The proposal for regulating Bitcoin and other cryptocurrencies called BitLicense could have far-reaching and chilling effects.
The proposal for regulating Bitcoin and other cryptocurrencies called BitLicense could have far-reaching and chilling effects. Not only does the licensing issues affect businesses and invade citizens privacy with overly big brother type burdensome identifications of users, it will also likely shut down Bitcoin and cryptocurrency mining in the US.
One of the most respected and best Bitcoin Mining Pools is BTC Guild. It is run by Eleutrhria who hosts the pool in Nevada. They have a shutdown plan in place that would affect both BTC Guild and Scrypt Guild.
I and others have been having a conversation on BitcoinTalk about the situation. I will post his very pertinent thoughts and plans with links to the whole thread. Eleuthria is very astute and in my opinion the best non-P2Pool operator there is. To see him having to plan the closure of his business that serves so many is scary in a profound way. This is the kind of business death and closure that the proposed regulation guideline will have on many businesses. As a passionate miner who enjoys the whole ecosystem from the hardware, software and pool options I am extremely upset that this could happen. Stewardship of the blockchain is key to Bitcoin’s or any cryptocurrency’s survival. We have had 51% of the power taken by an uncaring company, and have survived all sorts of craziness, but the proposed regulation can kill Bitcoin in its tracks in the US.
Here is what Eleuthria has stated when questioned about the proposal. His initial comment on it was:
And so it begins. New York regulators are now proposing things which would make it essentially illegal for anybody to use Bitcoin in that state without being registered. It is so over-reaching that it would even catch things like the Bitcoin tipbot on reddit, which would be an illegally operating entity if it allows you to tip a New York resident.
When asked where the pool resided he had this telling response to it that really shows just how bad this could be even across state lines. In a state that has fully embraced Bitcoin and cryptourrencies, California could end up losing businesses due to the regulations.
Nevada currently, but this regulation would affect the pool if it has users in New York. And I doubt an “I agree I’m not a resident of New York” checkbox would be enough. Luckily this has 45 days of commenting, then review, and then there are 45 days after it’s put into effect before it is enforced. Quite frankly, if something even remotely close to what is currently open for comment goes into effect, the pool will probably be forced to close.
Living in the US makes trying to sidestep/ignore this a non-option. I doubt they’d chase international pool owners, but depending on what country they’re in, I wouldn’t exactly assume they’re safe (US doesn’t have a history of respecting international borders when it comes to internet businesses).
Chilling, simply chilling. As Josiah Wilmoth showed the community is half on the case by forking the BitLicense proposal and some making efforts at coming up with suitable legislation that would protect all involved without giving away our privacy, closing businesses, and stifling innovation. We need everyone to get behind a well thought out response and alternative plan to the original proposal. A response to Eleuthria by hurricandave was an eye opener into how a business owner like Eleuthria sees the threat.
I’ve read several articles about this proposal and most of them seem to give the same quote, that merchant and consumers using Bitcoin strictly for the sale of Goods and Services are exempt. I view the fact that you collect a 2% fee for providing me the service of access to Bitcoin mining software and a service of reasonable security protection from online attackers, makes you a simple merchant and ‘us’ the consumers of your service. Therefore “We” are not subject to the SDN verification as well as State Licensing. Though you may want to tweak the support page to make it clear ‘You are only providing a Service and are not a Bank, Loan Agent, or Monetary Transfer Provider.’
The problem is it isn’t worth the risk to be operating in the grey area of how it’s interpreted. Prosecutors will always have the upper hand on that one, especially when they have could throw enough prosecutors/lawyers with a combined annual salary higher than the gross income received from the pool in its lifetime.
He is not wrong that the litigious side of it all despite being across state borders still makes the threat of it too much to bear for many companies including him.
I asked him outright about closure.
So you are saying we should be ready for you to shut down without notice or be blocked based on the state we are in? I understand not wanting to take the risk ,I am not belittling that at all. I just want to have an idea what we need to plan for? The proposal will not stand as is. It has already been pointed out that it violates federal privacy laws and interstate commerce laws.
There is a 45 day period before the regulations would go into effect, and that doesn’t begin until after they are finalized (which is after a 45+ day comment period and then a revision period). If they come into effect and still have wording which is absolutely applicable to pools, then the pool will begin shutting down and cease to exist at the end of that 45 day grace period.
At this point, I don’t believe what exists currently will pass, but that doesn’t mean what does come out won’t still be applicable to pools in some way which makes it too risky to continue operating. The reason for that post is that under those circumstances, the 3-month-closure period identified in the 2nd post of this thread and in the FAQ on the website will be reduced from 90 days to 45 days in order to cease operations prior to the regulation going into effect.
He did have one final statement at this time as well on the subject.
We have a couple months before anything is really known at this point. Logically, NY state should not be able to enforce this regulation against any company without a nexus in NY, even though the proposed regulation is trying to claim differently. The problem is whether or not there is some federal law/agreement that would allow them to extend their authority. The other problem is that even if they have no authority to do so, it doesn’t mean they can’t try.
There’s also the chance that other states jump on board with the NY regulation. If that happens, there’s no guarantee how much time companies in other states will have to react before they become targets.
At least from what we’ve spoken about so far, wizkid057 (Eligius) appears to believe there is no legal threat to businesses not based in NY. I’m much more conservative, and as such have been preparing for the worst.
I am fine with rational common sense legislation yet the proposed guidelines are not that. They are a way to invade citizen’s privacy way more than even setting up a bank account does. As I have stated before the community and businesses need to come together and properly craft a response with rational guidelines and regulations that will help spur growth and innovation. A set of rules that does not invade our privacy to the point where we are all treated as criminals without ever doing anything wrong. The Proposal as is will drive away more than just Eleuthria, it will drive away big and small businesses, it will drive away people who just want to use it because they do not want to give up absolutely every shred of privacy to buy a $2 cup of coffee with it. Dell just announced that it would start accepting Bitcoin, BitPay has had a huge investment in its platform. Coinbase has been expanding at a rapid rate and building all sorts of merchant relationships and innovations. What NYS and (NYDFS) Superintendent Ben Lawsky have proposed in the BitLicense will stop it all dead in it’s tracks.
I know the proposal was like throwing stuff at the wall to see what sticks but the community and businesses cannot be passive in thinking someone else will take care of it for them, and it will not pass as is. If we all, members of the community, its businesses and industries do not come together and propose a viable alternative to the proposal and get vocal about this, we could be in deep trouble.
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Last modified: January 25, 2020 10:02 PM UTC