Bitcoin Forum

When people ask for Bitcoin to be regulated the way other financial services are, they are typically people who have little idea what that actually means or would mean to them.

I’ve actually operated under those regulations for many years – let me give you an example using what I know best: the world of stockbrokers/ financial and investment advisors such as those who work for major brokerage firms. (I was a FINRA General Securities Principal / Supervisor and Registered Rep for about 18 years – this group covers all stockbrokers and financial advisors at major investment firms)

These examples are standard in this world:

EVERY piece of correspondence including email and hard copy mail MUST be approved by a General Securities Principal before being sent - “Nice having lunch Jim, look forward to discussing your IRA”

Certain written materials, such as brochures, articles web pages or blog pages ALSO have to be approved by a Compliance officer

In some cases these materials have to ALSO be approved by the regulators

Any article, magazine or link sent must be approved (and usually will not be)
   
Licensed Registered Representatives must report the use of ALL outside personal email addresses and social media - if you do use social media, a compliance officer from your firm WILL review your posts for ANYTHING remotely related to investments or the economy -- some firms disallow all social media entirely even for personal use - your work email will be even more closely monitored

Any public speaking event must be approved ahead of time and all content, PowerPoint slides, invitations and a script must be approved

Registered Representatives must regularly be fingerprinted, take tests and engage in continuing education

ALL activities done by a rep in his/ her personal time must be approved: this includes sitting on non-profit board seats and clearly anything related to business such as being a minor partner in a coffee house or owning income real estate – anything more complex than this is most certain to be disapproved and not allowed by the firm

If a client you have moves out of state and you speak to him and are not licensed in that state, you have broken the law

Registered Representatives are required to get updated proof of ID and account information from every client on a regular basis even if they have known the client for years

If an assistant who is not licensed answers a phone and a client says to sell a mutual fund the assistant cannot accept that order

All of your email is saved and reviewed by the firm – they will read it
   
Registered Representatives must be fingerprinted, have a background check and report annually at a compliance review which can take a couple of days on all facets of their life and business – even something as simple as renegotiating a personal loan is considered material and failure to report it can result in serious action
   
You are not allowed to donate to any politician, PAC or political cause unless you file a form explaining the donation
   
There are typically multiple authorities governing the actions of Registered Representatives this includes the DOL (for pension and 401k plans) the CFTC (for commodities) FINRA (formerly known as NASD), the exchanges, the SEC, the IRS in some cases and the State Securities Regulators in every state --- if the rep works at a bank they ALSO have FDIC, the Fed Reserve System and many other banking regulators – if a rep works with something like annuities, they ALSO need an insurance license and are governed by more regulations and the insurance commissioner
   
I have barely scratched the surface on all the other technical requirements and rules governing underwriting, trading etc.

So lets just pretend that Bitcoin is regulated the way FINRA financial services are:

    It would be nearly impossible for any employed Bitcoin professional to comment on this forum legally

    Permission would be needed before you spoke at or even attended any conference

    You would need to submit everything you say or write to a compliance department for approval

    You would need to have all your emails monitored and report even social media connections and email address

    You’d have to check that you are properly registered in a state before speaking to a client there Etc. etc. etc.

Compliance costs total millions of dollars annually even for relatively small firms. This is why we see very few brokerage and almost no banking start-ups.

I could go on and on.

Next time you hear someone say “we need more regulation in order to help this space mature” take what they say with skepticism, especially if they have never actually lived and worked under such regulations.

Please join the Bitcoin Financial Association (for FREE for BitcoinTalk members using coupon code BITTALK)

bitcoinfinancialassociation.org

Also, please sign our open letter to finance regulator Ben Lawsky of New York (anyone can sign regardless of location or if you are a member or not)

EDIT: I forgot one of my favorites: due to concerns about protecting the elderly, you are forbidden from using the words "senior", "senior citizen" or "elder" in marketing material and marketing directed at seniors such as seminars held at senior community centers are a big no no

EDIT 2:  this was cross posted on Reddit-  a few mentioned that the comparison is different because this is securities law not Bitcoin --- although they may or may not (probably wont) classify Bitcoin as a security and make it subject to FINRA ---  I believe this is EXACTLY the TYPE of regulation some are seeking -  there are people who WANT Bitcoin to be regulated like brokers or banks (who have even MORE regs than brokers)

I didn't read everything but I get the point. Too much regulation is never good.

With that said,  trying to compare it to the regulation of the finincal industry might fall on deaf ears. Even with all the regulation the finincal industry has they've still found a way to game the system and make insane profits at the expense of others. Regulation didn't stop them  :-\ :'(

Signing. I didn't realize how much red tape regulation involved

so what's better?

having the government come in and steal $5 million from you?

that happened here before a new venture even got off the ground.

what you are advocating is completely fucking unrealistic.



ask gox and coinbase how they feel about regulation.

I would like to point out that these rules (assuming they are all accurate) vary depending on what type of financial services the business is providing. For example, an investment advisory firm most likely does not spend millions on compliance (magnitudes less in most cases) nor are the rules as strict.

Interesting how replies so far boiled down to TLDR

LOL how can you argue against any regulation if you are too lazy to read the fine print? I'd say those kinds of people deserve to be regulated.

They are all accurate.... The example is from what I know best which is FINRA regulation -- this covers hundreds of thousands of reps and relates to millions of customers -- every single professional at Fidelity, Charles Schwab, Merrill Lynch, Citi, JP Morgan, UBS, every discount firm, every independent at firms like LPL etc are all governed by these.

Some industries - like video games and the sale of paper are not as regulated.

I just try to imagine the chatter after a business dinner in the bar:

Person1: "Hi, did you read about the insider trading at XXX Corp?"
Person2: "Hold on a moment!" Walks quickly to the entrance, and calls the compliance officer of his firm.
Explains the question and discusses with the compliance officer what he can and cannot say. Comes back
and sheepishly says: "Sorry, I was advised by my compliance officer that I cannot give you any answer on these issues unless our review board has looked it over. Why don't you e-mail me the question, and I'll get back to you on monday? And I'm sorry about this, but I really have to leave now, we have mandatory tests tomorrow and I don't want any alchol to show up in my blood, then I might be disallowed form working with my clients, and might lose my job altogether. Bye!"

REGULATION!

Fortunately we didn't need Pre-approval to discuss something in a bar.

Provide we met a dozen other criteria

How convenient, then all the nasty business could take place there. ;) Well - it seems to me even regulation is not able to tame the bad boys. But on a serious note: I get your point that regulation is heavy stuff, and is not making it easy for startups.

My example refers to RIAs who do not have custody of client funds, I suppose I should have clarified that originally.

This is really important.

Far as I understand, it would prohibit a ton of people that are both use bitcoin and work for an exchange to even talk about bitcoin without passing the speech through a regulator. And the AML and KYC are already covered in the exchanges, there's no need to go further.

It's a pity you weren't there to answer the questions, as you unlike many of those present, seem to have the experience and knowledge in this area.

That's one reason I left Finra and became only an RIA.

But, even still, tons of requirements and it depends on what type of company a Bitcoin company is.   If someone writes a magazine about Bitcoin for example they may not face much reg.  But someone like an exchange might be treated like a FINRA member.

I'm definitely not for any of this type of regulation.  This type of regulation is probably more about controlling people vs. benefiting people.  I'm sure the "insiders" hide behind this wall of regulation.  Convenient for them and their profits.

Thank you -- had I known what the panelists would have said I would have absolutely insisted on being there to give a more balanced view.

I thought the hearings would be one side (the regulators) calling for more regulation with the other side (the panelists/ witnesses) calling for them to not regulate.

Instead we had a pro regulation government question 15 or so witnesses of which only two or so were anti-regulation and 3-5 (Winklevoss, Charlie Lee etc) were pro regulation and a few (Professor "Bitcorn" Williams among them) completely anti Bitcoin.

It was a disgrace -- if Williams was bumped and a few others like him bumped and replaced by Andreas Antonopolous,  Max Keiser and a couple others then it would have been more balanced.

I lost my respect for Charlie Lee. He gains from regulation, most of us lose.

The term "regulation" can mean quite a few things. What most of the investor and entrepreneur panels' panelists were arguing for (either explicitly or implicitly) when they made pro-regulation statements, boils down to a few fairly simple things:
1) Clarity that existing AML/KYC/BSA rules that are applicable to money services businesses cover virtual currency businesses to the satisfaction of regulatory bodies.
2) Some way of streamlining the current state-by-state patchwork of money-transmitter rules, and even the definition of "money transmitter".
3) Determination of whether bitcoin is a currency or commodity, neither, or both (as absurd as it is for a gov body, or anyone, to slap such labels on something that can be anything).
4) Clarity from the IRS on tax treatment of virtual-currency gains, and what constitutes a taxable event.


The regulatory nightmare you outlined in your OP is not even on anyone's radar (which I get is the whole point of this thread). So thank you for providing a detailed image of what this could eventually look like. The ecosystem is definitely immature; with both entrepreneurs and VCs in the space having almost no prior experience in institutional finance.

That said, OP, do you think it's possible for regulators to specifically address the items above without leading to a framework with such ridiculous and onerous symptoms as what you describe? How? It's become very clear that the above *does* need to be addressed in order for businesses to flourish (or to even get bank accounts...).


And sidenote: Andreas would be great on any panel, but Keiser is full of hot-air, and would make an awful ambassador for bitcoin (or pretty much anything).

Thank you.

The problem with inviting the fox into the hen house is that the nature of regulators is to take more and more power, grow their agencies and influence (often because of political or private sector career ambitions) and seek larger staffs and more influence.

If we have a little 10 person "Bitcoin division" of the State Banking or Securities regulators ....it won't stay small for long.   If Bitcoin grows like it has potential to we can see more oversight and regulation grow with it.

As for your question-- yes that clarity is ideal and exactly what we should be asking for....in Charlie's defense I hope that is what he meant...clarity, not regulation.

Unfortunately, to a hammer all problems look like a nail and Mr. Lawsky and others have already essentially said that they WILL regulate more...opening the door to a more nightmare scenario like this.

Also, some assume it goes without saying that Bitcoin exchange be counted as "money transfer" I would personally have preferred that even this basic step be skipped....we could have treated it like the transfer of frequent flyer miles or WOW money and not even had this much regulation.   The money transmitter registration has to be done in all 50 states and has many burdens surrounding it.

There is great danger in laws which give regulators broad power to interpret things and make new regulations as we go.

This is why the hearings were not in front of law makers but regulators.   Once law makers give power to regulators the regulators can simply make things up as they go and the regulations become very bloated.

I don't understand what gives them the right to regulate me? If it was up to me I would leave bit coin alone but people consider me a lunatic for thinking this way, I consider them a $@#$@# and now we are stuck. What's the problem , why can't we be left alone?

Those regulations only apply to brokers and exchanges - people who handle other people's money. If you're trading for yourself, or mining Bitcoin, you don't need to qualify as a broker.

Over half of Bitcoin exchanges have failed, often disappearing with customer funds. That's what happens with no regulation.

Right and regulations like this on Bitcoin companies would affect the entire community, the starup environment, VC investment etc etc etc. all in very negative ways.

Will people fail and "disappear with customer funds" with no regulation.  **Yep**

But if you think regulation will stop crooks then you only need to talk to a victim of Bernie Madoff who scammed more than six times the entire value of all Bitcoin on earth to see the answer.

If a victim of Madoff lost less than $500,000, they got it back from the Securities Investors Protection Fund insurance.  Above that, money has been slowly clawed back from Madoff's cronies who made big profits, and the bigger Madoff victims are getting about half their money back. Meanwhile, Mr. Madoff is Prisoner #61727-054 at Butner Federal Correctional Institution.

How is getting money back from Intersango working out for you? Or Tradehill? Or Mt. Gox?

I was responding to what you said above which is that "without regulation" exchanges go under.....the implication is that regulation prevents this.  It doesn't.   Instead of backing up that argument by saying yes regulation does prevent people like Maddoff, you've moved to a different argument which is that regulation helps people get money back and makes criminals go to jail.   I also disagree with this...the overwhelming majority of people who lose money in these types of situations do not get it back....and people who commit fraud and are caught go to jail with or without special new regulations.

Soooooooooooooooooooooooo many people wanted to "bring Bitcoin to the public" and now they have.

They will also reap what they have sown.

My $.02.

;)

This post is not a diss toward the OP, for I was with you the entire way till I reached the bottom of the post.


With all that education and thought that went into this, I bet you don't see the error made in naming the entity as you did, do you?

In fact, there are two issues.

Excellent example of changing the subject after losing the point.

IOW, it came out of my pocket. Thank you sir, can I please have another?


I had nothing at Intersango. I have funds at MtGox that seem to be safe for the time being. I got all my money back from TradeHill - twice. I guess I'm doing just fine on the 'getting money back' point.

Do you really think the purpose of regulation is to prevent gaming the system and making insane profits at the expense of others?

The purpose of regulation is:

1) to give politicians a plank for elections
2) to favor big business by making it difficult for startups/small business

If anything, in the long run, regulation favors "insane" profits by eliminating competition.

bitcoin is a threat to established business. those established business will go to washington with dollars and, in turn, politicians will use the excuse of the need for regulation to squash bitcoin in order to favor those established businesses.

That's how the system works.

Update - prince on Gox just tanked. Took this opportunity to convert all USD but $16.xx on that exchange to XBT. Then withdrew all my XBT. Transaction processed immediately. So again - the wild-west regulation-free exchanges are working just fine for me.

The word "Bitcoin" and the word "financial"?

We wanted Bitcoin because that is what is in the news and that is what people are turning to (bad) sources like Professor Williams from the NY hearings for.

It would not surprise me if we change the name in a few years to Crypto-something along those lines...but for now this gets us rolling.


Financial was more because its a focus on financial aspects (which are almost everything) versus non financial aspects such as the backbone code or blockchain security.

Also, some dude in Panama who has registered over 10,000 domains with a dictionary word and Bitcoin...seriously.


Where those the two problems or are there two more?    Thanks.  :)

i think they are doing it in a different way. calling it C4 which is part of the blockstream collective

https://cryptoconsortium.org/

Yep, Bitcoin Association still exists.

Despite its past problems Bitcoin Foundation still has a reach and depth that is hard for a new organization to match.   Many have tried, so far none have become as broad or large as Bitcoin Foundation -- this is why I think it's worth rebooting and launching fresh without scrapping the name, membership etc.

blockstream seems to have stolen alot of bitcoin foundation folk.

even the bitcoin foundations education director: Charles Hoskinson
and other names like Peter Todd, Andreas Antonopoulos, etc
https://cryptoconsortium.org/about

What makes you think the CryptoConsortium is run by Blockstream?   Afaik is run by Michael Perklin who is also a new board member at Bitcoin Foundation

oops you are correct. i was thinking of andreas's involvement with blockchain.com.. (me stupidly thinking it was part of blockstream.com)

so i guess c4 is part of the bitcoin.com & blockchain.com which i assume is still part of TBF powerhouse , rather than blockstream powerhouse

Bruce, don't hesitate to link bitcoinfinancialassociation.org found in the OP which redirects to http://bitcoinassociation.org/. We all know that you oversee http://bitcoinassociation.org/ and wouldn't necessarily think lesser of you if you would've made it easier for us by including the actual link to your endeavor.

This post is neither a rip on your character nor satire, the latter barring... it's hard to rip a dude who doesn't make grammatical errors.

If you are implying that regulations are not needed you are fooling yourself. I won't quote Uncle Ben from Spiderman, but really, if Bitcoin will hold such power and become a world's leading method of payments and transactions it will be also be subject to great scrutiny if you will hehe. It's just the way it goes because if not you will have the same problems we have right now with scamming sites, casinos and "investments" opportunities, it's the wild west.

No, haha, I think that's incorrect also.

Bitcoin.com is owned by Roger Ver who I don't think has anything to do with C4 / consortium
Blockchain.com shares a common investor (Roger) with Bitcoin.com but I don't think either of them have anything to do with C4
Andreas was an advisor to both...I don't think he's that active with Blockchain now but I don't know

In any event - I don't think there is much of a tie between them

This is a very old post that's been bumped to the top.

I think we should have regulations (preferably laws voted on by legislature) for those actions which actually have a victim:  theft, hacking, breech of privacy, fraud etc.

Most regulations today are not made by lawmakers but unelected bureaucrats with little accountability and most of these regulations IMHO do very little to stop bad acts and usually have no bearing on any act with an actual victim.

Bitcoin Financial Association changed its name shortly after launch to Bitcoin Association - partly due to a suggestion on this very thread over a year ago and partly due to a generous donation of the BitcoinAssociation.org domain name by someone also on this very board.

Mainly membership -- a dozen international chapters, affilliates, international name recognition (which, believe it or not, is not nearly as negatively viewed as it is by some here and on Reddit), overal membership, press connections, social media, corporate members etc.

So far many have tried but not many have been able to put something together in this way.

Yes, they definitely wasted money -- IMHO there was some value achieved from that spending -- maybe only 5% of what was spent -- but I think it has some value

Did you mean 'forum', not 'thread'?

No, this actual thread.  This is an old thread that was recently resurrected.

Foiled again

Not sure why you are attacking this as if this is a scientific list.

I told you the basics of why I think the organization has a value above zero.  Its a subjective thing, my own personal opinion unless we hire an independent appraiser.  This is only based on my opinion as a relatively new volunteer.   If you disagree, that's fine, no need to be combative or reiterate that they wasted a bunch of money.  I think everyone knows that.

There were some positive things I think they did with the money -- I can't take credit anymore than for the bad things and wastes of money.   Some that come to mind were some very large events, the funding of Bitcoin.org, funding of bitnodes, education committee, a comprehensive response to the problems with Bitlicense, press engagement etc.

Hey, Bruce, if you happened to find time between conducting billion-dollar deals, would you be so kind as to address the following either here or via following the link of the original poster, quoting it, then addressing it on that thread? The community, including this mentally unnnnnnnstable person - ME - would duly appreciate it.

I replied to that post as soon as I saw it, within a few hours of seeing it.

The questions / speculation are easily explained.

I expect an apology from you for furthering this false accusation ...especially without doing research, asking me for an explanation or reading my reply.

I know you like to play the role of a charming satirical character who challenges people.  But there is nothing funny or clever about disparaging the name of another person based on false or misunderstood information.   

In fact, it's quite a low thing to do and it adds nothing to Bitcoin or this forum.

I have had a spotless compliance record for over 20 years (as you can see from the document).  I don't lie, indont cheat and Indont associate with those who do.

Members of this community have been calling for transparency at the foundation for a long time.  I came in as a volunteer and came on this forum to provide details about past errors by others.   I had nothing to do with these people and no part in those decisions.  In most cases I never even met them.

As a result I have been attacked in every way possible and been subject to accusations and guilt by association of people I never associated with.

It's really shameful.