
Regulators Need to Take It Easy on Bitcoin Startups - peter123
http://www.wired.com/opinion/2014/03/safe-harbor-for-finance-startups-regulation/
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georgemcbay
I agree. Bitcoin exchanges should be free to lose and/or steal all the
bitcoins they hold at any time with no repercussions. As a non-participant in
bitcoin, lack of regulation makes the whole bitcoin economy so much more
interesting to read about.

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sp332
It's already illegal to steal bitcoins. And if an exchange represents that it
takes certain measures to secure wallets when it really doesn't, that's fraud.
Other than that, what is there to regulate?

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alex_c
Curious what you think about PCI Compliance and whether it should exist. After
all, stealing credit card numbers is already illegal.

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pjc50
PCI Compliance is entirely private/free market, isn't it?

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forgottenpass
Yeah. But is this a conversation about "if you want to participate in system
X, follow rules Y" or specifically anti-government sentiment?

As the Wired article talks about the cost of coming into compliance, I think
it is reasonable for the parent poster to ignore the source of the rules.
Unless you wanted to make a point about the source of rules impacting
compliance costs or voice your other reason for such a government/private
distinction. But now that I've already started arguing with myself I'm not
going to go any further.

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thinkcomp
Jerry has a few things right here, but he's mostly wrong.

Regulators should do anything _but_ "take it easy" on Bitcoin startups.
Bitcoin has proven to be in practical terms one of the most risky potentially
legitimate investment classes known to man. I'm not discussing its potential
use as a currency because it's in fact so risky that it hasn't even made it
there yet. All of this means that regulators should be forcing Bitcoin
startups to justify themselves.

I have proposed a bill to amend 18 U.S.C. § 1960 that I think would be a step
in the right direction:

[http://www.plainsite.org/issues/index.html?id=2](http://www.plainsite.org/issues/index.html?id=2)

I think the notion of a proportionally and increasingly scaled premium paid to
an FDIC-style insure is the right way to go (bigger institutions put slightly
more in per dollar held in trust to account for systemic risk), but if you
handle Bitcoin? Multiply the premium times 30.

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mycroft-holmes
Everybody has varying levels of comfort with the amount of risk they're
willing to take. There's no need for regulation. Let the companies operate how
they want to operate and let _people_ decide if they want to do business with
them. We don't need bureaucrats telling us the level of risk we're allowed to
get ourselves into.

~~~
cecilpl
Leaded gasoline. In my 70s-era car, I want to use it instead of unleaded,
since it improves my fuel economy significantly. However, the total cost of
the lead in the environment far outweighs the economic benefit. We needed
regulation to fix this.

Thalidomide. Regulation prevented thousands of deformities in the US by
imposing a proof-of-safety barrier before the drug was allowed to be sold.
Other countries were not so lucky as to have that regulation in place.

More to the point... How, as an individual, am I supposed to make an informed
judgement about the relative risks of MtGox vs Bitstamp, say? I have no inside
information about how those companies operate. There's a huge information
asymmetry problem that regulation alleviates.

~~~
crazy1van
> There's a huge information asymmetry problem that regulation alleviates.

How does regulation alleviate it?

~~~
normloman
By forcing companies to disclose the truth about their product.

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boon
The bitcoin community needs to come together and prove that legitimate self-
regulation and sufficient transparency can work. We need to shed the Mt. Gox's
by choice, and choose firms that are willing to undergo third party audits
(like Coinbase did recently).

I'm a firm believer that there are better avenues than regulation-at-gunpoint,
and cryptocurrencies are looking like a big part of that, but the _community_
needs to prove this.

~~~
gutnor
Money and self-regulation is never a good mix and it has not even been 10
years since the last time we have all suffered the result.

Of course, the point is not doing it too early to avoid chocking the potential
of bitcoin, but eventually, as bitcoin grows, after the power has shifted from
the original believer to greed-driven finance professional, you will need
regulation to rein them in.

Of course, we can dream that communities will be strong enough. But let's be
realistic - financial world has the money and it is their job to play with it,
it would make no sense for them to ignore something as important as bitcoin is
becoming.

~~~
wyager
>Money and self-regulation is never a good mix and it has not even been 10
years since the last time we have all suffered the result.

Unless you have unyielding cryptographic primitives to help.

I'm at the Austin Bitcoin conference right now listening to a talk about Open
Transactions and cryptographic exchange auditing. It sounds like exchange
theft is pretty much a solved problem. Using crypto, we now have ways to make
theft or coin loss pretty much a problem of the past, because we can make
operating a fractional reserve exchange impossible and make stealing coins
very, very hard. It seems like cryptographic regulation is drastically more
effective than government regulation.

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czr80
So, a prediction - stealing coins will always happen. Maybe no one will break
your cryptography, but you will never close off all side channel attacks.

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tlrobinson
So should we give up now?

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czr80
Of course not - but don't expect to be able to throw away lines of defense,
like regulation and state enforcement.

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mariusz79
No they don't.

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tlrobinson
Thank you for your valuable insight.

