New York State Continues Its Path To Regulating Virtual Currency

[bornil267645]

New York is trying to protect consumers and prevent illegal activity by regulating cryptocurrency.

http://www.ibtimes.com/bitcoin-new-york-state-continues-its-path-regulating-virtual-currency-1721103

[Spendulus]

New York is trying to protect consumers and prevent illegal activity by regulating cryptocurrency.

http://www.ibtimes.com/bitcoin-new-york-state-continues-its-path-regulating-virtual-currency-1721103

“There has to be a way for startups to start up and play by the rules without getting crushed by huge compliance costs,” Benjamin Lawsky, head of the state’s Department of Financial Services, said Sunday at a conference in Las Vegas.

Yes, Lawsky.

They are welcome to just move to Texas.

Like many of your totalitarian state's residents already have.

[deluxeCITY]

New York is trying to protect consumers and prevent illegal activity by regulating cryptocurrency.

http://www.ibtimes.com/bitcoin-new-york-state-continues-its-path-regulating-virtual-currency-1721103

“There has to be a way for startups to start up and play by the rules without getting crushed by huge compliance costs,” Benjamin Lawsky, head of the state’s Department of Financial Services, said Sunday at a conference in Las Vegas.

Yes, Lawsky.

They are welcome to just move to Texas.

Like many of your totalitarian state's residents already have.

Well one issue with the regulation is that it would force any exchange to hold sufficient reserves to cover all customer deposits which means they cannot engage in fractional reserve banking which people are generally against anyway. The main difference is that exchanges will need to pay to have their operations audited in order to prove they have sufficient reserves

[bluemountain]

New York is trying to protect consumers and prevent illegal activity by regulating cryptocurrency.

http://www.ibtimes.com/bitcoin-new-york-state-continues-its-path-regulating-virtual-currency-1721103

There is an argument both ways if this will be good for bitcoin or not. One one hand the ideology of people that use and own bitcon are very much against any regulation in any form. One the other hand this regulation has the potential to give bitcoin an incremental level of credibility and disassociate itself from the many illegal uses that it is associated with.

[stevec]

Why not just make it voluntary then?

That way the consumers and the market can decide if they want to trade on a regulated exchange (which is theoretically 'safer' but would probably have to charge higher fees to cover regulatory costs), or an unregulated exchange.

/Steve

[Spendulus]

New York is trying to protect consumers and prevent illegal activity by regulating cryptocurrency.

http://www.ibtimes.com/bitcoin-new-york-state-continues-its-path-regulating-virtual-currency-1721103

There is an argument both ways if this will be good for bitcoin or not. One one hand the ideology of people that use and own bitcon are very much against any regulation in any form. One the other hand this regulation has the potential to give bitcoin an incremental level of credibility and disassociate itself from the many illegal uses that it is associated with.

Do not fall for the surface arguments.

At the core this is an effort by the financial industry in NY to see to it that they are the only ones allowed to operate with cryptocurrencies.  This is not very complicated.  All it takes is to legislate a regulatory burden that cuts small businesses out of the running.  That is what you are talking about.

[J3VVL]

Why not just make it voluntary then?

That way the consumers and the market can decide if they want to trade on a regulated exchange (which is theoretically 'safer' but would probably have to charge higher fees to cover regulatory costs), or an unregulated exchange.

/Steve

because the so called regulated market is largely unregulated ... bitcoin is way too transparent for these shadeballs!

[darkmule]

New York is trying to protect consumers and prevent illegal activity by regulating cryptocurrency.

http://www.ibtimes.com/bitcoin-new-york-state-continues-its-path-regulating-virtual-currency-1721103

I seriously doubt New York State has jurisdiction to regulate something intimately connected to interstate commerce in any way that impedes it over local commerce.  New York has been known in the past to trample the dormant Commerce Clause, which generally prohibits states from stepping into the federal domain of interstate commerce, which is the domain of Commerce.

I'm finding it hard to imagine what they could do to prohibit it that wouldn't be flagrantly unconstitutional.

I could have written something longer, but my argument is pretty much similar to this argument by a company called Bitquant, so I won't reinvent the wheel.

In short, the basic points are that state regulation of interstate commerce is unconstitutional under the dormant Commerce Clause unless explicitly (or in some cases clearly but implicitly) authorized by Congress.

Congress has explicitly authorized such regulation of money transmitters by prohibiting their operation without a state license.

However, not everyone who does business in Bitcoin is a money transmitter.

Therefore, regulation of Bitcoin itself is not authorized by Congress and is, therefore, unconstitutional by default.

I think New York's actions are on very weak legal ground.

(Note:  this has not stopped them from getting too big for their britches in the past, though.)

[J3VVL]

New York is trying to protect consumers and prevent illegal activity by regulating cryptocurrency.

http://www.ibtimes.com/bitcoin-new-york-state-continues-its-path-regulating-virtual-currency-1721103

I seriously doubt New York State has jurisdiction to regulate something intimately connected to interstate commerce in any way that impedes it over local commerce.  New York has been known in the past to trample the dormant Commerce Clause, which generally prohibits states from stepping into the federal domain of interstate commerce, which is the domain of Commerce.

I'm finding it hard to imagine what they could do to prohibit it that wouldn't be flagrantly unconstitutional.

I could have written something longer, but my argument is pretty much similar to this argument by a company called Bitquant, so I won't reinvent the wheel.

In short, the basic points are that state regulation of interstate commerce is unconstitutional under the dormant Commerce Clause unless explicitly (or in some cases clearly but implicitly) authorized by Congress.

Congress has explicitly authorized such regulation of money transmitters by prohibiting their operation without a state license.

However, not everyone who does business in Bitcoin is a money transmitter.

Therefore, regulation of Bitcoin itself is not authorized by Congress and is, therefore, unconstitutional by default.

I think New York's actions are on very weak legal ground.

(Note:  this has not stopped them from getting too big for their britches in the past, though.)

California and New York call the shots .. get over it! lol

[Eastwind]

I hope if an exchange is located in NY, it is regulated to protect users.

[J3VVL]

I hope if an exchange is located in NY, it is regulated to protect users.

In my example, there is some chatter about doing most of the coding and legal stuff in NYC and basing the actual exchange somewhere else like in California or Nevada ... stay tuned !  

[darkmule]

I hope if an exchange is located in NY, it is regulated to protect users.

I hope any exchange I have anything to do with is not located in NY, since they would be regulating it just to flex their muscles, and clearly don't have any clue what they're doing.  The fact they don't know what they're doing speaks for itself in that they are attempting to mis-classify Bitcoin as somehow generally falling under Congressional legislation that is very specific to money transmitters.[

I.e. it is blatantly unconstitutional under the commerce clause.

Regulation by people who have no idea what they're doing rarely benefits anyone.

[deluxeCITY]

I hope if an exchange is located in NY, it is regulated to protect users.

I hope any exchange I have anything to do with is not located in NY, since they would be regulating it just to flex their muscles, and clearly don't have any clue what they're doing.  The fact they don't know what they're doing speaks for itself in that they are attempting to mis-classify Bitcoin as somehow generally falling under Congressional legislation that is very specific to money transmitters.[

I.e. it is blatantly unconstitutional under the commerce clause.

Regulation by people who have no idea what they're doing rarely benefits anyone.

It would probably not be unconstitutional under the commerce clause as NY has the right to regulate commerce that happens inside their own state. What may happen however is the house bill (I believe it is HR 5777) would override any regulations that is passed/adopted by NY

[darkmule]

It would probably not be unconstitutional under the commerce clause as NY has the right to regulate commerce that happens inside their own state. What may happen however is the house bill (I believe it is HR 5777) would override any regulations that is passed/adopted by NY

There is nothing so clearly interstate as exchange that occurs across the entire planet.  The only reason NY State and other states can regulate things like banking as they impact interstate commerce is because of explicit grants of authority by Congress.  The same applies to insurance, which Congress has also explicitly granted states the power to regulate in derogation of ordinary restrictions on regulating interstate commerce.  

To the extent there is no explicit grant of authorization, such regulation is prohibited, even if it does not directly contradict any other federal regulation.

I.e., Congress does not have to preempt state regulation directly or even indirectly.

[NewLiberty]

This Federal Bill 5777 would invalidate the NY State Bitlicense if it passes first.
https://www.congress.gov/bill/113th-congress/house-bill/5777/text

(a) 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 (collectively,
``cryptocurrency'' as defined herein) for a period beginning June 1,
2015, and extending five years after the enactment of this Act (such
period, the ``moratorium period''), except for statutes already enacted
and effective prior to the date of enactment of this Act, and 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.

The Bitlicense proposal is wrong headed anyhow.
It accomplishes the opposite of its stated policy goal.  By its very structure it creates extreme centralization and limits options to consumers.  One of the principle offerings of crypto currencies is their decentralization.  Though it claims "consumer protection" it accomplishes the opposite.  It chases companies out of the state and thus limits options and kills business in the state.

If NY State wants to lead the world, they should make an optional bitlicense that is a simple certificate that shows that a company is in compliance with all the EXISTING laws, rather than make up a bunch of new laws and pretend that it makes anything better.

If they did this, companies would rush to get the bitlicense because it would be seen as a good houskeeping seal of approval and would possibly give a competitive advantage with the customers that seek such things.  If they did this, it would accomplish their policy goal instead of undermine it.

[darkmule]

This Federal Bill 5777 would invalidate the NY State Bitlicense if it passes first.

Actually, Congress could preempt state legislation and regulation whether their bill passes first or afterwards.  (I'm not sure exactly which order you're saying is likely.)  This is yet another reason the NY State proposal is wrong-headed and premature, at best.  I wouldn't put it past those dunderheads in Albany to go ahead and try it anyway.

The other most likely culprit for stupid regulation is California.

[NewLiberty]

This Federal Bill 5777 would invalidate the NY State Bitlicense if it passes first.

Actually, Congress could preempt state legislation and regulation whether their bill passes first or afterwards.  (I'm not sure exactly which order you're saying is likely.)  This is yet another reason the NY State proposal is wrong-headed and premature, at best.  I wouldn't put it past those dunderheads in Albany to go ahead and try it anyway.

The other most likely culprit for stupid regulation is California.

Not really, no.
California declared cryptocurrency "lawful money".

Congress can do all sorts of things, but HR5777 specifically states what it does.  It creates a moratorium on new law.  What passes ahead of it is not affected.  Did you read it?  I even copied the relevant part here and bolded the important words to make it easy for you.

[darkmule]

Congress can do all sorts of things, but HR5777 specifically states what it does.  It creates a moratorium on new law.  What passes ahead of it is not affected.  Did you read it?  I even copied the relevant part here and bolded the important words to make it easy for you.

I read it and it is interesting, but as I pointed out, not relevant to the larger issue, which is in this document called the Constitution.  You might remember it.

I'm not sure why you're getting mad, since I agreed with all your points, just pointed out that NY's proposed actions are in violation of the constitution itself with absolute disregard to Congressional actions (other than those directly authorizing it to act).

[crazyearner]

lol good luck to them regulating it cos its not going to happen. They will have things set in place to follow and most of the US who does BTC wont follow their rules on it.

[darkmule]

lol good luck to them regulating it cos its not going to happen. They will have things set in place to follow and most of the US who does BTC wont follow their rules on it.

This is pretty much my opinion, and it is also my opinion that New York State is once again acting too big for its britches.

My opinion is also that their actions are prohibited by the U.S. Constitution itself and that they're legally out of line as well as being out of line by simple measures of sanity.