LN HUBs, will not be directing transmitting the BTC, they will be sending an OFFCHAIN Representation of the Value of a BTC (A LN Note or Token)
As such they are operating as a Bank , allowing deposits and letting people transact with LN / Bank Notes.
So a Money Transmitter License is not suitable for an LN Hub, the only license that will work legally is a Bank License.
That's actually an interesting view. Good stuff for specialized lawyers, I suppose
But I doubt the money transmitter-bank distinction exists in all countries. LN hubs could simply settle in the countries with the most liberal regulation.
The problem is relevant, however, for US citizens that want to provide "altruistic LN micro-hubs" for a decentralized LN and could get forced to pay for a license they couldn't afford. That would probably also be the case in other countries with similarly strict regulations.
Once that has become law of the land, the next step in the plan is to cause a price spike in transaction fees where only they and the rich find it affordable to
conduct ONCHAIN transactions
I doubt that would work. There is not only LN, there are also sidechains as a possible backup mechanism. And, obviously, altcoins (which, with Segwit could simply act as sidechains via atomic cross-chain trading).
- it looks to me that economies of scale will make LN hubs evolve towards a wheel and spokes kind of structure, because the more BTC you can lock up in many channels with many customers, the more chances you have to be able to transmit a lot of transactions through them, which will essentially give you the ratio between the profitable LN fee and the on-chain fee. So I wonder if this sentiment is correct, and has been studied, or if it is not something to worry about ; and whether it is a problem or not.
The answer to that problem I heard from LN supporters is that there would be lots of "altruistic" hubs - large BTC holders that would offer LN transactions for free or only for a small fee to incentive mass usage and grow the value of their Bitcoins. I think here we must wait and see if that happens or not. If what kiklo says is true (see above in my answer) and they require a kind of license then there would be probably less such "altruistic hubs" available and the network would be more centralized.
- however, what worries me most, is that fact that there is not enough room on the block chain to settle large parts of the LN network, if it needs to settle. As such, your "right to settle" is a right on paper, but could very well be thwarted by the practical limit of the room on the chain. In other words, in as much as the LN allows to scale to a large multitude of the number of transactions on chain, it seems to me that this large factor is also at the same time a serious security risk, because it can never settle most of the links on time. However, this is maybe also a gut feeling that is not justified in practice.
As I already said I consider your concern to be valid and I share it. A possible solution could be a three-layer-model, where LN is the third layer above a second-layer technology like pegged sidechains or extension blocks.
The problem is that neither
decentrally pegged sidechains nor extension blocks are currently possible without code changes in Bitcoin Core and the changes are controversial. But I think that would be the ideal way for Bitcoin to scale - reserve on-chain capacity for large transactions, sidechains for the smaller ones, and LN (working "above" a sidechain, not the main chain) for microtransactions like the often-cited coffee.
Edit: If atomic cross-chain trading gets possible (with Segwit or another malleability fix), there may be a way to use an Ethereum-like technology (with turing-complete script language) for an "Altcoin as a sidechain" model. The peg mechanism would then be managed by the altcoin chain, not by Bitcoin.
