New York to Regulate Bitcoin: Is the Cryptocurrency Biz Like "the Wild West?"

Highlights from this week's hearings on virtual currency.

Yesterday, the New York State Department of Financial Services (DFS) concluded a two-day fact-finding hearing on how to regulate Bitcoin and other virtual cryptocurrencies. The purpose of the hearing was to consider whether or not Empire State regulators should have a direct role in overseeing the use of virtual cryptocurrencies, or if existing federal regulations suffice.

In his opening remarks, New York State Superintendent of Financial Services Benjamin M. Lawsky made it clear that the question wasn't so much if New York should regulate cryptocurrencies, but how. "Right now, the regulation of the virtual currency industry is still akin to the Wild West," said Lawsky. "That lack of regulation is simply not tenable for the long-term." Lawsky also expressed a desire not to "clip the wings" of a promising new technology, and acknowledged the potential of cryptocurrencies to revolutionize the money transmission industry.

The first panel consisted of some of the leading investors and venture capitalists in the world of Bitcoin, including Barry Silbert of SecondMarket and the Bitcoin Investment Trust, Jeremy Liew of Lightspeed Venture Partners, Fred Wilson of Union Square Ventures, and Cameron and Tyler Winklevoss of Winkelvoss Capital Management. All five participants urged the DFS to take a light touch to avoid quashing innovation or driving the industry abroad.

When one panelist suggested that small upstarts could outsource their regulatory compliance duties to other firms, Fred Wilson of Union Square Ventures told the panel, "That sounds like a terrible idea." He continued:

You're talking about introducing all of the costs into the system that we're trying to take out of the system. Let's just understand what we're trying to do with Bitcoin. We're trying to create a world where transactions can move globally for free. And making these companies hire some outsource compliance firm is a bad idea.

New York State Superintendent of Financial Services Benjamin M. Lawsky |||Members of the DFS voiced concern that Bitcoin could be used to facilitate narcotrafficking and other illegal activities, as it did in the case of Silk Road, an online drug bizarre that was shut down by the government in October. On Monday, the day before the hearings began, Charlie Shrem, the founder and CEO of BitInstant and a major figure in the Bitcoin community, was arrested on charges of using cryptocurrency to launder money. The Winkelvoss brothers, who participated in the hearing, were major investors in Shrem’s firm.

Jeremy Liew of Lightspeed Venture Partners told the panel that these cases demonstrate that additional laws and regulations to protect against money laundering aren’t necessary. "Law enforcement did a fantastic job using existing regulations," said Liew. "It appears to have been controlled." At a later session, Cyrus R. Vance, Jr., the district attorney of New York County, and Richard B. Zabel, the deputy U.S. attorney for the Southern District of New York, argued that these recent prosecutions pointed to the need for more oversight. "There were hundreds of people engaged in criminal conduct dealing with these entities and dealing in virtual currencies and they haven't all been arrested," said Zabel.

But what sorts of rules are needed to help combat money laundering that don’t already exist on the federal level? Barry Silbert of SecondMarket and Jeremy Liew of Lightspeed Venture Partners |||The participants offered few specifics. Bitcoin investors expressed hope that any new regulations will be written broadly enough that they don’t halt innovation or drive the industry abroad. "Regulators are going to have to come up with a way to treat Bitcoin that is balanced and thoughtful," said Barry Silbert, "but also recognize that this is a global phenomenon."

"Bitcoin challenges the duopolistic incumbents," said Tyler Winklevoss, "and I think that's very healthy and I think that's very American and it's what we should all be striving for."

About 3 minutes.

Written and produced by Jim Epstein and narrated by Naomi Brockwell.

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  • Fist of Etiquette||

    BAN IT.

  • Free Society||

    for the children

  • kris713||

    what Patrick said I'm shocked that a mom able to get paid $5552 in four weeks on the internet. did you read this site link ..,.,..,.,.,., jobs80
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  • StAcacius||

    Leave it to New York for a quote like "it's not if we should regulate it, but how."

  • ||

    Human sacrifice, dogs and cats living together, people exchanging money without the government wetting its beak, mass hysteria!

  • Smilin' Joe Fission||

  • space junk||

    +1 here too.

  • ||

    I will never understand so many people's fear of the unknown and uncontrolled. I just thank my lucky stars I'm not one of those scum.

  • Fist of Etiquette||

    You fear every odd number Star Trek film. You don't understand and therefore fear The Dark Knight and Marvel's The Avengers. You can't control Michael Bay. Fear is all you know.

  • ||

    It's true! Pearl Harbor had Kate Beckinsale in it, yet I hated it! I need to understand how that is, yet I can't!

    Since it's physically impossible for me to hate Kate Beckinsale, I don't understand what happened. And so, I fear it. Thanks for helping me understand how retarded I am, FoE. You have a real gift. For retardation.

  • Fist of Etiquette||

    That was Kate Beckinsale? Damn, it's been so long I guess I forgot that. Truly its release date is a day which will live in infamy.

  • ||

    Look, say what you want about Michael Bay--I certainly do--but he has impeccable taste in women. It's what makes hatewatching his movies possible.

  • ||

    Sometimes I wonder if it's really fear of the unknown or fear of losing their jobs.

  • ||

    It's fear of losing their power that gets their panties bunched.

  • Unable2Reason||

    If glass were technologically unable to be made clear, only tinted, they would require us to put a one million candle-power arc-light in our vehicles so they could see inside. If guns inherently fired silently they would make us put noise makers on them so they could keep track of how and when we were using them.

    Absolutely, it is about control.

  • Killaz||

    That would be the 'untenable' part the bureaucrat quoted above mentioned. A world where the pie is no longer cut between the regulators and the favored syndicates, but where everyone gets a slice is not something his class is willing to risk.

  • Hugh Akston||

    Regulations are the mark of an advanced civilization. They make things streamlined and predictable, and are designed to make sure everyone follows the same rules, whatever they happen to be today. It's like everyone in America sharing a single neck.

  • feudalserf||

    all the easier to hang you with, my dears

  • Mark22||

    The Pharaos used to be an advanced civilization, so was the Holy Roman Empire, and the French and British empires, and they all oppressed their citizens, were thoroughly corrupt, and committed mass murder. I don't want to live in an advanced civilization; thanks, I'll take the wild west.

  • John||

    The "Wild West" resulted in the settlement of vast areas of virtual waste lands and their transformation into some of the most productive agricultural lands in the world. America fed the world thanks to the "wild west". Why do socialists hate the Wild West? Do they like starvation?

  • Hugh Akston||

    Judging from the effects of their policies? They sure do.

  • kinnath||

    Most people don't realize the wild west was Missouri, Iowa, and Minnesota.

  • Pope Jimbo||

    Don't forget about the Yankton cocksuckers who pestered the good citizens of Deadwood

  • Paul.||

    New Mexico territory.

  • Calidissident||

    Last semester, I took a health class that was about racial and gender based health disparities (I posted about it here, I took it because it was the only class that would satisfy a university diversity requirement and fit into my schedule). At one point, the professors had a professor from the School of Medicine who specialized in health care policy give a presentation to the class about health care reform. He repeatedly described the individual market prior to Obamacare as being like "the Wild West" and implied that it was basically an unregulated free-for all where insurance companies charged outrageous premiums for virtually no coverage. And when the time came for him to acknowledge criticisms of Obamacare, they were all overly simplistic, hyperbolic caricatures of the weakest arguments offered by its opponents (stuff like "It is the end of freedom!" or "It's gonna tax us to death!"). The one exception was the criticism that it doesn't do enough to control costs, which he acknowledged is very possible. However, notice that I (and he) used the word "enough."

  • Killaz||

    'Professor, how much do you make to spout that lazy vitriol? Does it ever make you suicidal when you contemplate your compensation versus what you actually contribute to your field or do you prefer not to dwell on it?'

  • Calidissident||

    I was shocked at how ignorant (or perhaps mendacious) a "health care policy" expert at a top 25 university could be. Doesn't reflect well on my school, although I'm sure you could find idiots like him at elite Ivy League schools.

  • Calidissident||

    expert should also be in quotes there

  • Killaz||

    You can. Robert Reich has a history of gigs at them, for one.

  • Francisco d Anconia||

    University diversity requirement?






    Okay, I've composed myself.

    What in the fuck does diversity have to do with higher education AT ALL, let alone it needing to be a requirement?


  • iEagleHammer||

    I took "African Studies," slept every day, and got an A. It definitely "broadened my horizons."

  • Copernicus||

    You got an A coz you studied like an African.

    BOOM! Nailed it.

  • Eggs Benedict Cumberbund||

    I graduate college in 1980. I think I missed most of the bullshit.

  • OneOut||

    What ? John we stole the Indians land and killed many of them off !

    You think that is good? Is that worse than slavery like you were pontificating on in another comment section ?

    You said that the people of the South deserved every hardship they faced as a result of the war and reconstruction.

    But the Indian wars were just and noble ?

    It's Ok that we stole the land of, and killed many of, native cultures; but the South and it's people ( non slave owners as well ) were vile and deserved what they got ?

    Consistent much ?

  • Eggs Benedict Cumberbund||

    Indian wars were profitable, not just. But that's an issue for a stagnant stone age society...somebody with more tech is eventually going to take your shit. Not pretty but entirely predictable. That's why I think that we should immediately kill ET when they visit.

  • Paul.||

    Why do socialists hate the Wild West?


  • ||


    Firearms and Principles.

    If you took money and didn't deliver, you lender was within his rights to shoot you. If you took money that didn't belong to you without asking really nicely, the owner was within his rights to shoot you.

    Socialists don't just hate the hammer, they hate the reasons people feel justified in swinging it.

  • Anonymous Coward||

    How about telling the regulators to go pound sand? Or telling them the truth that the only reason they are invited to this sham meeting is for the government to figure out how to get their slice of the pie.

    Every time I hear someone refer to something as "the Wild West" without sarcasm or irony, it typically means there is an idiot afoot. The "Wild West" did not exist outside of dime novels and Hollywood movies. Most of the cow towns where shoot-outs at highnoon were supposed to be a regular occurence were safer than New York City.

  • Free Society||

    but not taxed and dominated as easily as New York City

  • ||

    The most legendary shootout of all time, the gunfight at the OK Corral, lasted thirty seconds. The North Hollywood bank robbery shootout lasted 45 minutes and expended 2,000 rounds of ammo. Which was wilder?

  • Killaz||

    But imagine how crazy it would have got if the nation's second most expensive and first most brutal police force had not been there to contain it?

  • OneOut||

    It wouldn't have been very crazy.

    They would have just taken the money and left.

  • ||

    It wouldn't have been very crazy.

    They would have just taken the money and left.

    Taken all the money, shot at a few white people that looked like Chris Dorner, burned down a house and then left.

    So crazy I still can't believe people seem to just have let it go.

  • Killaz||

    When you mention rounds, that pales in comparison to another shoot out in LA.

    I went down to Minnie’s every Thursday evening to play some cards and drink a little. I fell asleep early and when I woke up around two A.M. I saw four white women and three dudes—two blacks and one white. I saw guns spread out all over the floor, an’ I asked them why they had guns, more than I’d ever seen in my life. They didn’t answer, and, instead, the black dude asked me my name and then introduced me to everyone.

    [When asked if Patty Hearst was there]
    Man, how can I tell? All white women look the same to me.
    —Brenda Daniels, [14]

    Read the next three paragraph on the standoff, 9000 rounds expended -- the radical bitch who murdered the school official over school ID policy comes out, guns blazing, gets her head blown off -- Tarantino are you listening?

  • OneOut||

    But only right wing nut jobs have guns and are dangerous !

  • Pope Jimbo||

    What? No love for the simple folks from Northfield, Sunny Minnesota shooting the shit out of the Cole-Younger gang?

    More than 30 seconds and lots and lots of shots fired.

  • Christophe||

    That's amazing. My favorite bit:

    The first James brother, the last to step out, found himself witness to a war zone. He was truly shocked. With a quick look around, the men spotted dozens of citizens firing upon them from windows up and down Division Street, many using rifles with price tags dangling from their barrels and trigger guards.
  • The Last American Hero||

    But but but, in the Wild West, they had open carry, which some people find creepy, and in some cases, nauseated.

  • Eggs Benedict Cumberbund||

    Open carry. Most people calm the fuck down when you have a gun visible on your belt.

  • Brandon||

    Are those guys related?

  • The Late P Brooks||


  • MJBinAL||

    This is called "We must protect our friends on Wall Street!" and "How do we get jobs, campaign contributions, and extortion money out of BitCoin?".

    Assurances that you just want to have funds transfers without cost is in fact confirming their fears!

  • Kyfho Myoba||

    From paragraph 6 above:

    in the case of Silk Road, an online drug bizarre that was shut down by the government in October.

    Drug bizzare?

  • Paul.||

    A two day fact-finding mission to find out how to regulate Bitcoin or whether they should regulate bitcoin?

  • Paul.||

    Sorry, I don't trust these Bitcoin investment gurus, Winkedinklevloss brothers, or really anyone else involved here.

    This is a shadowy cabal of cowardly, pencil-necked regulators and machines of regulatory capture, dancing for for entertainment purposes only.

    And I'm not even a bitcoin fan, I'm pretty neutral on the whole idea. In fact, I kind of take Peter Schiff's view of bitcoin.

    That's how much fuck New York regulators.

  • Mark22||

    Who cares who they are? Steve Jobs wasn't a nice character either, but his products were pretty good.

    Does Bitcoin lower transaction costs? Is it reliable and safe? Those are the only questions that matter, and you can answer them just by looking at how Bitcoin works in practice.

  • Paul.||

    I think comparing these guys to Steve Jobs is inapt. What I see here is people demanding regulations which favor early adopters and early investors. Regulatory capture. Rent-seeking.

    I could be wrong. And I'm open to the counter arguments. When the regulator started talking about how unregulated bitcoin was, and therefore it was in need of regulation, no one just asked the question, "Why?".

    Everyone there seemed to indicate that they could trade in bitcoin without money laundering and sneaky activities. They were essentially pinkie-promising that nothing evil would ever happen with bitcoin transactions.

    I say evil will happen with bitcoin transactions. Who cares?

  • BenjaminRTucker'sRevenge||

    Right. The twins are crony capitalists, not free marketeers. And evil is done regardless, so who cares.

  • BenjaminRTucker'sRevenge||

    If they give up the war on drugs, most of this solves itself. The problem is prohibition, not unregulated currency.

  • para_dimz||

    Article I, Sec. 10: No State shall make any THING a tender in payment in debt but gold and silver coin.
    They can't legally do anything about bitcoin. To do so would be allowing, by state decree something else to be a tender in the payment of debt.

  • ||

    No regulations, no governmental control, no outside interference - that's what Bitcoin is all about! But this is outside of the scope of these morons!

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