Not true, Paypal does not accept chargebacks for digital products...

HR 5777, a new bill submitted to Congress by US Representative Steve Stockman (R-TX), calls for a five-year moratorium on digital currency regulation within the US.

The bill, titled the Cryptocurrency Protocol Protection and Moratorium Act, would hold off any “statutory restrictions or regulations” for the five-year period after 15th June 2015. The bill was submitted on 1st December and has since been referred to both the House Committee on Ways and Means and the House Committee on Financial Services.

The draft law also calls for virtual currencies to be classified as traditional currencies under US tax regulations. Currently, the IRS taxes bitcoin holdings as though they were a type of property. Stockman filed a bill earlier this year looking to classify digital currencies similarly to foreign currency.

The timing is notable given the pending finalization of the New York Department of Financial Services's (NYDFS) BitLicense framework, the comments of which were made public on the regulatory group's website yesterday.

In past statements, Stockman said he believes that “New York is putting the cart before the horse” in shaping its regulatory framework.

The section outlining the regulatory moratorium reads:

“Neither the Federal Government nor any State or political subdivision thereof shall impose any statutory restrictions or regulations specifically identifying and governing the creation, use, exploitation, possession or transfer of any algorithmic protocols governing the operation of any virtual, non-physical, algorithm or computer source code-based medium for exchange.”

The clause also calls for "further suspending the enactment and effectiveness of any and all pending statutes and regulations until the end of the aforementioned moratorium period, except as otherwise provided in this section".

Pointing to bitcoin benefits

According to HR 5777, the moratorium is needed to fully assess and examine the potential economic benefits of digital currencies.

The draft text suggests that bitcoin may offer the American public economic and technological advantages, and "may be crucial to overall economic growth".

Stockman's move to preempt regulatory frameworks both currently in development and in the future reflects prior statements by the Texas Republican, who suggested in previous conversation with CoinDesk that the rules being written for bitcoin today would drive away the individuals and companies needed to ensure its success.

As Stockman commented in July:

“Many [doctors] are dropping out of the profession because it’s overregulated. Now, what may happen to the bitcoin community is that, if there’s so much regulation, there’ll be a lot of people who say, 'You know what, I’m done with this. I’m not gonna do it.' And it’s going to crush the industry.”

Whether the bill will be passed remains to be seen. Following the release of the draft text, Bitcoin Foundation global policy counsel Jim Harper noted on Twitter that the bill may likely fall short due to lack of support and Stockman's pending exit from Congress after his unsuccessful bid for the US Senate.

California officials are considering whether to regulate digital currencies such as bitcoin after concluding they have the authority to do so under existing law.

Staff at California’s Business Oversight Department have determined that a state law governing money transmitters, used to regulate businesses such as Western Union Co., may also apply to digital currencies, in which units of money are created and exchanged independent of central banks, said Tom Dresslar, a spokesman for the department.

“The consensus among staff is that the department and commissioner could regulate virtual currency, to some extent, under current state law,” Dresslar said in a telephone interview from Sacramento. “Consumers would be the prime concern of any regulatory structure we build -- making sure they are fully aware of the risks associated with virtual currency and providing effective, reasonable safeguards against those risks.”

The question of how and whether to regulate bitcoin has confounded regulators around the world since it emerged in software form in 2009 from a paper authored by an anonymous computer scientist and cryptographer. Bitcoin proponents and some financial regulators say the digital currency is an important innovation that makes payments easier and cheaper.

Venture Capital

Venture capitalists in Silicon Valley (BSVX) and elsewhere have invested hundreds of millions of dollars into digital-currency startup companies. At the same time, law enforcement has tackled companies and individuals over bitcoin’s use in online drug bazaars and consumer frauds.

California, the world’s eighth-largest economy, has a history of setting the agenda for the nation and the world on everything from banning plastic shopping bags to climate change regulations and immigrant rights. Home to Silicon Valley, California would become the largest U.S. state by population to regulate virtual currency.

“It will be good to see California move forward in a responsible way, applying their existing regulations and providing some clarity and certainty for digital currency businesses,” said Patrick Murck, executive director of the Bitcoin Foundation, an advocacy group for the currency.

Money Laundering

In March 2013, the U.S. Treasury Department’s Financial Crimes Enforcement Network, which polices money laundering, said virtual-currency firms may be regulated as money transmitters. As a result, U.S. states, which regulate traditional money transmitters such as Western Union and MoneyGram International Inc. (MGI), have stepped up to determine if and how their existing laws would apply to a novel form of money.

New York’s Department of Financial Services in July proposed the creation of a “BitLicense,” a special category of permit that would apply to virtual currency. The move has drawn heavy criticism from bitcoin companies for being unduly burdensome. Benjamin Lawsky, the department’s chief, has stressed the need to combat money laundering in any new regulations.

California would build any regulatory regime for bitcoin around consumer protection, Dresslar said, though issues related to money laundering would also play a role.

Transmitters Statute

The Business Oversight staff concluded some types of virtual currency may qualify as mediums of exchange under the money transmitters statute whether or not they are redeemable in money, Dresslar said. Bitcoins are not now in wide circulation, but can be used to purchase everything from hotel rooms to psychiatric services to coffee.

A meeting of an internal task force at the Business Oversight Department in mid-December could lead to new rules specifically for the embryonic industry, Dresslar said. They haven’t decided whether a signoff from Governor Jerry Brown, a Democrat, is required, Dresslar said.

Venture capital firms, especially those based in California’s Silicon Valley, have invested about $403 million in bitcoin-related companies, according to the website CoinDesk. The money has gone to startups that swap bitcoins for fiat currencies such as the U.S. dollar, ones developing ways to secure bitcoins and firms that process payments in virtual currencies.

Any new regulations would also impose other requirements before virtual currency companies would obtain a California license, Dresslar said.

Applicants would have to show they have sufficient capital to operate and a qualified management team, which would have to undergo criminal background checks. They’d also have to be bonded at levels consistent with size and maintain reserves, called “eligible securities,” equal to the amount of their outstanding money transmissions.

Escrows have been used for a very long time right now. There are three main downsides:

- Loss of liquidity
- High transaction fees
- Reliance on trustworthy middlemen

The biggest downside is the transaction fee. Real-life eskrows are hugely expensive. But they're worth it in large business deals because they secure against large companies breaking down on deals going haywire. Eskrows aren't used for guitars or cellphones in this case, they're used in corporate lawsuits, fusions and large construction projects. That's where the humongous margins are considered normal.  

Right off the bat, Bitbay removes the biggest downside. The transaction fees are negligible.

Middlemen are another problem. They exist, but they are rare. Putting a large sum of money to be 'taken care for' by someone else, no matter how reputable is a problem. It takes a lot of checks and balances to counter the huge incentive for the middlemen to watch the deal go bust. This immediately explains why escrow fees are so expensive.

Bitbay also solves this. The escrow holder is a piece of incorruptible software.

So what remains is the loss of liquidity. People are entirely right that this is inconvenient for shopping online. Both for the merchant as well as the customer. But it's foolish to focus on just this. The exchange isn't just an Ebay, it's also a currency  exchange, a stock exchange, a service platform, a craigslist and a ticketswap.

So fair enough. Bitbay won't immediately be used for the next smartphone or Furby. But it WILL be used to buy commodities and services. Stuff like gold, stock, coins. As well as marketing, design and code. There's simply no real alternative in this world.

It's not going to take out the online vendors. But it's going to facilitate a whole new market of traders that are currently really struggling in a financial environment where mutual trust is very low. If liquidity is the only obstacle then so be it. Not every downside is an unacceptable downside.

Why do people always talk big figures? What about a cell phone? What about a software license? What about a domain name?
By your logic, 99% of online transaction are >1500$ right?

Such ignorance...

Wait until you buy that 1800 miners and receive shit

^ You get it.
The DD escrow just doesn't seem practical for use.
I wonder how many people actually read the complete FAQ or understood how the escrow system really works.

Flaw?  Do you know how fast those things sell?  Merchandise movement is merchandise movement...

I don't think that smart contracts are going to be limited to DD though.  I could be wrong but I would think that they would be negotiable between seller/buyer.

agreed. if youre offering this service everything you type needs to be typed correctly. otherwise i hope you find someone who needs your services

Yea, pretty absurd...  Will limit the market to people selling DOGE tshirts.   

Because you have to deposit TWICE the amount required to buy the product. So, unless you are just some psychopathic rich weirdo who doesn't mind spending double the amount for something just to torment the seller, this isn't going to happen very often because most people actually value their money.

I'm just wondering how the floor works.  If people just dump the coin and the price drops to $20 are they going to halt all the trading of paycoin to keep it from dropping below $20.

That whole blog thread is pretty sorry reading, makes everyone commenting look like twisted, hyper-sensitive basement dwellers.