Benjamin Lawsky unveils New York's historic BitLicense

Why You Shouldn’t Fear the Blockchain Regulators

Kevin Werbach is a Professor of Legal Studies & Business Ethics at the Wharton School at the University of Pennsylvania, and the author of “The Blockchain and the New Architecture of Trust,” from which this article is adapted.
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In 2015, New York became one of the first jurisdictions in the world to adopt a regulatory regime for cryptocurrencies. The Department of Financial Services began requiring virtual currency businesses to obtain a “BitLicense” in order to operate or serve customers in the state.
“We want to promote and support companies that use new, emerging technologies to build better financial companies,” said then-New York Superintendent of Financial Services Ben Lawsky, when announcing the rules. He continued:
“Regulators are not always going to get the balance precisely right…. But we need to begin somewhere.”
Perhaps. Yet Lawsky picked the wrong somewhere. And he moved fast to formalize rules governing what was still, in 2015, a small-scale and fluid cryptocurrency community.
Bitcoin entrepreneurs and technologists argued that the threat of overbroad regulation, and the costs of compliance, would chill startup activity. More than 4,000 comments were filed on the draft rule, most of them critical.
And when the regulations went into effect, a substantial number of Bitcoin-related startups left New York, including the exchanges Kraken, Shapeshift, Bitfinex, and Poloniex. “The ‘Great Bitcoin Exodus’ has totally changed New York’s Bitcoin ecosystem,” declared the New York Business Journal.
Three years after the Great Bitcoin Exodus, the crypto-native exchanges have not rejoined the New York startup scene. But other firms have.
R3, the financial industry distributed ledger consortium with over $100 million in funding, is headquartered in New York. As one might expect, so are a number of finance-focused blockchain startups such as Digital Asset Holdings, Symbiont, and Axoni. Pillars of Wall Street such as Goldman Sachs, JPMorgan, and the parent company of the New York Stock Exchange are getting into the action.
And the activity is not limited to financial services. Consensys, a venture development studio building around Ethereum technology, grew from 100 to over 400 employees during 2017 alone in its Brooklyn headquarters, and is working on dozens of innovative projects around the world (though it recently announced significant layoffs). Blockstack, a high-profile startup hoping to build “a new internet for decentralized apps” on blockchain foundations, is located in New York as well. The New York bitcoin and ethereum meetup groups each have over five thousand members.
The BitLicense, for all its flaws, did not kill off cryptocurrency activity in New York. Neither did it create the model for regulatory innovation its creators intended. Subsequent jurisdictions developing cryptocurrency regulatory frameworks explicitly distinguished their policies from the overly restrictive elements of the BitLicense.

for more story...https://www.coindesk.com/why-you-shouldnt-fear-the-blockchain-regulators
submitted by smathium to u/smathium [link] [comments]

Reminder: Benjamin M. Lawsky promised that the NY bitcoin regulations would be released no later than May 31

End of May "at the latest."
law360.com/articles/646017/lawsky-says-bitlicense-could-change-to-ease-compliance
New York Superintendent of Financial Services Benjamin M. Lawsky said that the final BitLicense would be release by the end of May “at the latest.”
It's holding up the launch of at least one service (Gemini). Possibly others.
Bitlicense will come into effect January 2015
forexminute.com/bitcoin/nydfs-superintendent-benjamin-lawsky-resign-2015-49520
He previously stated January 2015 to be the month when BitLicense will come into effect.
Will resign in early 2015
insidebitcoins.com/news/nydfs-superintendent-lawsky-to-step-down-early-next-yea26217
The man who has been at the center of the bitcoin regulation firestorm is reported to be weeks from relinquishing his post. New York State Department of Financial Services Ben Lawsky will resign in early 2015, according to published reports. - Nov 10, 2014
That's an interesting coincidence. The Bitlicense was supposed to come into effect at the same time that he resigned. When his resignation was delayed until June 2015, the Bitlicense also happened to be delayed until June 2015.
Why does Lawsky struggle so much with the truth?
submitted by slowmoon to Bitcoin [link] [comments]

Novauri's comments on the BitLicense

Hello, this is Will from Novauri. You almost certainly haven't heard of our company before. We are not planning on releasing it for use until 2015, and we haven't spent a dime on marketing. Still, our team feels strongly about the emerging BitLicense regulations in New York, and I wanted to share the letter we sent to the DFS with the community today.
We already shared our views within days of the proposal being released here, but we've had much more time to craft a formal response. You'll find an abbreviated version below, and a full copy of our letter on our website here.
I know this is a somewhat 'dry' topic, but it's important to the future of bitcoin in the US. Our thoughts on this topic are below. Thank you.
About Novauri
Novauri is a virtual currency startup based in Denver, Colorado and San Francisco, California. Novauri will allow bitcoin users to purchase and sell bitcoin using ACH debits and credits from their bank accounts. The service will be available initially to US consumers in early 2015.
We are different from our competitors in that Novauri will not control the private keys to our customers’ bitcoin addresses. Not only will Novauri never have access to customers’ private keys, but our systems are designed so we will never see private keys in unencrypted form.
We intentionally built this feature into our service as a risk protection measure for our customers. Novauri cannot suffer from the catastrophic failures and massive internal thefts we’ve witnessed at services that pool customer bitcoin and control their private keys because Novauri never has control of our customers’ funds, bitcoin or US Dollars. We feel strongly that this feature is both safer for our customers and cheaper for us as a service provider. Our design requires no expensive security layers around pooled wallets, no insurance for massive, pooled wallets that are vulnerable to insider theft, or regulatory responsibility as a fiduciary holding retail customer deposits like a bank.
Innovation, bitcoin, and concerns about the proposed rules
We believe bitcoin and its underlying blockchain technology is the most significant invention of the century. Bitcoin allows for unique digital information that can exist safely on the open Internet without the protection of a central authority. Bitcoin’s unique combination of cryptography and “hashcash”-based proof of work consensus with an integrated economic incentive to participate in the consensus that also creates an automated, and fully predictable monetary policy is something we’ve never dreamed of before 2009. The applications for this technology extend far beyond payment systems, and have the capability to uniquely identify anything digitally; a possibility that becomes exponentially more exciting when it intersects with other emerging technologies, such as the Internet of things, drone applications, or holograph-based UI and peer-to-peer communications.
That being said, we believe the proposed BitLicense regulation falls short in three key areas:
1) Redundancy with existing regulation, and creates an unfair playing field
Novauri believes that the BitLicense regulation is written in such a way that it will greatly stunt growth and drive innovation to other States or Countries entirely. The regulation contains provisions that exclude existing banks from the rules entirely.
Novauri recommends removing the provisions that exempt banks entirely, and replacing the redundant and overreaching language in these areas with a simple statement: The rules and regulations applying to bitcoin at a Federal level (especially from FinCEN) shall apply to all applicable virtual currency businesses with activities in New York State.
2) KYC provisions and ineffective cyber security provisions are dangerous for consumers
Perhaps the most dangerous aspects of the proposed regulations are the identity verification processes. We’ve already seen the disasters that the data retention provisions in the Bank Secrecy Act have caused in terms of the ongoing identity theft epidemic. Every week another bank is hacked, and more and more personal information goes up for sale on the darknet. We feel that these issues are an unintended consequence of the data retention requirements in the BSA, as well as the decision by certain companies to monetize “big data”. Novauri feels that these are misguided regulations and business decisions, and is vehemently opposed to corporations storing and selling personal information. The economic costs of identity theft greatly outweigh any advertising revenue made by these companies, and the cost to taxpayers in reimbursing billions and billions of dollars in stolen tax refunds each year, to say nothing of the stress these unintended consequences cause normal people when they discover their identities have been stolen.
This issue will be far worse with bitcoin, which features a public ledger. As soon as personal information is leaked, it can be associated with the blockchain and the entire financial history of individuals will be viewable by anyone. As written, Novauri feels the proposed KYC provisions in the BitLicense proposal constitute a potential threat to our National security.
Novauri recommends that the NYDFS delay the requirements around KYC until a more elegant solution evolves that doesn’t risk massive identity theft incidents or violations of personal privacy. We recommend full synchronization with existing regulation, and revision such that an individual’s right to privacy is balanced against the needs of law enforcement. This synchronization should also include checks and balances that are non-existent today.
Regarding “cyber security”, Novauri believes that the regulations are ineffective, as technologies are continuously evolving. Novauri recommends that the NYDFS require businesses that act as fiduciaries for customer deposits and maintain control of private keys to hold deposit insurance for 100% of the value of all fiat and virtual currency deposits. If the business has faulty security, the insurance company can make that determination and increase their premiums. In the event that the business’s security is unsafe, the insurance companies will not issue insurance at all. This is a “future proof” way to ensure cyber security without politicizing the topic or risking that rules and regulations become ineffective and anachronistic with time, as they almost certainly will as written.
3) Failure to create a risk-based system that scales with the risk of the service
The proposed regulation doesn’t differentiate between businesses that exchange fiat for bitcoin while taking control of deposits, those that exchange fiat for bitcoin and do not take control of deposits, or even businesses that exchange no currency at all and have no responsibility as a fiduciary. This will effectively kill all small businesses and startups in the State of New York, and if these rules are used as a model in other States, will drive the industry offshore entirely.
Novauri recommends creating at least two types of businesses under the proposed BitLicense regulation:
Virtual Currency Retail or Investment Banking Providers would be regulated in a manner similar to banks, but Virtual Currency Retail or Exchange Service Providers would be subject to minimal regulation. Again, Novauri highly recommends using insurance as a way to “future proof” the areas of cyber security and KYC provisions.
In closing, given the possibilities presented by this emerging technology, Novauri requests that the NYDFS consider revising the rules heavily, adopting a progressive and risk-based approach that uses insurance in lieu of prescriptive measures, removes duplicative rules and regulations, and gives the technology the room it needs to grow and evolve.
Sincerely,
Will Madden Founder & CEO Novauri, LLC
For a full version of our comments on the BitLicense proposal, please visit our website here.
submitted by MrMadden to Bitcoin [link] [comments]

Bitcoin Regulation, Ben Lawsky and Banning Ideas Ben Lawsky releases BitLicense at the BITS Emerging Payments Forum (full video) Excerpt from Ben Lawsky at Cardozo Law School The New York State Department of Financial Services has conducted a hearing on the regulation of vir Bitcoin's Regulatory Nightmare Is About to Get More Frightening

Ripple Welcomes Ben Lawsky Now that Ben Lawsky is a member of Ripple’s Board, things will get very interesting. The goal is to let the company advance its payment platform and the native XRP asset. Though the accusations are not new, they came to mainstream media for the first time when Marc Hochstein, editor-in-chief of the American Banker, asked Lawsky about the possible conflict of interest in his issuing regulations governing Bitcoin on June 3, 2015. Ben Lawsky zealously followed and supported Bitcoin regulation in New York, even when With just weeks to go before he steps down, Benjamin M. Lawsky, New York’s top financial regulator, on Wednesday released rules for running a Bitcoin business in the state.. In a speech at the Bitcoin News Final Version of BitLicense Is Out. Not Many Impressed. Ben Lawsky’s much awaited BitLicense update in finally out. The final version of licensing regulations for Bitcoin and other Historic bitcoin regulation announced for Wall Street and beyond Jun 3, 2015, 12:39pm EDT just disappear into a black hole,” according to Lawsky's speech transcript. Many bitcoin

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Bitcoin Regulation, Ben Lawsky and Banning Ideas

Thoughts on Ben Lawsky and his proposed Bitcoin ban. Ben Lawsky of the New York Department of Financial Services NYDFS has proposed some very onerous and extreme regulations surrounding Bitcoin ... This is true more than ever today because as Ben Lawsky put it, just 6 mos ago we were in a state of hyper regulation. Members of the fintech ecosystem often point fingers at the regulator as slow ... excerpts from superintendent lawsky’s remarks on virtual currency and bitcoin regulation in new york city Superintendent of Financial Services Benjamin Lawsky said the industry currently has no official state or federal oversight in place. "Right now the regulation of the virtual currency industry is ... BitLicense Will Publish At The End of October And NYDFS Superintendent Ben Lawsky Will Keynote Money20/20 Early November [UPDATE] If everything goes as scheduled.

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