BruceFenton (OP)
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February 06, 2014, 04:51:24 PM |
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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)
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BTCisthefuture
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February 06, 2014, 05:07:27 PM |
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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 ![Cry](https://bitcointalk.org/Smileys/default/cry.gif)
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pinguino
Jr. Member
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February 06, 2014, 05:23:43 PM |
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Signing. I didn't realize how much red tape regulation involved
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rat
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February 06, 2014, 05:42:52 PM |
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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.
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Keyser Soze
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February 06, 2014, 05:47:27 PM |
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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.
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Honeypot
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February 06, 2014, 06:07:48 PM |
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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.
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BruceFenton (OP)
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February 06, 2014, 06:23:53 PM |
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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.
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.
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TheFootMan
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February 06, 2014, 06:37:37 PM |
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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!
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BruceFenton (OP)
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February 06, 2014, 06:39:35 PM |
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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
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TheFootMan
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February 06, 2014, 06:43:40 PM |
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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. ![Wink](https://bitcointalk.org/Smileys/default/wink.gif) 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.
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Keyser Soze
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February 06, 2014, 07:13:01 PM |
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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.
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. My example refers to RIAs who do not have custody of client funds, I suppose I should have clarified that originally.
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chufchuf
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February 06, 2014, 07:19:34 PM |
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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.
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BruceFenton (OP)
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February 06, 2014, 08:01:26 PM |
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My example refers to RIAs who do not have custody of client funds, I suppose I should have clarified that originally.
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.
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QuantumQrack
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February 06, 2014, 08:07:49 PM |
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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.
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BruceFenton (OP)
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February 06, 2014, 08:47:19 PM |
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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.
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.
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Ragnarly
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February 06, 2014, 09:08:50 PM |
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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.
I lost my respect for Charlie Lee. He gains from regulation, most of us lose.
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Melbustus
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February 06, 2014, 09:31:49 PM |
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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.
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. 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).
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Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.
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BruceFenton (OP)
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February 06, 2014, 09:46:44 PM |
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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...).
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.
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2bfree
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February 07, 2014, 12:23:50 AM |
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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?
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Nagle
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February 07, 2014, 12:35:11 AM |
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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.
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