Bitcoin Forum

URL: http://dfs.ny.gov/about/press2013/memo1308121.pdf
reddit: http://www.reddit.com/r/Bitcoin/comments/1k7e18/ny_regulator_memo_notice_of_inquiry_on_virtual/

Reserved.

<rhetorical question> Hm... what about FIAT and those problems? </rhetorical question>

http://www.youtube.com/watch?v=gkY8WBNjyqY

Lawsky has been in the news before:

Ben Lawsky's Moment: Financial World Pounces on Standard Chartered Regulator

Reuters


JOHN HUDSON 719 ViewsAUG 15, 2012
Nine days ago Ben Lawsky was a no-name financial regulator working for the state of New York, but now he's the front page protagonist behind the largest money laundering settlement in U.S. history. On Tuesday, the 42-year-old superintendent of financial services announced the $340 million payment by Standard Chartered, the British mega bank that allegedly laundered some $250 billion of Iranian money. Those charges, leveled at the bank eight days ago, came out of nowhere, but equally surprising was Lawsky's lightning-fast settlement of the case, which The New York Daily News championed as "quick and effective." "Bravo to state Financial Services Superintendent Ben Lawsky," added the tabloid. But despite the impressive haul for the one-year-old state agency, the man has quickly made enemies with powerful U.S. and European regulators and some of  the biggest voices in financial journalism. Here's how Lawsky's opponents are trying to take down New York's rising star regulator after his huge cash haul on Tuesday:

He jumped the gun. Lawsky's agency wasn't the only regulator looking into Standard Chartered's questionable dealings with Iran prior to last week's charges. According to reports, regulators including the U.S. Treasury, the Federal Reserve, the Justice Department and the Manhattan District Attorney were also involved in the matter. But in pursuing his go-it-alone strategy, Lawsky infuriated the feds and may have complicated forthcoming investigations and settlements, a former prosecutor tells Bloomberg. “Ben Lawsky hijacked the feds’ case,” says Rita Glavin, currently an attorney at Seward & Kissel LLP. “That kind of move causes a major headache for the Justice Department. Before, they may have been more willing to share with a state regulator. They may not be so willing in the future.”  While that may be true, The New York Times' Jessica Silver-Greenberg reports that its unclear if the feds would've pounced if Lawsky hadn't. "In the weeks leading up to Mr. Lawsky’s move against the bank, the Justice Department was on the brink of deciding not to pursue criminal charges, after concluding that virtually all of the transactions with Iran had complied with United States law, current and former authorities said." Either way, feathers were clearly ruffled.

He played fast and loose with the facts. In today's paper, The Wall Street Journal's editorial board makes a piercing assessment of Lawsky's conduct in the case. "His grandstanding on Standard Chartered may also do more harm than good. For one thing, his declaration of allegations includes some exaggerated facts. Of the $250 billion of transactions at issue, it now appears that $249 billion and change were legal at the time they occurred," writes the newspaper. "We're told by other law enforcers that roughly $300 million in transactions over the course of a decade were illegal. This is higher than the bank's public claim of only $14 million, but a tiny fraction of the amount in Mr. Lawsky's initial accusation. So far the illegal transactions also don't appear to have had any ties to terror or weapons." Pushing back against the Journal, blogger Yves Smith called it an "alternative reality editorial," noting that both "parties have agreed that the conduct at issue involved transactions of at least $250 billion."

He sacrificed the truth for a headline. CNN Money's Larry Doyle says a hasty fine settlement could prevent us from uncovering the actual misdeeds of Standard Chartered. "The last thing I want to see is a fine. Better that Standard Chartered pays not a penny than we suffer again from not truly knowing and learning the truth. A fine only serves to suffocate the truth," he writes, calling for an independent investigation. "When a bank is merely fined for dealing with a rogue nation such as Iran, that payment is nothing more than blood money. A fine does not rebuild confidence but erodes it dramatically because the public is aware that the truth remains under wraps. What rebuilds confidence? The truth. If the truth exposes ugly practices within Standard Chartered and similarly lax oversight from regulators, then so be it... In delivering the truth, the public and our global economy will be reinvigorated by fresh air filling our collective lungs."

It was a publicity stunt. In an interesting window into the world of competing global regulators, it appears Lawsky's peers aren't big fans of his alleged grandstanding. "Lawsky’s order angered U.K. officials, who viewed it as an attack on London’s status as a financial center," Bloomberg's Greg Farrell and Tiffany Kary report. "In the U.S., regulators including the Treasury Department, the Federal Reserve and the Manhattan District Attorney complained privately in published reports that Lawsky’s order was a publicity stunt that disrupted their own probes of the matter."

Want to add to this story? Let us know in comments or send an email to the author at jhudson@theatlantic.com. You can share ideas for stories on the Open Wire.

national security blah blah blah national security blah blah blah blah blah blah national security blah blah blah blah blah blah national security blah blah blah

Francine McKenna, Contributor
PERSONAL FINANCE
|
 
6/21/2013 @ 11:35AM |5,344 views
Deloitte By Any Name Won't Be Monitoring NY Banks For A While

When the Superintendent of the New York State Department of Financial Services, Benjamin Lawsky, said he was going to hammer on a banking consultant, many thought the nail might be ultra-connected Gene Ludwig’s Promontory Financial Services. After all, it was Promontory that pooh-poohed the bad conduct at Standard Chartered, estimating it at mere millions instead of hundreds of billions.
Instead Lawsky banged on Big Four auditor Deloitte’s Financial Advisory Services business unit. DFS fined the firm $10 million this week and banned Deloitte from accepting new consulting engagements at financial institutions regulated by Lawsky. Deloitte’s violations took place while standing in the shoes of the regulator as a “monitor” at Standard Chartered. The original Deloitte engagement was the result of a 2004 joint written agreement between Standard Chartered and the New York State Banking Department – a DFS predecessor agency – and the Federal Reserve Bank of New York which identified several compliance and risk management deficiencies in the anti-money laundering and Bank Secrecy Act controls at Standard Chartered’s New York branch.
The order addresses Deloitte’s “misconduct, violations of law, and lack of autonomy during its consulting work” at Standard Chartered Bank on those anti-money laundering (AML) issues.

From a press release from New York Governor Cuomo’s office:
DFS’s investigation into the conduct of firm professionals during its consulting work at Standard Chartered found that Deloitte:
Did not demonstrate the necessary autonomy required of consultants performing regulatory work. Based primarily on Standard Chartered’s objection, Deloitte removed a recommendation aimed at rooting out money laundering from its written final report on the matter to the Department. The recommendation discussed how wire messages or “cover payments” on transactions could be manipulated by banks to evade money laundering controls on U.S. dollar clearing activities.

Violated New York Banking Law § 36.10 by disclosing confidential information of other Deloitte clients to Standard Chartered. A senior Deloitte employee sent emails to Standard Chartered employees containing two reports on anti-money laundering issues at other Deloitte client banks. Both reports contained confidential supervisory information, which Deloitte FAS was legally barred by New York Banking Law § 36.10 from disclosing to third parties.

Oof!
American Banker’s Chris Cumming quotes mewhile describing the impact of this enforcement action.

More significant is the precedent Lawsky has set. It could be “very disruptive” for banks if other states, following New York’s lead, ban consultants from operating and issue their own sets of regulations, says Francine McKenna, an accounting watchdog and journalist who has contributed to American Banker‘s BankThink columns.

“Banks will have to have a contingency plan if suddenly a very significant consultant stops working,” she says.

Even though the New York sanctions on Deloitte would only apply to state-chartered banks, they could have a spillover effect in terms of industry-wide reputational risk. Some consultants expect to see big national banks — especially those already under regulatory scrutiny — also rethinking their use of the firm.

Deloitte’s law-breaking at Standard Chartered probably made officials at the Federal Reserve Bank of New York particularly uncomfortable. Deloitte’s audit arm is the financial auditor for the entire Federal Reserve system, and Deloitte also audits some of the firms the Fed has been highly dependent on during and after the crisis such as BlackRock. Deloitte’s actions at Standard Chartered belied its intended role as the eyes and ears of the Fed and DFS, making sure Standard Chartered corrected its money laundering ways. Instead, Deloitte helped Standard Chartered assuage regulator concerns by breaking the law and sharing confidential regulatory information with the bank from its other “monitor” engagements.

Deloitte has been working on a similar engagement to correct AML violations at the nationally chartered US operations of HSBC Holdings PLC in New Castle, Delaware, where the firm is again acting at the behest of the feds. The HSBC engagement is a “look-back” at thousands of old transactions ordered by the OCC in 2010 when the regulator cited the bank for multiple anti-money laundering failures. According to Reuters last year, it was not going well.

The New Castle look-back, overseen by consultants Deloitte LLP, was manned by more than 100 former law-enforcement officials, bank examiners and others. Many of them were working under contract with outside anti-money laundering consulting firms…In the HSBC look-back, one contractor said, many suspicious cases were “buried.” In one case, the contractor wanted to find out why 13 parties had wired a total of $1.3 million into an HSBC account in Hong Kong on the same day. He said that when he asked a Deloitte supervisor to request that the Hong Kong office provide information about the customer, he was told that decision rested with the HSBC manager in charge of the account. The information never was provided, and the same contractor said he was later fired for not clearing enough alerts.
The look-back team held brief weekly meetings at which Deloitte overseers ticked off how many cases had been cleared and complained about delays. Several contractors said that investigators deemed slow on the job were fired.
Similar allegations  - that Deloitte seems more eager to please a bank involved in a regulatory action rather than stand tough as the proxy for the regulator  - recently surfaced at Lloyds Bank in the UK. That engagement addressed customer claims processing for payment protection insurance (PPI), designed to cover loan repayments for debtors who became ill, had an accident or lost their jobs.
PPI was mis-sold by UK banks on a massive scale to customers who did not want or need it. According to the London Evening Standard, Lloyds – the biggest PPI seller in the UK  – was fined £4.3 million by the Financial Services Authority for not settling PPI claims promptly.

From the London Evening Standard on June 11:
Lloyds Banking Group has admitted “issues” in the handling of PPI complaints and fired Deloitte which operated the unit.
It comes as an undercover reporter on The Times claimed that when he went through the training procedure to join the PPI complaint centre at Royal Mint Court he saw staff taught how to “play the system” against customers.

This included turning a blind eye to the risk that fraud may have been committed and knowing that most customers gave up if their complaint was rejected first time around.
Most of the headlines for news stories about Deloitte FAS’s agreement with DFS regarding Standard Chartered referred simply to “Deloitte”. Deloitte spokesman Jonathan Gandal tried to make the distinction in the firm’s official statement:
Deloitte FAS looks forward to working constructively with DFS to establish best practices and procedures that are ultimately intended to become the industry standard for all independent consulting engagements under DFS’ supervision.

It is important to note that, as the agreement also states: “This is not intended to affect engagements performed by any Deloitte entity other than Deloitte FAS.  Neither the fact of this agreement nor any of its terms is intended to be, or should be construed as, a reflection of any of the other practices of Deloitte-affiliated entities.”

However, Deloitte itself says on its global website:
“Deloitte” is the brand under which nearly 200,000 professionals in independent firms throughout the world collaborate to provide audit, consulting, financial advisory,risk management, and tax services to selected clients.

Can’t have it both ways.
So it’s not too surprising that the public, and even regulators, legislators, and some journalists are often confused about the difference between Deloitte LLP the audit firm, Deloitte Consulting the consulting firm (not to be confused with Deloitte FAS LLP a different consulting firm), and Deloitte the tax advisory firm when one of them gets into trouble. It’s also hard to separate the Deloitte global member firms such as Deloitte’s China firm when it’s sued or sanctioned for Chinese reverse merger fraud and refuses to cooperate with the US regulators from Deloitte Touche Tohmatsu the global “coordinating” firm and then from the Deloitte US firms. The Big Four audit firms look more and more like any other multinational corporation hiding behind myriad separate legal entities rather than global professional services partnerships providing “seamless” service delivery.

Reputation risk doesn’t seem to get in the way anymore of audit firms helping some criminal banks do lots of illegal things. That’s what I said when DFS first made the allegations against Deloitte in August of last year.
“Reputation risk” is now an oxymoron. Bankers and their enablers, the audit firms, have no risk to their reputation from anyone that matters. They are both repeatedly the subject of settlements, consent decrees, non-prosecution agreements, cease and desist orders and the rest of the regulator arsenal. They keep profiting and repeating their crimes with impunity.
That’s what I warned about when Deloitte was awarded the “independent” consultant role at JP Morgan Chase, performing the “look back” review required by the OCC/Fed consent decrees signed with a dozen banks in April of 2011 as a result of foreclosure abuses. Deloittehas an even bigger incentive to cheat and look out for JPM Chase and itself on that engagement, rather than borrowers who were cheated by the bank. Most of the foreclosures Deloitte is “independently” reviewing are based on mortgages acquired by JPM from Bear Stearns and Washington Mutual, two of Deloitte’s audit clients before those institutions failed and were taken over by JPM.

I wondered out loud to NY DFS spokesman Matt Anderson, “How does DFS plan to make sure Deloitte, and the banks, don’t circumvent the ban by shifting Deloitte FAS staff to other Deloitte entities and running new engagements through them?”

Anderson reassured me. “DFS has the ability to monitor compliance since it controls access to confidential supervisory information under its 36.10 authority. They can’t access the information without our approval. The road runs through our agency.”

Benjamin Lawsky and the NY DFS team are on it. Let’s hope federal and state regulators in the US and international regulators follow that lead with similar tough actions against all the various forms, and firms, used by the Deloitte and its fellow Big Four enablers – PwC, KPMG and Ernst & Young.
Deloitte provided its full official statement, a portion of which was reproduced above, in response to my request for comment.

Ehhhh.... you and your country's national security - ever lasting excuse for anything; from dropping atomic bombs to fighting cryptography.

Give me a break, please and spare me this nazi bullshit - I have enough of it on my TV :)

Cross-posting from the Legal Subforum:

DFS seems to have learned from the industry’s reaction to the California DFI’s bare cease and desist letter.  DFS coupled their subpoenas with a public notice stating explicitly the purpose of their requests: to involve the industry in developing “appropriate regulatory guidelines” for the digital currency industry.  The Foundation will support its members and the bitcoin community as needed during this process.  This includes engagement with regulators and, where appropriate, legal defense.

4 horsemen of infocalypse

The foundation is welcome to begin by publishing accounts of all the BTC it scammed out of members of the community, and by separating the treasurer and the executive functions. Ideally five minutes after it quits posturing as if it had any sort of relevance whatsoever.

The gall of the MtGox-BFL pushers, incredible.

Dear Benjamin Lawsky,

Transparency is a two-way street.

If you desire transparency of Bitcoin companies, please reveal:

1) When your central bank will stop printing money and debasing the currency used by millions of retirees for their savings.

2) Why nobody at HSBC was criminally charged with money laundering, despite their recent case which represented the largest money laundering scandal in history.

3) Whether you believe two consenting adults, in an allegedly free country, having been found guilty of no crime, have the right to do business privately between themselves.

Of course, you don't have to respond to these questions, and you won't. Yet, you'll force other people to respond to your questions with threats of theft (fines) and or kidnapping (imprisonment). How civilized.

reserved

my reply.

DFS found millions upon millions of US Dollars related to drugs / terrorisism in the period from 2009-2013.

DFS found less then 12btc related to drugs / terrorisism in the period from 2009-2013.

Q)what terrorist problem do you refer to which are linked to 'virtual currencies?
1)the credit card thefts of US FIAT used in illegal activities by vandalising ATM machines to get card details.
A)bitcoin does not require ATM's

2)the millions/billions of currency used to buy weapons
A)so far NO bitcoin has been linked to obama selling weapons to enemies. bitcoin remains public property not government, which makes it harder for obama to cover up his war games.

I fought the law and the Lawsky won.

Bitcoin being taken seriously = good news for bitcoin.

If bitcoin is to succeed - by which I think we mean "go mainstream" - then regulatory guidance/interference is inevitable.  And not just in the US.

Nice try Mr. Benjamin M. Lawsky, but several things...

First, don't try to pretend the businesses and individuals that use a currency are equal to a currency itself. There is no "virtual currency industry". There are individuals and businesses that may use virtual currency at various levels but that commonality doesn't separate all such entities neatly into one industry.

Second, don't imagine you have jurisdiction to make meaningful impact on the use of virtual currency. Bitcoin, for example, being a decentralized global currency extends beyond any one U.S. state, and indeed beyond the U.S. itself.

Last, the U.S. dollar, as the world's reserve currency, I can assure you has been far more dangerous on a measure of human morality than the fledgling billion dollar Bitcoin market. The U.S. dollar has undoubtedly financed far more drug deals, global scale arms deals, heinous crimes, assassination, and murdering of innocent children unfortunate enough to be in the path of U.S. militarism in places like Iraq and Afghanistan.

So, as you consider the purpose and intent of your regulation please keep in mind the reality of just how much more dangerous the U.S. dollar has factually been, for a number of years, in this world.

I guess this explains why BitInstant has sort of stopped providing their services?

I'm not sure how US businesses can go forward without limiting the number of states they deal with, or cutting off service to the US altogether. It's a big fucking deal when a Bitcoin-oriented service snags a couple million in VC funds. For a "MSB" to be fully compliant and serve all the states, they need many multitudes more than that -- at no gain, except to have permission to operate. It's basically taking an enormous pile of money, dumping it in a pit, and having the company execs say "THAT'S how committed we are to this business." Compliance will snag a whole lot of business from people and companies which otherwise may not even consider buying BTC due to how risky using exchanges are right now.

I think there's going to be a bit of a blackout in the US from major service providers for years, but once funding and proper licensing is secured, we can get back off LocalBitcoins and sites too small to regulate, and enjoy safe trading from behind our desks again. While we're trading in a decentralized p2p way, though, the USG and states are almost certainly enabling money laundering and tax cheats -- so their priority shouldn't be in threatening service providers, but in establishing a path forward.

If regulators would just hold off and let these businesses grow to the point where they CAN fully comply, I think everyone'd be better off. Suggesting something like a five-year grace period would really be better for everyone involved than to start off a "conversation" talking publicly about enabling terrorism, child porn, and money laundering.

Just reading your post I can tell you haven't listened to this episode of Let's Talk Bitcoin:

http://letstalkbitcoin.com/post/57717761405/the-regulatory-question-inside-bitcoins-conference

The talk features a panel discussion from the recent Bitcoin Conference in New York, which included actual professionals in the regulatory space including from the U.S. GAO.


Not true. Again you need to listen to the talk. Also, not every Bitcoin related business is categorized as a money transmitter. If you want to sell fruit from your orchard, offer singing lessons, or babysitting services, for bitcoin you need no license, for example.

Is there a transcript of that? I sure don't hear of many Bitcoin businesses taking in hundreds of millions. There are ways around dumping money into bonds and fees for state-by-state MSB licensing -- you could partner with an already-licensed company, but that has its own costs (tangible and otherwise). Another idea I've heard floating around is to open a credit union to get around MSB licensing.

Where is the list of all 2 dozen recipients?

There might be a transcript, but I don't know where. LTB makes its content available in an open source way, and I think they mentioned someone making transcripts once...

Yes, you're correct about partnering with a licensed company as a cost effective option. That was one of the things discussed. There are a lot of cost saving considerations which is what surprised me most. Like you I had the 1M dollar figure as the starting point. Actually, registering at the federal level is not so costly. From there a business would also need licensing for the 50 states, but there is more to that. For example, whether or not a state requires a license if a business is not physically located there can be different. Some states, at least two, if I can remember being Montana and New Mexico I think, don't require any additional license.

So, yes, to operate in all 50 states and be fully compliant as a money transmitter is going to be costly, but there are options and already Bitcoin businesses making progress, for example, with partnering with existing licensed entities.

EDIT: also yes you're right, they mentioned banks are not subject to money transmitter licensing, so opening a credit union might work.

but guys.... bitcoins are a commodity not a currency! people can't get their facts straight ;)

Montana & SC. New Mexico is sorta-kinda free of extra MSB registrations unless there's a "negotiable instrument" involved.

I'm not sure how many states still don't consider online doing businesses in their state to be regulated by their laws - but that's probably substantial, too. Still, unless you're going to discriminate by state (which is totally valid), the costs for getting all states' MSB licensing is quite a few million. Just for my little state of MI, it's >$500k in bonds and fees, >$500k for CA, and it's probably similar in other states.

Yes, but you only make a down payment on the bonds, based on the credit rating of the owners or something like that. Like I said, people really should listen to the talk. I found it very insightful.

Sad, but true.

A wise thing for Bitcoin companies to do is to stay out of the US. Go to countries with a more sane understanding of what to "regulate".


ya.ya.yo!

You mean the Bitcoin Foundation.  Well I'm an Annual Member and Marco is also a BTCGLobal adviser.

Here is the list:


BitInstant
BitPay
Coinabul
Coinbase Inc.
CoinLab
Coinsetter
Dwolla
eCoin Cashier
Payward, Inc.
TrustCash Holdings Inc.
ZipZap
Butterfly Labs
Andreesen Horowitz
Bitcoin Opportunity Fund
Boost VC Bitcoin Fund
Founders Fund
Google Ventures
Lightspeed Venture Partners
Tribeca Venture Partners
Tropos Funds
Union Square Ventures
Winklevoss Capital Management

Seems like the state of New York is very "nice" compared to California.  Remember when California sent that notice to the Bitcoin Foundation threatening jail and fines? New York is actually asking somewhat nicely in this inquiry.  If it weren't for the weather I would move out of California.

Nevertheless, it doesn't matter what California, New York, or any other state does.  In the end Bitcoin cannot be controlled.

I will go out of my way to have nothing to do with companies that bend a knee to our corrupt ass out of control government.

I spoke to a few of the served entities tonight, and I know a few of them aren't even operational yet. This is clearly an attempt to start a dialogue.

I am however worried for the likes of BitInstant because I believe they have been operating in NY without a license. I may be wrong about that. Otherwise people should have nothing to fret over.

Someone over at Hacker News said something very smart on this subject.  Quoted here in its entirety:


https://news.ycombinator.com/item?id=6203085

If you'd like to shine the light back on Ben Lawsky and NYFDS, you can find them @BenLawsky and @NYFDS respectively.  Public opinion does seem to matter to them to some degree or the statement wouldn't have mentioned the importance of "technological innovation" in NY.

Let's continue to educate journalists, politicians and government officials and most of all, ourselves.

This piqued my interest. Are there US regulations regarding the use of, say, the Euro in the United States as payment for services or goods? I couldn't imagine so. If I want to use it and a business is willing to accept it, where's the bother? The focus of regulators in the US has only been (within my view) money exchangers because that's all they CAN regulate since it's the interaction with U$D that concerns them.

+11111111111111



edit: Just saw BFL on the list... fffuuuuuuu

You don't start dialogue with subpoenas. This is clearly an attack on bitcoin, an attemtp to drive bitcoin companies away

Satoshi's well-crafted layer of anonymity now looks much more wise and much less paranoid.  Good for him that he's not going to get put through this (or any future) circus.

Perhaps that's how they do it in New York.

Someone might want to have the fungibility conversation with Lawsky ... for a regulator of monetary products he seems entirely ignorant of what properties good money needs to have ... it's like asking all cars that are not US made to have square wheels.

... also his name is just a little too cute for law guy ... really, it's like a joke that starts out "lawsky, copsky and thiefsky go into a bar for a brewsky ..."

Time to put a face on the name.

Benjamin Lawsky

http://media.npr.org/assets/img/2012/08/18/ben_lawsky_00_wide-8c08711e0f72a02091641c28cb2a29d417064a2d.jpg??s=4

That's why no one has, or is ever likely to make *publishing* bitcoin software illegal.  Though censorship is routinely implemented -- loli pron is illegal just about all over the world.


Who suggested banning cryptography?  That's ur paranoia talking.


Huh? See 1 & 2.  See also: Pirate's Bay, LimeWire, eMule, Napster.  No one had to mess with p2p to make certain file content (warez, rips, etc.) less available.


Child pron is also just strings of bits, as is classified information, database dumps & jacked CC info.  Some strings of bits are legal, some are not.


Uh huh.  That's why lawmakers rarely boot a speedball & chug half a quart of JD before writing lawz.  Exactitude. :)

You can though, and the indicator of this in my book is the fact that many of these companies are non-operational. There is no indication of wrongdoing mentioned in the subpoena.

In fact...

Ignore all the mamzy pamzy anti terrorist nonsense and you get to what they are after: hey we see that our regulatory framework might not best suited for digital currencies and we are afraid to stifle innovation but we are also unwilling to allow illegal activity to go on. Please prove to us you aren't doing anything illegal and tell us how your business works so we can start to figure this thing out.

Would you put Lawsky (or anyone from NYFDS) on payroll to administer a IT system holding bitcoins?

(NB: looks like he has a shiny 4-screen monitor bank ... all with empty windows desktops :))

It's going to be ages, if ever, these guys can "have a conversation" about bitcoin. Imagine how ridiculous it would look if they started sending legal letters out to Bittorrent companies ...

This is the State of New York we're talking about. I don't for one second believe they're as benignly concerned as your post would suggest.

I dont get this, how exactly will they ACTUALLY stop Bitcoin? There is talk, more talk and even more talk. All the rules and regulations in the world, wont do shit to Bitcoin. The reality is that thousands of users ARE using it, regardless of what someone is saying, simply because they know they cannot be touched. So what is this all for? One last hurrah by regulators?

They can't stop Bitcoin "core" but they can make it prohibitively expensive/difficult to operate as an entity on the line between virtual and fiat.  They can either those malice or ignorance drive out most of the competitors in the US, leaving only a few massively capitalized entities (next gen banks) to remain.  Granted Bitcoin itself will "go on", and no the US isn't the whole world, but it doesn't make it good news.

Worst case, government(s) could ban the purchase, sale, transfer, or possession of Bitcoins, by executive order.

Government(s) could ban the purchase, sale, or transfer of Bitcoins without a license and associated detailed "record keeping".

No law prevents any "criminal" from doing anything. If everyone becomes a "criminal" merely for exercising their civil liberties (and we all are, committing 3 felonies a day according to http://www.amazon.com/Three-Felonies-Day-Target-Innocent/dp/1594035229 ), then very few can ever suffer "punishment". The government can only use fear of punishment for violating more laws than any human being can possibly comprehend as its stick, not imprison every single person/"criminal" that it "rules".

As I pointed out before bitcoins are actually stored in the cloud on thousands of computers worldwide. To "own" bitcoins really only means you know the private key allowing them to be sent somewhere else. Since brain wallets (https://en.bitcoin.it/wiki/Brainwallet) can store any number of bitcoins a law banning possession literally means telling people what they can and can't think.

Note that all of the bitcoin companies that received a notice of inquiry are U.S. based companies.  Bitcoin is a worldwide phenomenon and there is no way the U.S. can control companies beyond the borders of their jurisdiction.  I think the employees of the NY regulator who does research on bitcoin knows that bitcoin cannot be regulated.  However, they are paid by the state to do their job and write reports.  I bet that deep down in their hearts they know it is futile to control bitcoin.  They probably have bills to pay or a family to feed so they perform their jobs on a daily basis to earn their income.  It is unfortunate, though, that the leadership is muddling through the facts without acknowledging the truth.  I hope through the inquiries that it is the bitcoin companies that give the N.Y. regulators guidance instead of the other way around.

http://www.youtube.com/v/cDQk4lGSEJQ

That would be one of the worst things they could do. Plenty of early adopters would love that, as the price for bitcoins in the U.S. would surge as a result.

The only reason I will stand by my point in this conversation is because I have some (in)direct knowledge about the tech sector here in NY. For the past few (7-9) years quite a bit of discussion has gone on about how to make NY more attractive to technology companies. I even know a guy who spoke on panels on behalf of the tech community in front of state officials regarding this manner. Silicon Alley formed from this.

With technology follows money. Lots of it it. Many of the big VCs/angel groups dumping cake into Bitcoin businesses are here in NY, along with many of the companies listed in those subpoenas. These guys aren't they type to sit around and wait for someone to tell them it's okay to do something. They want answers to sure up their investments.

A beacon was sent out and this is the first formal response.

Probably time to start writing your senator and congressman.  We have a few friends in DC now.

... better yet forward them an ounce of the finest from SR to demonstrate how effective bitcoins really are ...

(ps: kids and idiots should not try this at home)

Huh. That's actually fairly interesting, but I can't help but wonder if they've actually *achieved* their goal of improved tech-industry-friendliness in the last several years. I'm not sure that the formation of a tech-oriented locale actually demonstrates that.

Time will tell.

You're totally right about that. Ask most they will say NY has not accomplished what they set out to do.

Government always accomplishes what it sets out to do (which is 180 degrees from what it publicly claims it sets out to do).

this exaclty +1000

eg drugs,
better education
freedom
etc etc

too many rich people/companies can minimize tax with CC's fot it not to work, and they can buy votes.

quite right ... and they invariably accomplish it so well that they have to double the size of the program and extend it for twice as long ...

It won't, and that's the fun thing to watch.
They don't know what to do so they are just trying *anything*.
Just like a caught wild animal will thrash around even though its situation is hopeless.

I think the expression you're looking for is "caught a tiger by the tail" :)

No, I'm thinking more like a pigeon or rat in a cage.

In that case, we can forgo speech therapy & go for ECT without wasting any time.

My letter to Benjamin Lawsky.  Sent to him here (http://www.dfs.ny.gov/insurance/nyins_super.htm).

Dear Mr. Benjamin Lawsky,

In regards to Bitcoin.  What you're doing is tyrannical.  Lawmakers today act more like the wild wild west with their overregulation and dictating then any businessman.  American's want to be free.  The one thing that will make them free is Bitcoin.  Currently, we are not truly free because of our centrally controlled currency aka Federal Reserve Bank.  Regulating Bitcoin will not help Bitcoin and other cryptocurrencies.  Regulations will do quite the opposite, as they always do.  By regulating Bitcoin, you are creating criminals.  When an action is deemed "illegal," criminals are created, therefore freedom and liberty is lost.  Bitcoin is great because it is not regulated.  Recent regulations on U.S. citizen banking practices have isolated us from the world.  Most foreign banks will not accept U.S. customers for the simple reason, they don't want to comply with U.S. regulations.  Bitcoin solves this.  Many countries are embracing Bitcoin with no regulations, i.e. Germany, India, Kenya, etc etc.  Bitcoin is global.  You cannot stop it.  They only way to stop it is to shut down the internet forever.  Not gonna happen.  You could temporarily halt it with an EMP or nuclear bomb, I doubt you'll do that.  If you regulate bitcoin in the United States and hamper it's legitimate use, you will play an active role in the downfall of the United States.  Bitcoin is meant to liberate the world.  The rest of the world is embracing Bitcoin because they know the U.S. will regulate it.  They know our government will try and stop it.  They know we will suffer for this regulation of Bitcoin.  They know it is freedom.  China is embracing Bitcoin because they know the U.S. will try and stop it.  Bitcoin will cure poverty all around the world.  People are free when they are free to communicate and trade with one another regardless of borders or culture.  Iranians use Bitcoins with impunity through CoinAva.  People are resilient and creative, in good ways and bad.  If you try to stop/regulate Bitcoin, people will find ways around your proposed regulations.  Instead of creating new products and helping each other they will waste their time avoiding you.  They will hurt other people trying to avoid you.  That's what happens when government regulates an industry.  They will still use Bitcoin no matter what you do.  American Bitcoin entrepreneurs will expatriate the United States.  They will flee to a more Bitcoin free country and create jobs/products there.  America will suffer.  You are not helping.  You are the problem.  Big banks and big government are the problem.  Have you ever read the book, "Atlas Shrugged?"

Bitcoin is John Galt.  GET OUT OF THE WAY!

-J

I sent that to them.  You don't like it?

I hope you didn't actually send that letter.  Exactly the type of ideological idiocy, that is hurting Bitcoin adoption, it's legitimacy and makes this whole process much harder than necessary.  "Atlas Shrugged"??  That's your argument??  Sheesh...kids these days.   ::)  I believe in free speech and all but sometimes I just wish these zealots would learn when to stfu.

Dear joe1975,

Thank you so much for your kind yet eye-opening letter.
Me and my recently elected friend, Mayor mcCheese, just couldn't stop reading it!  If it wasn't for Atlas Shrugged, which proved to be quite the page-turner and just about impossible to put down, we'd still be at it.

I was saddened to learn i was not helping with the suffering of America, as was Mayor mcCheese -- we're both real sorry.  We're doing the best we can, though Hamburglar is proving to be a fiendishly clever adversary.  EMP is just about the only way to stop him, and, as you know, that's a weapon of last resort.  Sure, we were forced to use it to conquer Equestria, but at what cost?  Pinkie Pie still refuses to talk to us!

We're eager to learn more about international finance from you, joe1975, please keep on writin'.

Your friend,

  Benjamin <3

Okay, hahaha!  I understand my letter will do nothing.  But what if millions of Americans sent him similar letters?  What if we flood his office with calls?  I did send it to him.  I signed it with my name, address, ph# and all.  I was so disgusted with his subpoenas, I had to vent.  How many of you are calling and writing him?  How many of you are voicing your opinions to the powers that be?  I call my congressman/senators all the time.  If you don't stand up to the aggressors, you will be aggressed.  It's like the bully at the playground.  Let them know you won't take it.

Seems like hank-picking 20 high profile BTC people...
Serving them with a subpoena to get TRUTHFUL testimony UNDER OATH...
Is precisely the opposite of what you describe = a very measured, responsible response.

So a friend of mine looked at one of these subpoenas last night. They are very detailed documents, lot's of requirements but nothing seems to be out of MSB scope. I hope I am still right about this.

A couple of years ago I had a discussion with someone here about bad publicity. I was voraciously attacked by all and told that any publicity is good for Bitcoin. Well this is the result of years of bad publicity in the U.S.A. combined with too many average people getting scammed and running to do the only thing they know to do/have been programmed to do (alert the authorities). This is obviously what everyone wanted so why complain now? The worst possible outcome that could happen is the American Nazi's stop using Bitcoin and it flourishes in the rest of the world. Oh sure, some pro-American countries that always implement our legislation will follow suit but that won't stop the rest of the world from using it and people that fervently believe in it can just go live in one of those countries.

Dying to read actual subpoena text...

Does the subpoena include confidentiality clause, preventing the sharing of its contents?

It was 13 pages, my friend doesn't remember seeing a confidentiality agreement. I'll see if I can get a copy.

I hope you did not send that.  It appears to have been written by a crazy person.

He has been advised not to post it. I will take a look at it in the coming days, report back what I can.

Oh sent indeed!  I think it's great!

Sshhh...Lawsky has a secret.

https://i.imgur.com/RSJbWua.jpg

LOL YES

"Please don't throw me into the briar patch!"

I don't remember if this was posted yet, in this thread or another, but there is this:

"The Consumer Risk of Bitcoins, The Senate’s Committee for Homeland Security sent a letter to Secretary Janet  Napolitano on Monday urging a probe into the oversight of the flourishing digital-based currency market."
http://www.foxbusiness.com/personal-finance/2013/08/14/consumer-risk-bitcoins/

Homeland Security!

We're all terrorists now.

 :D That's pretty good ... I can spot at least 4 hidden btc references are there any more?

Lawsky's reference to "national security" was been duly noted. This is govspeak for the "National Security Agency" is taking an interest/helping us with us investigation ... i.e. the US military resources (NSA) can be used once they declare it a matter of "national security".