those games or gaming platforms, (B)
cannot be converted into, or redeemed for, fiat currency or digital currency,
and (C) are not redeemable for real-world goods, services, discounts, or
purchases.

(3) Customer affinity or rewards programs that use digital currency that can
be redeemed for goods, services, or for purchases with the issuer or other
designated merchants, but cannot be converted into, or redeemed for, fiat
currency or digital currency that is not part of the customer af nity or
rewards program.

(4) Issuance of a credit card voucher, letter of credit, or any value that is
redeemable only by the issuer for goods and services provided by the issuer or
its affiliate, except to the extent required by applicable law to be
redeemable in cash for its cash value.

(5) A person or entity developing, distributing, or servicing digital currency
network software.

(6) A person or entity contributing software, connectivity, or computing power
to a digital currency network.

(7) A person or entity providing data storage or cybersecurity services for an
enrolled digital currency business, if the data storage or cybersecurity
services do not store digital currency.

~~~
verisimilidude
For my part, the wording in #1 looks especially flimsy.

What the hell does "nominal" mean? Is "nominal" measured against some absolute
dollar value, or against the scope of the task/services rendered? It's not
hard to imagine some massive smart contract transactions that would require a
lot of resources to perform, but which wouldn't otherwise have any financial
purpose. Would those be deemed too costly, not nominally cheap enough, for
this act?

I also wonder about the meaning of "non financial" here. What would this mean
for a coin like ETH? ETH does not aspire to be anything more than grease for
the Ethereum network. Nonetheless, it's now traded on exchanges for BTC, USD,
etc. Does its rising value in trade mark it as "financial" for the purposes of
this act, in every ETH transaction on the Ethereum network, even though it's
not directly intended for financial purposes?

~~~
djrogers
It's vague on purpose, as vagueness gives the appointed bureaucrats more power
in their rule-making processes. Strict, detailed laws don't give them any
extra leeway to make rules that favor rent-seekers and friends.

~~~
jdavis703
On the flip-side flexible rules allow for regulatory agencies to adapt and
respond to changing conditions without having to wait on a legislative body to
get around to updating its rules.

~~~
CamperBob2
In other words, it turns those agencies _into_ legislative bodies.

~~~
akiselev
No, it makes them into _regulatory_ bodies. Would you really trust Congress to
legislate the minute details of FDA clinical trials or EPA pollution
regulations? How about transportation safety codes or allocation of NSF/NIH
funding for basic research?

This is a fundamental feature of most modern democratic bureaucracies: the
power of regulators flows directly from the legislature which sets the goals
and scope of each agency but it is up to the individuals in each organization,
who have spent most of their lives in the relevant fields gaining direct
experience, to decide on the specific implementation of the legislators'
vision.

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Animats
Read "The $65 million Bitfinex hack shows that it is impossible to tell a good
bitcoin company from a bad one"[1] on Quartz. They can't even find the
company's offices. The Hong Kong address is a mail drop. The British Virgin
Islands address is a mail drop. The CEO is missing. Looks a lot like an inside
job.

Fingerprinting cryptocurrency company management is a good idea.

[1] [http://qz.com/753958/the-65-million-bitfinex-hack-shows-
that...](http://qz.com/753958/the-65-million-bitfinex-hack-shows-that-it-is-
impossible-to-tell-a-good-bitcoin-company-from-a-bad-one/)

~~~
Hermel
As someone who has suffered a significant loss from the Bitfinex hack, I still
prefer technical over regulatory solutions.

You should also note that Bitfinex used to have a much more secure setup, with
most of its Bitcoins being stored in cold, offline storage. However, US
regulation required them to use segregated accounts for each user. Under such
a requirement, the cold storage variant does not work any more, so they moved
to keep everything online so they could physically move the Bitcoins back and
forth as they were used for margin loans within Bitfinex. It was too much
misguided regulation that made them vulnerable in the first place.

~~~
mhluongo
I think the CFTC interference is overstated- BitFinex still could have
segregated cold wallets for the whales, and I've heard they made the change
primarily in response to the last hack.

I want the CFTC interference to be the primary issue, though- it certainly
fits the narrative and would be a great lesson going forward.

Note: I also lost money on the hack.

~~~
Animats
Offline combined storage is not a more secure setup if the problem is insider
theft. Mt. Gox had offline storage controlled by Mark Karpeles. Given how hard
it is to find the principals of this company, this looks like an inside job.

~~~
aminorex
Given that I am ignorant, it looks like a conspiracy.

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mmanfrin
The MTA was previously used against companies that simply facilitated
marketplaces. I worked for a mobile-ordering startup called GoPago that got
hit with a suit over the MTA since we were 'storing currency' (i.e., people
paid us money for food that we would then pass on to the merchant that made
the food). The only way of getting approval for 'money transfer' was to get a
'Medallion' which took around 18 months.

The MTA was awful, and this appears to be gutting the parts that was
applicable to its overreach.

I see a lot of negativity in this comment section about the changes, as CA is
moving to change the law to be used to regulate digital currencies which I
believe was the _original intent of the MTA_ (not specifically digital
currencies, but anything fiat used as currency).

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r00fus
So what constitutes a digital currency? I mean, I've heard arguments that BTC
is really an asset being traded. Didn't see that

Also: looks like proposed fee has been increased to $5000 from $500 (didn't
look for other details).

Amusing that legalese is essentially similar to code, but without variable
declarations (ie, $digitalcurrency := "currency that's traded online,
including but not restricted to BTC, etc") it's a bit of a nightmare to parse.

~~~
dragonwriter
From the proposed law:

“Digital currency” means any digital representation of value that can be
digitally traded and is used to facilitate the sale, purchase, and exchange of
goods, services, or other digital representations of value among its users.
Digital currency does not include fiat currency, e-money, or currency value of
which was fixed by its issuer to the value of a fiat currency.

~~~
jsprogrammer
Missing is a definition of what "value" is.

My Bitcoin is a digital representation of the bits needed to solve a
particular block. It doesn't represent value, but a numerical solution to a
mathematical problem.

~~~
dogecoinbase
Playing dumb only makes you look dumb. Judges/legislators/basically everyone
can see right through this kind of pretense and aren't particularly
sympathetic to the "b...but I'm technically correct!" stance.

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smokeyj
> and aren't particularly sympathetic to the "b...but I'm technically
> correct!" stance.

That stance is called the rule of law and being technically correct matters.
That's the whole point of that court thing.

[http://time.com/money/4421955/bitcoin-miami-judge-money-
laun...](http://time.com/money/4421955/bitcoin-miami-judge-money-laundering/)

~~~
JumpCrisscross
> _the rule of law and being technically correct matters_

As one of many factors. The rule of law does not suspend human reason and
common sense. SCOTUS recently ruled in favour of original intent over a
strictly structural in an ACA case, where the later would have meant literally
interpreting a likely typo [1].

[1]
[https://www.washingtonpost.com/politics/courts_law/obamacare...](https://www.washingtonpost.com/politics/courts_law/obamacare-
survives-supreme-court-
challenge/2015/06/25/af87608e-188a-11e5-93b7-5eddc056ad8a_story.html)

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yerbatime
If you disagree with the proposed legislation, you can very easily contact
your CA Senator and let them know here:

[https://nobitcoinlicense.org/](https://nobitcoinlicense.org/)

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Kinnard
I hope this will provide an impetus for the community to organize and stop
this.

~~~
logfromblammo
I hope this will provide an impetus for more tech businesses to diversify
their operations to places outside of California.

It's a bit like seeing your best friend in an abusive relationship. You almost
want to see it go too far, so your friend will finally wise up and break it
off. _Almost._

Yeah, organize and stop this. But also read this pamphlet on how to get help
from an abused industry shelter near you.

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thinkcomp
For context on the California Money Transmission Act, on which this bill is
based, see:

[http://www.thinkcomputer.com/20140214.cfpbcomment.pdf](http://www.thinkcomputer.com/20140214.cfpbcomment.pdf)

OCC has recently expressed interest in regulating financial technology
startups at the federal level. So far I'm not aware of any bill in Congress
that would actually facilitate their doing so, however. But it's about time.

Until then, here's the "Commissioner of Business Oversight"...

[http://www.janlynnowen.com](http://www.janlynnowen.com)

...and her perjuring deputy...

[http://www.robvenchiarutti.com](http://www.robvenchiarutti.com)

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erdevs
Whether it's this bill or not, this kind of legislation is inevitable, isn't
it?

~~~
lijason
Yeah, I don't really understand the anger about this. Financial institutions
already have significant regulations. It's not clear to me why the digital
currency equivalent institutions shouldn't be treated similarly. If the only
argument for digital currency is lack of regulation, it seems that people
should be pushing for decreased regulation on financial institutions instead.
An end-around regulation just because we're using digital currency as the go-
between doesn't seem to make a lot of sense.

Big caveat, I haven't read this bill or about this bill enough to know if it
goes significantly beyond the regulations for financial institutions. If so,
clearly, that's different.

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jimmaswell
Will this hurt Second Life/its users?

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KeatonDunsford
Can imagine this will be impossible to force with the rise of decentralized
exchanges for BTC and ETH like Bitsquare and EtherEx. But still...

"The bill would prohibit a person from engaging in the digital currency
business without enrolling in the program and would prohibit the conduct of
digital currency business through an unenrolled agent. The bill would require
a person seeking enrollment to pay a nonrefundable fee of up to $5,000... The
bill would also require the person to provide fingerprints and would authorize
the commissioner to deliver the fingerprints to law enforcement agencies."

Fuck this.

~~~
tn13
Truly fuck this law. Not even sure how they are going to enforce this rubbish.

~~~
trhway
a law may be not completely enforceable in normal situation, yet it would
still provide at least two things: 1. scaring away a bunch of would-be players
and 2. once somebody got law enforcement attention even for non-related things
the law may provide for additional charge and thus higher pressure and higher
chances that something would finally stick.

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cloudjacker
bitlicense part trois

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chollida1
[https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml...](https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160AB1326)

I believe this is a better link to the same editing, its atleast easier to
parse the changes and it has colours!!

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sctb
Thanks, we updated the link from
[http://www.leginfo.ca.gov/pub/15-16/bill/asm/ab_1301-1350/ab...](http://www.leginfo.ca.gov/pub/15-16/bill/asm/ab_1301-1350/ab_1326_bill_20160808_amended_sen_v94.pdf).

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pseudointellect
Glad the title was updated from the previous titlegore. Thanks, mods!

