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US States Edge Toward Cryptocoin Regulation 172

Posted by timothy
from the hey-these-still-smell-like-dollars dept.
SonicSpike points out an article from the Pew Charitable Trusts' Research & Analysis department on the legislation and regulation schemes emerging in at least a few states in reaction to the increasing use of digital currencies like Bitcoin. A working group called the Conference of State Bank Supervisors’ Emerging Payments Task Force has been surveying the current landscape of state rules and approaches to digital currencies, a topic on which state laws are typically silent. In April, the task force presented a model consumer guidance to help states provide consumers with information about digital currencies. A number of states, including California, Massachusetts and Texas, have issued warnings to consumers that virtual currencies are not subject to “traditional regulation or monetary policy,” including insurance, bonding and other security measures, and that values can fluctuate dramatically. ... The article focuses on the high-population, big-economy states of New York, California and Texas, with a touch of Kansas -- but other states are sure to follow. Whether you live in the U.S. or not, are there government regulations that you think would actually make sense for digital currencies?
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US States Edge Toward Cryptocoin Regulation

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  • Crytocoins are designed to be de-centralized in order to not be controlled by any dominant party

    I wonder how are they going to "regulate" something that is not supposed to be regulate-able ?

    • Re: (Score:3, Insightful)

      by jaeztheangel (2644535)
      perhaps they will require a licence to accept payments using them?
    • Re: (Score:3, Insightful)

      by disposable60 (735022)

      The key phrase is about what makes sense.
      To a legislator bought by the banking and payday loan industries, there will be a sense of panic to at least be _seen_ to be doing _something_; so that will make sense.
      To an ambitious prosecutor, there will appear an opportunity to bring the full weight of the criminal 'justice' system down on some poor schmuck who orders something legal-but-distasteful using MathMoney without paying sales tax or submitting the forms no one can figure out how to order let alone fill

      • Re: (Score:2, Insightful)

        by Anonymous Coward

        The irony is, in designing a de-centralized currency, I was thinking of the children.

        • by zildgulf (1116981)
          Nonono! You are thinking about the wrong children. In politics the only children that matter are the ones of the oligarchy. BitCoin would make other children middle class and independent of the ruling class' iron grip on their money.
    • Re: (Score:3, Insightful)

      by gstoddart (321705)

      By treating it like currency and passing laws about what you can do it?

      They make not be able to regulate the entire currency, but they can certainly pass laws regarding their own people and what they are required to do.

      Did anybody really think that you could simply say you have a form of currency which isn't regulated and expect governments to just say "well, they've beaten us"?

      That would be a neat trick.

    • by paiute (550198)
      Anything can be regulated. Control is a separate issue.
    • Crytocoins are designed to be de-centralized in order to not be controlled by any dominant party

      I wonder how are they going to "regulate" something that is not supposed to be regulate-able ?

      The NSA owns your computer, and the computer you want to trade bitcoins with*. They could enforce any regulations if they were willing to admit to this. Being a cryptocurrency rather than a physical one also means that they can vanish your money with the click of a button instead of having to personally visit you.

      * Maybe I'm just paranoid, but there are so many hardware and software components, any of which could have backdoors or keyloggers installed. They could demand any domestic product secretly contain them from manufacture, and "inspect" any imports. Even easier with domestic software, or they could get a few of their agents helping to develop the software (I hear they have lots of talented folks).

      • by gstoddart (321705)

        Being a cryptocurrency rather than a physical one also means that they can vanish your money with the click of a button instead of having to personally visit you.

        So, tell me again, how is this different from most money these days?

        Anything you have on deposit is pretty much just electrons. The vast majority of 'real' money is pretty much just as virtual these days.

        • Money has been virtual a lot longer than that. Even cash is virtual: The physical tokens are just representative of something more abstract. The last time money was physical was when it was on the gold standard - and even then very few people actually took up the promise backing it and swapped their notes for gold.

          • by lgw (121541)

            Gold notes were just as virtual as anything else. Physical gold coins, or barter for consumables, is the only way to avoid virtuality, and there were many practical reasons we went away from that. Nothing, of course, will prevent a government from debasing a currency - it's what they do, it's all they do.

      • As long as you keep your private key secure no one can take your Bitcoins. You can generate your private key on a non-networked computer and write it down, then transfer your coins to the public address.

        Assuming you trust your printer, Mycelium is working on a USB plug to make paper wallets [indiegogo.com].

    • by pla (258480)
      I wonder how are they going to "regulate" something that is not supposed to be regulate-able?

      Simple - They will effectively exclude businesses in their own states from participating in the BitCoin economy.

      This won't affect the vast majority of individuals, because they can't stop individuals from buying from vendors in another state; and it won't affect businesses in unregulated states - Well, I take that back - It will benefit businesses operating outside those states that try to regulate cryptocurren
    • by jythie (914043)
      Cryptocurency is not magically exempt from regulation simply because people hope it is. How does one regulate anything? You make rules, when people are caught breaking the rules they get in trouble.

      People focus too much on the idea of dragnets or detection, of technological solutions, and that that if there is no technology that can automatically scour something it somehow makes it unregulatable. Such currencies make automated tracking difficult, but people are still people and businesses are still busi
    • by Luckyo (1726890)

      Regulate exchanges. You can do whatever you want with your cryptocurrency, but it's not worth the electricty needed to keep it alive until you can exchange it for hard currency. For example, most of the "we accept bitcoin" companies do not handle bit coin at all. Instead they simply outsource the payment to an exchange which delivers hard currency to the company at certain exchange rate when customer pays in bitcoins.

      Exchanges need to interface with standard payment systems. As a result, they are vulnerable

    • New York is looking at requiring 100% + holding of any deposits made to a company that holds the crypto currency, like an exchange. The wording they used is amusing : "As capital protection, these companies would have to hold the same amount of virtual currency as they owed to their customers. But unlike banks, which are also subject to capital requirements, these companies would be allowed to hold some of it in virtual currency. "

      I like how at first pass it sounds like banks hold 100% also

  • by penguinoid (724646) <spambait001@yahoo.com> on Monday July 28, 2014 @01:00PM (#47551381) Homepage Journal

    The laws should be identical to the extent possible, between different forms of currency.

    • The laws should be identical to the extent possible, between different forms of currency.

      So, your average C-Store should be required by law to accept Japanese Yen or the Sudanese Pound?

      That aside, doesn't the Federal Government get to decide what's money and what's not? Didn't think it was the business of State governments to be regulating money....

      • The laws should be identical to the extent possible, between different forms of currency.

        So, your average C-Store should be required by law to accept Japanese Yen or the Sudanese Pound?

        I don't really think it's the government's business to tell merchants what they must accept in exchange for their goods. For example, they shouldn't be forced to accept the $10,000 US dollar bill, even if it is legal tender, nor whatever flavor of credit card. I'm sure the merchants can figure out for themselves what to accept in payment if they want to have customers.

        That aside, doesn't the Federal Government get to decide what's money and what's not? Didn't think it was the business of State governments to be regulating money....

        They may think so, but it is people who decide what is money and what is not. People have burnt money as fuel in the past, when it was cheape

      • We are not talking about regulating money per se, but about business regulating how business handle and use money.

        State governments have a long, long history of bank regulation and oversight. This has faded as most banks have switched to a federal charter instead of a state charter. But they still have considerable oversight. What is maximum interest that can be charged, what methods of collections can occur when a person is overdue on their loans, etc. While most Liberations would oppose usurer laws, most

  • by QilessQi (2044624) on Monday July 28, 2014 @01:05PM (#47551407)

    I imagine that the sorts of things we'd want to regulate about "digital currencies" are the same things we'd want to regulate about any foreign or domestic currency; e.g.:

    - You can't use it to pay for illegal goods or services
    - You can't receive it in payment for illegal goods or services
    - You can't use it to hide other transactions related to illegal goods or services (i.e., money laundering)

    So... can we just formally decree that cryptocoins meet the definition of a "currency", and be done with it? Otherwise I'm afraid that we'll be creating another legal (and patent) swamp where "...with Bitcoins" will become the new "...on the Internet".

    • The IRS won't regulate it as a currency for a very good reason - doing so would mean they'd have to tax income from Bitcoin the same way they have to tax cash income. With cash income, there's a paper trail - the IRS can look at pay stubs from your employer and look at bank statements to determine whether or not you are paying enough in taxes.

      Bitcoin is different. There's no paper trail, at least not one with names and social security numbers attached to it. They'd have a hard time proving anything in terms

      • Uh, you do realise all those things you mention about cash having a paper trail has nothing inherently to do with the cash and everything to do with the regulations surrounding the financial system - they would all equally apply to bitcoins the moment the government says so. If your employer pays you in bitcoins, that would appear on your payslips, and your bitcoin exchange transactions would be subject to scrutiny just as bank account transactions are...

      • by QilessQi (2044624)

        With cash income, there's a paper trail - the IRS can look at pay stubs from your employer and look at bank statements to determine whether or not you are paying enough in taxes.

        Actually, I think you mean, "with employer-declared or bank-mediated income, there's a paper trail." If I pay someone in small green pieces of paper to mow my lawn, and they keep it under their mattress until they need it, then there's no paper trail at all.

        • by u38cg (607297)
          Yes, but then when you get audited and they ask "and how did you pay for your five-bed condo in NYC?" you'd better have an answer that will stand up...
      • by jythie (914043)
        Looking at the 'paper trail' is not automated, it involves a human sitting down and examining an individual or business. It is a little harder to audit BTC, but no harder then companies that work primarily in cash which are taxed just like anything else.
      • The IRS doesn't regulate currency. The Treasury does.
    • Does it really qualify as a currency yet? I don't know. How do we define what makes a currency?

      And don't misunderstand me. I'm not trying to claim that bitcoins aren't worth anything. But Garbage Pail Kids trading cards are probably still worth something. There may be someone in the world who would accept them as payment for goods and services. Does that make them a currency?

      Does a currency need to be backed by some kind of country? Is there an expectation of stability of price? Do you need an are

      • by QilessQi (2044624)

        Does it really qualify as a currency yet? I don't know. How do we define what makes a currency?

        That's been the debate about Bitcoin all along. The best answer is probably this: http://en.wikipedia.org/wiki/I... [wikipedia.org]

      • How do we define what makes a currency?

        Money is generally defined as
        Medium of exchange
        Store of value
        Unit of account
        Anything that can be used as money is money. As such, money is flexible. If you think tulips, receipts (bank drafts, post-dated checks, warehouse receipts, tobacco , tulips, Dot Com stocks, cows, garbage pail kids, are money , it is. If you change your mind it does away. Currency tends to be "harder" – harder to create and destroy and tend t

    • - You can't use it to pay for illegal goods or services - You can't receive it in payment for illegal goods or services - You can't use it to hide other transactions related to illegal goods or services (i.e., money laundering)

      You are missing the point, you list a bunch of stuff that is already illegal. Why do we need additional regulation for this currency, when it is already established that the said activities are already prohibited with regular, cold cash? And what is the point of passing laws govern

      • by QilessQi (2044624)

        We are arguing exactly the same thing. I pointed out the three regulations that we most likely care about, and then I said:

        So... can we just formally decree that cryptocoins meet the definition of a "currency", and be done with it? Otherwise I'm afraid that we'll be creating another legal (and patent) swamp where "...with Bitcoins" will become the new "...on the Internet".

        • yay, We both win teh argumentz!!
        • But we don't have to declare anything - it is already illegal. You can't trade in illegal goods. Period. If a good is illegal on one side of the trade, it does not matter what is on the other side. The government does not have to create a list of thing where it is. A criminal can’t say –"ha – but I used blue whales while trading cocaine – and blue whales are not on the probation list of tradable goods – ergo I can sell all the cocaine that I want".

          • by QilessQi (2044624)

            Again, agreed. I think the reason people leap to the idea of "regulating" Bitcoin is that it has notoriously been used for shady purposes due to its effective untraceability (yes, you can find out that X BTC were transferred into wallet Y, but finding the real-world owner of Y can be difficult, and can be made even moreso).

            But there may be other regulations in place regarding "currency" that pertain to banks and exchanges, and perhaps that is what the OP was thinking. But even so, I don't think we should

      • by jythie (914043)
        It depends on what exactly the laws are. Right now BTC is in a bit of a grey area, it is unclear which laws apply to it and which do not. Chances are the bulk of the 'regulation' will simply be saying what BTC counts as and thus which pre-existing laws apply to it. So making it explicit as opposed to something 'new' and thus both citizens and law enforcement have a clear guide about how to apply existing rules to something new.
    • So... can we just formally decree that cryptocoins meet the definition of a "currency", and be done with it?

      I certainly hope not, because ultimately they're completely unlike other foreign or domestic currencies in that they have nothing backing their worth*. They're much more like coupons, casino tokens, or tasting tokens at a beer festival than real money. They're a medium of exchange not a store of value. The flaw in the logic behind cryptocurrencies is that their inventors and proponents fail to reco

      • by QilessQi (2044624)

        This is always the crux of the Great Bitcoin Debate. What counts as backing the worth of something?

        A non-trivial amount of Bitcoins are "owned" by somewhere roughly between 500,000 and 1,200,000 people, depending on how you calculate the number (https://bitscan.com/bitnews/item/how-many-people-really-own-bitcoins-and-why-does-it-matter). They come from numerous countries across the globe. Any one of those countries could collapse, and in theory the BTC holders would remain solvent -- this is touted by the

        • You need to strike the first two since they are both pegged currencies, Tuvalu to the Australian dollar and Barbados to the US dollar. That is, their value is derived from the underlying currencies.

          And what makes a currency a currency is not how many people hold them or the might of the military. What really matters is I can live my daily life using that currency. Can I buy a loaf of bread or pay my rent? When I do any mental accounting, to I think in BitCoins, dollars, or cigarettes?

          • by QilessQi (2044624)

            Sure, agreed. But every time someone comes up with a "Bitcoin can't buy X" argument, someone else posts an article like this -- which was updated today:

            http://www.coindesk.com/inform... [coindesk.com]

            Again, I don't own or use Bitcoin or any other cryptocurrency, but I do appreciate the technology, and how its adoption has spread . And there are a lot of people who seem to be rooting for it to fail, although I can't quite understand why. Jealously at not being one of the early adopters? Fear of the unknown?

            • Here is an analogy. I don't consider Klingon, Esperanto, or Latin to be real, living languages. They fill all of the requirements of being a language but people can't live their daily lives using these language and they don't think in these languages. Books may be translated into these languages, but few books are written in these languages. Native speakers are rare. Latin may be an edge case.

              Yes, you can do a lot of things with BitCoins. But form the posts that I see on Slashdot, these retailors are immedi

              • by QilessQi (2044624)

                I would guess that one reasons that retailers are converting BTC to local currency immediately is that it is insanely volatile right now, so holding BTC comes with risk. If the value becomes more quiescent (say, on a par with the USD), and if the retailers can purchase their supplies from other retailers who also accept BTC, then direct re-spending of BTC would rise without the vendor going through an exchange first. Which would be ideal, since any exchange is going to skim a little off the top.

                See, I als

        • This is always the crux of the Great Bitcoin Debate.

          No it's not, because it's no more something that can be debated than whether or not the sun rises in the East in the morning. You can't debate facts.
           
          The rest of your post is just more of the same - smoke and irrelevant mirrors.

          • by QilessQi (2044624)

            Oh, I'm sorry... I wouldn't have wasted all that time citing actual numbers if I'd realized that I was talking to the sole authority of facts related to economics! :-)

            • No, I'm not the sole authority of facts relating to economics. I'm just not impressed by "actual numbers" when they're irrelevant to the discussion at hand and accompanied by smoke and mirrors.

              And if you actually had a clue rather than parroting BS in the fashion of a cargo cultist, you'd note I never debated the validity of your facts - only their relevance. When confronted with this, you fall back on the typical defense of the terminally clueless... you raise the white flag and declare victory by indu

              • by QilessQi (2044624)

                Hmm, I can't at all see where I "personally attacked you", although I do see you lashing out a lot. But that's ok, son... I ain't mad. :-)

                It does seem like you're having a lot of problems convincing people on this thread. Maybe if you stated clearly why you think a cryptocurrency valued at 7.5 billion US$ isn't a real currency just because there's no government backing it, you might get some folks to see things your way. But saying things like "your argument is irrelevant" or "you can't debate facts" wit

      • I certainly hope not, because ultimately they're completely unlike other foreign or domestic currencies in that they have nothing backing their worth*.

        Ask yourself what backs the value of UPS shipping labels, that people are willing to give substantial sums to obtain one? Intrinsically the label is just sticky paper with some printing on it. The answer is the UPS network of trucks and distribution terminals. They enable a package with a label on it to get from one place to another.

        In a similar way, the Bitcoin network of p2p nodes, mining hardware, desktop apps, merchants accepting it, and user wallets enable moving money from one place to another. A

      • by JoelKatz (46478)

        I don't follow your logic. Nothing backs gold. Does that mean it's not a store of value?

  • by Animats (122034) on Monday July 28, 2014 @01:38PM (#47551715) Homepage

    Over half the Bitcoin exchanges have gone bust. Entire Bitcoin "stock exchanges" disappeared with the money. Bitcoin "investments" promising substantial returns each month were, of course, Ponzi schemes.

    Bitcoin is a scam magnet. Irrevocable, remote, anonymous money transfers are the scammer's dream. (Yes, there are people talking about cryptographic escrow schemes so you can buy something with Bitcoins and have some recourse if it doesn't show up. So far, that hasn't reached usability.)

    That's why Bitcoin needs regulation. If you're going to hold other people's money, you have to be regulated. Deal with it.

    • > That's why Bitcoin needs regulation

      Regulation doesn't stop scams, it merely makes them more creative. Let's regulate 'till only lawyers can own a business? Scams could be not prevented but undone, by total transparency and traceability, which is easier to implement than you think ("the books have no trace of transactions involving you and this thing? then you don't own it").

      But, unfortunately, transparency would expose powerful people and their tricks, so the powerful people allow STASI-like spying a

    • >Over half the Bitcoin exchanges have gone bust.

      Gee, reminds me of the 1999 .COM bubble, where >50% of every *regulated* tech company went bust.
      Or should we make an analogy to the *regulated* housing market in 2007/2008?

      Regulation has little to do with it. The fed blows bubbles, by printing vast sums of 'dollars', including the current bitcoin and stock market bubbles. Excess credit has to flow speculatively somewhere when negative real interest rates are the norm in ZIRP capital.

    • > Bitcoin is a scam magnet.

      Unlike, say, the entire banking and real estate industry in the early 2000's? Or the founder and former head of the NASDAQ exchange, Bernard Madoff? LIBOR price fixing? I could go on.

    • The biggest scam magnet ever is Wall Street and the stock market. Bitcoin is not even a few coins in the fountain. Why does one get so much more attention than the other?
    • Bitcoin has nothing to do with holding other people's money. If holding other people's money requires regulation, that requirement should be independent of what form the money takes -- bitcoins, gold, dollars, whatever.

  • The fact that it is decentralized means that it can neither be regulated nor banned. I'd rather our politicians did something useful for once but a useful politician is kind of an oxymoron.
    • Well, they can try, but it will be about as successful as controlling bitTorrent, or cannabis.

      The proposed New York State regulations require the "issuer" of a virtual currency to get a license if they have users in the state. Who exactly in the bitcoin community would that be? Satoshi Nakamoto? Chinese mining farms? So I agree, good luck. At most some bitcoin-based businesses will just not deal with New York customers.

  • by DuBois (105200)
    A thousand times. NO! Bitcoin is unregulatable. That is its genius. Any government that tries to regulate it will look both stupid and hubristic.

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