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Bitcoin Government The Almighty Buck Politics

New York State Proposes Sweeping Bitcoin Regulations 121

An anonymous reader writes On Thursday, Benjamin M. Lawsky, the superintendent of financial services, announced proposed regulations for virtual currency companies operating in New York. The "BitLicense" plan, which includes rules on consumer protection, the prevention of money laundering and cybersecurity, is the first proposal by a state to create guidelines specifically for virtual currency. "We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity—without stifling beneficial innovation," he said in a statement.
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New York State Proposes Sweeping Bitcoin Regulations

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  • Translation (Score:5, Insightful)

    by Anonymous Coward on Thursday July 17, 2014 @07:24PM (#47478935)
    "We have sought to strike a regulatory balance so that we can collect taxes from this growing industry without killing the golden, tax-paying goose."
    • by Anonymous Coward

      Translation Translation:

      "These fucking hookers ain't gonna pay for themselves! fuhgeddaboudit!"

    • by nurb432 ( 527695 )

      I would agree, but they tend to kill, cook and eat the goose.

    • "Also, we like the tracking capabilities of these virtual currencies, which is another reason for nurturing this industry."

      • Banks: But the banks will lose their control of money and who makes it, we will regulate this out of existence.

        People: Go pass ur fiat and always suspect counterfeit paper money elsewhere, and put ur bank interchange withdrawal fees where the sun don't shine.

    • Anyone with an IQ above room temperature has long known that if Bitcoin was accepted as a medium of exchange it would be treated like any other and subject to the appropriate taxes and has no problems with being so.

      • Part of the idea behind bitcoin is that regulations would be difficult to enforce. Not impossible, because if you're buying Stuff with bitcoins than you still need a delivery address. But difficult. If I want to, say, hide my illicit income, or shuffle funds off to a country under embargo, or donate to an organisation no bank is willing to do business with, or hide a big pile of wealth while declaring bankruptcy, or do some online gambling in violation of a law forbidding such businesses, or pay someone und

        • by green1 ( 322787 )

          Party of the idea behind cash is that regulations would be difficult to enforce. Not impossible, because if you're buying stuff with cash then you still need a delivery address. But difficult.

          I could go on, but the point is that none of this is new with Bitcoin. Cash, which has been around a lot longer without society collapsing, has all the same regulatory problems.

          • by jythie ( 914043 )
            I have heard people make the same argument about self reporting taxes in general, easy to lie and hide income, unless you get audited of course. That is where enforcement will probably happen, they are not going to track and tabulate every transaction, but just like every other business and individual there will be a chance of audit. So using BTC will have the same basic risk as any tax avoidance, works fine unless the dice roll against you. It does not impart any significant extra security.
        • I take it you've never studied forensic accounting, or met a forensic accountant? (I have both, as it's a specialty my wife (an accountant) was looking at going into.) It's actually very hard to make funds "disappear" unless they never "appeared" in the first place. The only way to hide illicit income is to never visibly spend it and never take traceable possession of it. You might be able to hide a big pile of wealth - but you will leave traces that you moved it. Paying someone under the table? Same

          • Would bitcoin make it easier, though? Considering that 'accounts' can be created at will, even for just a single transaction in and out, it's going to take a great deal of effort for a forensic accountant to pierce the trail together. Effort justified to go after organised crime, but not the petty criminal who just wants to do some gambling on an offshore casino. Potentially with bitcoin the police would need to call in a forensic accountant to spend days going through pages of transactions in order to figu

            • For penny-ante criminal activity, yeah, BTC might make it easier for perpetrator and harder for the cops if he uses his head and a little common sense.

              But for the bigger stuff and full blown fraud? (I.E. anything that's going to bring the full weight down on your head.) I don't think BTC will change things much unless you're willing to never, ever touch the hidden or ill gotten money that you've somehow managed to never have in your name in traceable records in the first place. Once it's traceable, I sus

          • by AK Marc ( 707885 )
            Then you known dumb accountants. I bet I could hide $10,000,000 and move it (or a large portion of it) to anyone you wanted. And you could never trace it back to the source.

            Prove me wrong. Name a person you want me to pay $10,000,000 to, and give me $10,000,000.

            . Forensic accounting and accountants have been around a long time, and they've seen everything you describe.

            And they've admitted that they can't track online gambling sites and such (not my method).

            The reason most laundering fails to protect the source is that they don't like paying 3-4 sets of income taxes on it. You have to move it to hide it, and

      • by green1 ( 322787 )

        And the appropriate way to treat it is like cash. Can you do untraceable cash deals and avoid taxes? Yes, but it's not legal to do so. Bitcoin is the same. I believe that the law already covers this anyway, technically you must pay tax even when bartering. Will people abuse this? Of course, but no more so than they do with cash today.

        The thing is, I don't see why any new law is needed. If I pay you cash to fix my sink, tax is supposed to be paid, likewise, if I trade you supper for you fixing my sink,

        • by jythie ( 914043 )
          Since there seems to be confusion and disagreement regarding how to treat BTC and other virtual currencies, I imagine all a new law would really contain is explicit clarification of existing laws so businesses and courts have a clear unambiguous base to work from.
        • They're doing this because legislators are effectively being paid to legislate, rather than use the existing laws to their best advantage. A previous government in Britain created one new criminal (felony) offence for every day that it was in office, with a significant proportion bordering on the silly, insane or just plain stupid. It is, for instance, now illegal to explode nuclear weapons in Britain.

          I do suspect though that were anyone to actually do this, the Victorian laws forbidding the unauthorised us

      • by Yoda222 ( 943886 ) on Friday July 18, 2014 @07:50AM (#47481343)

        Anyone with an IQ above room temperature

        Kelvin or Celsius ?

      • by jythie ( 914043 )
        yeah, but a lot of people believe that if you make something difficult to regulate somehow that makes it legal. Kinda like installing hidden compartments in cars, it does not make transporting drugs and less illegal and advertising that you want to help people break the law does not put your garage in a good place.
      • That's fine. It will never happen, but it would be amazing if you could pay your income taxes with bitcoin. That's how the banks getcha. You have to use their dollars to pay your taxes, and you can't get around that, which means you always have to deal with the bankers, and they always get their taste. If you could remove them from the equation, that would free mankind.

        What would actually happen, though, is you'd still have to pay taxes on bitcoins you received as income, just with the value converted to do

    • Re: (Score:1, Flamebait)

      by rtb61 ( 674572 )

      Only need one bit of legislation, declare it a ponzi currency, which it is and let the real asset seizures begin.

      • by itzly ( 3699663 )
        If it were a ponzi currency, why would you even want to seize it ?
      • No, I won't bite on the Ponzi flamebait. But <sarc>I'm sure Satoshi is quaking in his boots</sarc>.

        Er, reality check?

        • Your "little bit of legislation" is only going to affect people in your little bit of jurisdiction.
        • Except for someone who actually is stupid enough to directly declare he has bitcoin, it is trivial to conceal it, and trade/spend it outside problematic jurisdictions.

        Are you one of those who also believe that we just have to pass stricter laws and piracy will disappear?

        • by rtb61 ( 674572 )

          You know how a ponzi scheme works http://en.wikipedia.org/wiki/P... [wikipedia.org]. Those at the top of the pyramid sell the scam to those at the bottom. Those higher up the pyramid make a load of money whilst those at the bottom make nothing as the scheme collapse. Now bitcoin, how easy was it to generate money at the begging for free, all those people had to do was sell the scheme to others, who would find it progressively harder to generate coins, whilst those at the begging cashed in for millions, hmm, ponzi currency

    • by Anonymous Coward

      It's worse than that, actually: It's done from the idea that regulation is "naturally" inherently necessary, and that they are competent to pick the right rules. When the very genesis of bitcoin in large part stems from regulatory over-reach, like with the "anti-money laundring" witchhunts, as if money stinks. It doesn't, but dealing with any money at all has become an onerous task for everyone, moreso for people doing legit things, because of all the fear that it might.

      So what this really is, is a push to

    • by jhantin ( 252660 )

      Doesn't this create an awkward tension between two objectives of lawful authority? On the one hand, collecting taxes on income generated by commerce; on the other, extinguishing that commerce that tempts the wrath of other laws of the land (and with it the taxable income that commerce ostensibly generates).

    • by jythie ( 914043 )
      And what is wrong with that? Sounds like encouraging economic growth.
  • by pubwvj ( 1045960 ) on Thursday July 17, 2014 @07:35PM (#47478991)

    NY State may run afoul of the Interstate Commerce Clause which bans them from interfering with the Universe outside their borders.

    • by mysidia ( 191772 )

      Yes..... since Bitcoin transactions involve the public ledger and miners which are all stored out of state, every time bitcoin changes hands it is simultaneously interstate commerce and foreign commerce, because the internet itself is inherently interstate.

    • by Ralph Wiggam ( 22354 ) on Thursday July 17, 2014 @08:03PM (#47479135) Homepage

      NY has a unique position among states because so many finance-related companies are headquartered there.

      • Which is exactly why they are doing this. NY was also the state that most strongly favored carbon credits......why? Because anytime there is something to trade, NY gets a piece of it.
      • Not really. North Carolina has a ton, Charlotte having the 2nd most financial HQ's in the company only behind NY, with San Fran as a distant third. Both of these locations, even including super-blue San Fran, aren't as meddlesome when it comes to this kind of stuff.

  • Aren't there already laws on consumer protection, money laundering, fraud, abuse, and cybersecurity? I'm honestly wondering why they need extra laws to outlaw actions that are already illegal.

    If this is about taxes (can't tell from TFA), aren't these business already taxed on their profits like any other business? It seems to me that this is all a bit unnecessary, and likely to drive away people who seek to start Bitcoin based companies.
    • Its not just about taxing business. Individuals are to be taxed too.

      A recent IRS advisory said virtual currency is to be treated as an assent not a currency. So lets say you receive some bitcoins. At some future date you spend these bitcoins. Since these bitcoins are an asset you have to account for their gain or loss in value for the days that you held them and declare a loss or gain on your taxes. In short spending bitcoins has the paperwork overhead of selling stocks, its not like spending dollars at
      • So now a number is magically an "asset" ???

        The government has -zero- jurisdiction digital bits, er, BitCoin.

        Fuck the IRS and their archaic mindset.

        • by itzly ( 3699663 )

          So now a number is magically an "asset" ???

          Basically yes. Because of the structure of the bitcoin network, some numbers are assets. That was the whole point, wasn't it ?

        • The government has -zero- jurisdiction digital bits

          You think your bank has a little box with your name on it and all your money inside in paper and coins?

          • by Anonymous Coward

            I think I worked out where the negative mass is kept.

        • by AK Marc ( 707885 )

          So now a number is magically an "asset" ???

          Anything with "value" is magically an asset. That's what assets are.

      • The IRS and many people, it seems, don't understand BitCoin. It doesn't help that the name also misleads in this way.

        BitCoin is not analagous to actual coins, objects which can be exchanged. BitCoin is a distributed peer to peer bank.

        Why is it a bank? A bank is no longer a store of actual physical objects, it is merely a transaction ledger. Transactions are logged that determine the number of tokens that a given account controls. Account balances and so on are merely a digest of this transaction log - the l

        • In what way does that matter for the purposes of the IRS, or of people investigating money laundering? The IRS wants to know your income, and doesn't really care if you got it through a bank, in small unmarked bills, BitCoins, or whatever.

    • by Anonymous Coward
      Yeah its not like millions of dollars worth of bitcoins disappeared from Mt Gox without anybody being held to account ... oh wait!
      • Re: (Score:2, Insightful)

        by Anonymous Coward

        Yeah its not like millions of dollars worth of bitcoins disappeared from Mt Gox without anybody being held to account ... oh wait!

        That happens with US dollars too. Former NJ Governor and former US Senator John Corzine lost/misplaced hundreds of millions of dollars at the financial company that he ran. He did not go to jail. Of course it helps to be a leading Democrat and friend of the President of the United States. He was on Obama's short list for a cabinet position and Obama had publicly cited Corzine as one of his best allies in the Senate. For some reason the US Justice department didn't feel a need to send him to jail.

        • by Smauler ( 915644 )

          Who modded this AC up?

          If there's one thing I'm sick of with slashdot, it's the constant party bickering. Yes, we understand Republicans don't like Democrats, and Democrats don't like Republicans. We get it.

          If there are political points to be made (like there are in this story), make them about the story, not some obscure deal someone else made.

        • by jythie ( 914043 )
          There will always be corruption and favoritism, but it is still better to have a framework for addressing misdeeds then simply leaving it at 'well, rich people will get away with it anyway, so why bother making it illegal?'
        • John Corzine lost/misplaced hundreds of millions of dollars

          He should check his other trousers.

    • ... likely to drive away people who seek to start Bitcoin based companies.

      A business can accept bitcoins for payment and never touch a bitcoin nor ever be at risk for price fluctuations.

      Various exchanges provide merchant services where a merchant gives sale info to the exchange, the exchange converts the dollar amount to bitcoins and provides the merchant with the converted amount and a bitcoin payment address (one belonging to the exchange). The customer essentially makes the bitcoin payment to the exchange. When the exchange confirms the payment they credit the merchant's a

      • by Eddi3 ( 1046882 )
        I'm not sure how that's relevant to my point. I was talking about Bitcoin based businesses such as exchanges, mixers, etc.

        If you have a company that sells computer parts, but accepts Bitcoin via a third party merchant service among other payment methods, I would think they aren't directly subject to these regulations and certainly aren't reliant upon Bitcoin to survive. Perhaps the third party would have to charge more for the transfer if they were based in NY.
    • by nurb432 ( 527695 )

      Of course there are already laws, but if the legislature didnt keep passing redundant laws like this, what else would they do?

      And yes its about taxes, and squelching anonymity..

    • Aren't there already laws on ... money laundering

      Yes, and they need to be repealed.

  • by schwit1 ( 797399 ) on Thursday July 17, 2014 @07:37PM (#47479001)

    What could go wrong if 50 states and the feds decide on differing, possibly conflicting regulations. But maybe that's the point - regulate them into obscurity.

    • by AHuxley ( 892839 )
      If your within their Empire and practicing "money" changing you may have to:
      have some bond or trust account in United States dollars
      name and contact information to some expected level of ID standards
      disclosures risks.
      Anti-money Laundering Compliance and reporting and hire more staff.
      and a few other new tasks
      Think of it as been a "bank" somewhere that has just got a treaty request from the United States. Have fun filling out the new virtual forms.
  • Wouldn't this basically be a stake in the heart of what makes Bitcoin Bitcoin - the ability to anonymize transactions?

    If that goes away, then Bitcoin value will turn to vapor pretty quickly.

    • by Eddi3 ( 1046882 ) on Thursday July 17, 2014 @08:01PM (#47479119) Homepage Journal
      Bitcoin is inherently the opposite of anonymous. Every single transaction is forever part of the blockchain, free for anybody and everybody to download, and even compulsory if you want to have a local wallet.

      The only way to anonymize your coin is to use a service which mixes up your coins so that it's nearly impossible to trace where they went once they go into the system.
      • by Kjella ( 173770 )

        Create a new BitCoin account, transfer some funds there and claim "I don't know whose account that is and I don't remember why I sent money there" and you've got a weak plausible deniability, I mean it's not like I have to keep track of my cash that way, just because I was given a $20 bill with serial number 1234567 from the bank it doesn't prove anything when it shows up in some drug dealer's roll of cash. Or for that matter, that a $20 bill once used to buy drugs is now in my hands. Money kept in secret m

        • by itzly ( 3699663 )
          You don't even need to transfer bitcoins there yourself. Whenever you receive bitcoins from someone, have them sent to a new wallet. If you can keep the transaction secret, the bitcoins can be kept secret too.
    • That isn't the heart of bitcoin at all.
  • by h4ck7h3p14n37 ( 926070 ) on Thursday July 17, 2014 @08:17PM (#47479187) Homepage

    we believe that setting up common sense rules of the road is vital to the long-term future of the virtual currency industry, as well as the safety and soundness of customer assets.(We think the situation at Mt. Gox, for example, made that very clear.)

    It seems to me the Bitcoin community has been doing just fine without regulatory "assistance". Sure some people got burned by Mt. Gox, but I'm okay with that being one of the risks if it allows me to avoid government meddling. The State is a hell of a lot more of a threat to me than some shyster like Karpeles.

    • by Anonymous Coward

      Sure some people got burned by Mt. Gox, but I'm okay with that being one of the risks if it allows me to avoid government meddling.

      That's nice, but the people who got burned didn't take it that stoically.
      In fact, a lot of them seemed surprised and angry at discovering that putting their stuff in a shady unmonitored site for trading children's online card game cards was a risky thing to do.

      Between the scams and incompetence these incidents are so common that I don't know by what measure you could say the community is "doing fine". Though I suppose the scams at least keep up the velocity a bit.

      • In fact, that's not nice at all. If the Bitcoin is to be a currency, it should not be viewed as a risky investment or something like that. Otherwise, the chances are null it will become a real player in the currencies market. On another hand, if you are to provide some kind of guarantees to eventual users, you also have to cover the charges for that service.

        And at the end, why should someone use bitcoins if they are equivalent to any other trading system? Given the charges to offer some legal guarantees, gi

    • by eWarz ( 610883 )
      Aren't most of the bitcoin companies out there foreign anyway? State law isn't going to do a thing for companies that don't operate within the US.
  • by Anonymous Coward

    This is typical of NY arrogance. Schumer, Guillani, Bloomberg, petty tyrants all. They manage their sheeple, denying them arms, sodas, and freedom from the banking establishment.

    NY is a bump on the cryptocurrency freeway.

    • by rcb1974 ( 654474 )
      Totally. Mod parent up. I've lived in NY for almost 40 years and am so sick of this place. It has become a cesspool for parasite socialists.
  • by ArcadeMan ( 2766669 ) on Thursday July 17, 2014 @09:02PM (#47479395)

    It sounds so broad as to include my Final Fantasy XI gil, World of Warcraft gold and Star Trek Online credits.

    Will they try to tax my Steam achievements too?

    • I never really got into Bitcoin, but now I have an urge to acquire lots of Dogecoin to make taxday more fun. Such paperwork. So doge. Such write off. Much deductions.

      Get a letter from the IRS: Bad Shibe, don't try and doge taxes.
  • If NY does this a new type of business will be created in which transfers of cash flow to branches outside of NY and are then converted to or from bitcoins. One could even work this into a charge card in an automated way. In other words NY will have the lead yanked out of its pencil.
    • And, if those businesses violate money laundering and reporting laws, they'll be prosecuted.

      The authorities don't have to trace the bitcoins, they can just look at the cash side of the transactions.

      And, of course, if people use this to evade taxes, the IRS will be on their trail.

  • The whole point of bitcoin is that it is an anonymous currency which the government can't track. Once it is "regulated" nobody will need to use it! They will find another way to exercise their right to transact in private.


      The transaction log is public. BitCoin *is* the transaction log (and the protocols for updating it).

      Every transaction is visible, by design. BitCoin can't work otherwise.

      If you only ever trade BitCoin that you mined yourself on your own private hardware, you might have a shot at anonymity. But if you make any kind of exchange transaction to buy them that someone can track, then you can be associated with your entire transaction history. I guarantee that right now there are programs in t

  • Things that get the bitcoin "community" riled up are pretty amusing. Bitcoin is going to be a tax nightmare if you actually bother to file for it. Isn't it subject to capital gains tax in the US too?
  • That's really the only thing you're talking about.

  • So the regulations that allowed fraudulent investment products( leading to the 2008 housing bubble and subsequently global financial collapse) worked so well. Obviously these regulations will be equally as efficient in *crowding out new industry players*cough cough... Rooting out illegal behaviors and * shafting cough cough* protecting consumers. https://m.youtube.com/watch?v=... [youtube.com]

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