17 July 2014
New York’s New Bitcoin Rules Are Going to Kill Its Startups
11:38
New York State has released a first draft of its much-anticipated plan to regulate bitcoin and other virtual currencies, and at first blush, they look like they were written for the 19th century banking industry, not the modern fast-changing world of crypto currencies.
The guy responsible for the rules, Benjamin Lawsky, has a fine line to walk. Bitcoin, after all, came of age as a lubricant for illegal activity on the Silk Road. But today, a new generation of bitcoin startups are coming of age with millions of dollars in backing from legitimate venture capital companies. Is New York about to drive these startups out of town by clubbing them with onerous regulations before they can walk? Quite possibly. The New York regulations introduce a new level of reporting rules that cover a wider swath of businesses and require more work than the current federal guidelines.
The guidelines ask bitcoin businesses to keep track not only of the physical addresses of their customers, but also of anybody who sends their customers money using the bitcoin network. That undermines the fundamental value proposition of bitcoin, which works very much like the internet’s version of cash. But there’s more. Bitcoin businesses must also file frequent reports to Lawsky’s organization, the New York State Department of Financial Services, or DFS, to detail changes in ownership, financial forecasts, even strategic business plans.
If adopted, these requirements will make things very tough for bitcoin startups, who have limited resources and are scrambling to invent whole new types of businesses. “I am concerned that the reporting is extremely frequent and extremely detailed. And it seems quite onerous especially in a new business,” says Jean-Jacques Cabou, a partner with the law firm Perkins Coie, who advises bitcoin companies
In some cases, bitcoin businesses would have to do more reporting than other businesses licensed by the DFS. For example, they have to store 10 years worth of customer complaints. “The corner store that does money transmission doesn’t keep 10 years of customer complaints,” says Cabou. “This is just a lot for a new industry to do and I think it would be very hard.”
OK, reading the NYDFS proposed BitLicense rules a little closer, this is problematic. cc @bobmcmillan http://ift.tt/1nfDOzK
— Jerry Brito (@jerrybrito) July 17, 2014
Another big problem is that the regulations appear to cover a whole new class of bitcoin businesses that are not presently subject to federal regulation. These include online wallet companies like Blockchain and BitGo, and maybe even bitcoin tipping apps. That’s “ridiculous,” according to Patrick Muck, general counsel for the Bitcoin Foundation. “Really the scope of this thing ropes in the whole industry,” he says. “This proposal would set New York up as a quasi-federal regulator for the entire bitcoin industry.”
The DFS did not immediately respond to WIRED’s request for comment, but the agency is clearly ready to engage in some back-and-forth with the bitcoin community. Lawsky, the Superintendent of Financial Services at the DFS, unveiled the proposed regulations on Reddit today, where they were not exactly well-received.
Roger Ver, a libertarian who and serial bitcoin business investor, believes that—if adopted— the rules will drive bitcoin businesses out of New York. “These men calling themselves government are not asking anybody to do anything. They are making demands, and will put us behind bars if we don’t obey,” he says. “Bitcoin was specifically designed to strip away power from men who would be so presumptuous to believe that they have the right to rule over others.”
July 17, 2014 at 12:23PM
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World Bank economist calls bitcoin a ‘naturally occurring’ Ponzi
11:38
Staunch critics of bitcoin have labelled the digital currency as a Ponzi scheme – economist Gary North went into great detail outlining a list of reasons why the popular cryptocurrency is one. Financial institutions, think-tank organizations and economic analysts have also called it a Ponzi scheme. But is it possible for the digital currency to be a “naturally occurring” Ponzi?
According to a recent report authored by authored by Kaushik Basu, a World Bank economist, entitled “Ponzis: The Science and Mystique of a Class of Financial Frauds,” it’s feasible that bitcoin could very well be a natural Ponzi, which doesn’t necessarily have anything to do with Ponzi schemes.
Basu discussed how Ponzi schemes today are a lot harder to pinpoint because they’re more sophisticated and more difficult to detect in the present day economy. Basu presented the case that there are examples of natural Ponzis in the market today: the housing market is one example because if potential homeowners think housing prices will soar then they’ll fight to acquire a home that leads to heightened demand and higher prices. However, once the bubble maximizes and bursts then those who entered at the tail end of it lose out.
The World Bank economist also cited gold as a victim of natural Ponzis.
Here is what Basu wrote in regards to bitcoin:
“One of the most recent cases of bubbles occurred in the new ‘Bitcoin’ experiment. Bitcoin is a cryptocurrency; the main and original attraction of which is the low transactions cost associated with its use. One can buy bitcoin the way one can buy euros and trade freely with others having euros. Trouble started when people began speculating that the value of bitcoin would rise, thereby raising the demand for bitcoin and making the value-rise a self-fulfilling prophesy. In other words, what we witnessed recently in the bitcoin phenomenon fits the standard definition of a speculative bubble.”
The United States Securities and Exchange Commission (SEC) previously wrote last month that bitcoin may very well be a Ponzi scheme and hurt investors who refrain from performing their due diligence and required research.
Economist Nouriel Roubini also chimed in on the bitcoin foray and categorized it as a Ponzi scheme as well. Roubini, who has called for many bubbles in the stock market today, averred that the peer-to-peer decentralized digital currency is a “lousy store of value.”
Of course, the words that really bothered the bitcoin community were that of North, who opined: “Here is an economic fact: the number of fools is limited. They are a scarce economic resource. As the price of bitcoins rises, more fools will be lured into the market. But this is a finite market.”
July 17, 2014 at 11:45AM
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Online Education Platform Skilljar Allows Instructors to Accept Bitcoin
11:37
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Title edited, as it was noticed we had used the same exact title as CoinDesk. An interesting announcement today. Skilljar, a company that allows organizations to offer courses on the Internet, has stated that instructors using their service are now about ... July 17, 2014 at 11:31AM
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World Bank economist calls bitcoin a ‘naturally occurring’ Ponzi
11:10
Staunch critics of bitcoin have labelled the digital currency as a Ponzi scheme – economist Gary North went into great detail outlining a list of reasons why the popular cryptocurrency is one. Financial institutions, think-tank organizations and economic analysts have also called it a Ponzi scheme. But is it possible for the digital currency to be a “naturally occurring” Ponzi?
According to a recent report authored by authored by Kaushik Basu, a World Bank economist, entitled “Ponzis: The Science and Mystique of a Class of Financial Frauds,” it’s feasible that bitcoin could very well be a natural Ponzi, which doesn’t necessarily have anything to do with Ponzi schemes.
Basu discussed how Ponzi schemes today are a lot harder to pinpoint because they’re more sophisticated and more difficult to detect in the present day economy. Basu presented the case that there are examples of natural Ponzis in the market today: the housing market is one example because if potential homeowners think housing prices will soar then they’ll fight to acquire a home that leads to heightened demand and higher prices. However, once the bubble maximizes and bursts then those who entered at the tail end of it lose out.
The World Bank economist also cited gold as a victim of natural Ponzis.
Here is what Basu wrote in regards to bitcoin:
“One of the most recent cases of bubbles occurred in the new ‘Bitcoin’ experiment. Bitcoin is a cryptocurrency; the main and original attraction of which is the low transactions cost associated with its use. One can buy bitcoin the way one can buy euros and trade freely with others having euros. Trouble started when people began speculating that the value of bitcoin would rise, thereby raising the demand for bitcoin and making the value-rise a self-fulfilling prophesy. In other words, what we witnessed recently in the bitcoin phenomenon fits the standard definition of a speculative bubble.”
The United States Securities and Exchange Commission (SEC) previously wrote last month that bitcoin may very well be a Ponzi scheme and hurt investors who refrain from performing their due diligence and required research.
Economist Nouriel Roubini also chimed in on the bitcoin foray and categorized it as a Ponzi scheme as well. Roubini, who has called for many bubbles in the stock market today, averred that the peer-to-peer decentralized digital currency is a “lousy store of value.”
Of course, the words that really bothered the bitcoin community were that of North, who opined: “Here is an economic fact: the number of fools is limited. They are a scarce economic resource. As the price of bitcoins rises, more fools will be lured into the market. But this is a finite market.”
July 17, 2014 at 11:45AM
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Bitcoin, meet Lawsky’s BitLicense
11:09
7.Sharks off the British coast again?
8.Murdoch and Time Warner, one hundred years ago
9.The data keiretsu, continued
Show fewer
July 17, 2014 at 10:25AM
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16 July 2014
Bitcoin 'mining pool' promises to stay small
17:00
NEW YORK (AP) — The largest group of bitcoin miners, which maintains and processes transactions in the digital currency, is promising to avoid majority control of the currency as a temporary measure to maintain the payment system's credibility.
Mining pool GHash.IO, which is controlled by a British company, CEX.IO Ltd., said Tuesday that it would not amass more than 40 percent of the processing power of the bitcoin system. Earlier this summer, it briefly exceeded 50 percent.
Miners operate the computers that keep track of bitcoin transactions. As a reward, they receive newly minted coins. A miner that controls more than 50 percent of bitcoin processing could control the flow of transactions, freeze people out of the network and keep all future bitcoins for itself. However, that would undermine the usefulness and credibility of the system, potentially making bitcoins worthless.
Changes to the software have been proposed to avoid the problem of a "51 percent attack," but CEX.IO said it isn't "able to solve the problem in a long-term perspective, taking into account interests of existing mining pools, individual miners and bitcoin community."
The company is setting up a committee of major bitcoin market players to develop a technical solution for the problem.
Bitcoins allow people to send money over the Internet without going through banks. Transaction costs are low, but it also means the currency is useful for illegal activities such as money laundering and drug sales. Bitcoins have also become a target of speculators betting on the currency's continued run-up. Its value has grown a hundredfold in the last two years.
From a technical standpoint, bitcoins are sequences of numbers, painstakingly produced by computers churning through millions of calculations. Bitcoin transactions are recorded in a virtual public ledger, known as the blockchain. Miners are in charge of maintaining the blockchain.
One mining computer might take years to produce a single block of coins, and there's no way to know when that might happen. In pools, miners divide the bitcoins they create among themselves in proportion to the work done, providing with them with a steadier stream of income.
July 16, 2014 at 05:05PM
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Exploring the Nascent Future of Bitcoin (3 Videos)
17:00
[fivefilters.org: unable to retrieve full-text content]
In terms of a life-cycle of technology, it is easy to see Bitcoin as being at the same developmental stage as babies going through the “terrible twos”. All of its technological possibility lies ahead, nobody is sure what particular path it will take ... July 16, 2014 at 04:33PM
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U.S. gold dealer launches first digital currency backed by bullion
17:00
NEW YORK (Reuters) - U.S. precious metals dealer Anthem Vault Inc said on Wednesday it has launched the first digital currency backed by physical gold, with an aim to increase the use of bullion as an accepted form of electronic money.
Las Vegas-based Anthem said it will launch 10 million "INNCoins" backed by 100 grams (3.5 ounces) of gold, with all coins expected to be in circulation by July 2015.
"It should make gold more acceptable as a form of currency by combining its appeal as a store of value and a much more efficient medium of exchange," said Anthem Blanchard, chief executive of Anthem Vault, who previously worked at online precious metals market GoldMoney.
Blanchard said Wednesday's launch was a promotional offering, and the company has plans to offer a full suite of virtual currencies backed by a larger amount of gold as well as other precious metals at the end of September.
INNCoin is a form of cryptocurrency - with the most notable one being bitcoin, which operates on a decentralized, peer-to-peer network, meaning no government, bank or administrator regulates the currency.
The system reward computers that solve complex mathematical problems by the occasional payoff of new bitcoins in a process known as bitcoin mining.
The launch comes at a critical time for online currency markets after the failure of Mt. Gox, once the world's biggest bitcoin exchange, and increased regulatory scrutiny shook investor confidence in digital currency.
The market is also crowded, with Anthem competing against established players, including Namecoin (NMC), Litecoin (LTC), Dogecoin (Doge), Peercoin (PPC) and Mastercoin (MSC).
(Reporting by Frank Tang; Editing by Marguerita Choy)
July 16, 2014 at 04:14PM
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