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Friday, January 9, 2015

Bitcoin's Dreaded Bitlicense Revision Promised Soon

The anticipated and feared revised New York "Bitlicense" proposal will be issued soon and "early in 2015" according to New York State Department of Financial Services chief Benjamin Lawsky in new comments made Friday.

Lawsky's comments included the ominous warning:
People wanting to "flout the law...will not be able to survive."
Bitcoin and digital currencies refer to an electronic payment system that does not use conventional, or "fiat" (i.e. government-issued) money. This emerging industry's role in the financial sector has come under scrutiny, because of an incorrect and irresponsibly shared view (promoted by conventional banking competitors) which Lawsky himself voiced that Bitcoin comes from 
"a very unregulated world...[that is] colliding with the closely regulated banking system."
However, a reasoned and knowledgeable approach recognizes that the Bitcoin and digital currency sector, like all other commercial activity, is as subject to the same myriad of state and federal laws on fraud, for example, and other criminal and civil laws that regular businesses are subject to -- so the common view that Bitcoin is in some lawless netherworld is pure bunk. 

Lawsky persists in promoting the myth of Bitcoin as some sort of refuge from the long arm of the law. This is the same type of nonsense often used to impose laws or regulations known by their proponents or enforcers to have disparate (and hence, legally challengeable) effects. Lawsky, for one, claims that his Department "wants to make bitcoin safer" without putting innovative companies "out of business." Be warned that such an objective can be achieved, of course, if many of those companies simply stay in business but move out of New York State, if not out of the country altogether.

Read Eric Dixon's Original Comments To The New York State Department of Financial Services on Its Original Bitlicense Proposal: From August 2014.

Bitcoin is not "unregulated." It merely is not regulated in the same way -- not yet -- as the large financial institutions. But make no mistake, regulator Lawsky said clearly:
 "there hasn't been enough regulation" about Bitcoin.
And Lawsky's job is to regulate. That means finding something to regulate. The need for regulation is not the need to protect people; it's the need for people, like regulators, to have and keep their jobs!

The key to any acceptable and legally-sustainable regulation, of course, is whether it achieves "fairness" among competitors in our economy. Regulatory favoritism will surely give way to cries of crony capitalism, and here, crony regulation. 

On related themes, Lawsky did appear to recognize the benefits of "encryption as a way to avoid the sharing of personal information."

The proof, of course, will be in the details of the eventual new draft regulation. 

Eric Dixon has been a corporate, business and regulatory lawyer in New York for 20 years. 

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