Quote from: Melbustus on July 17, 2014, 05:21:20 PM

Quote from: DeathAndTaxes on July 17, 2014, 04:42:58 PM

Quote from: Melbustus on July 17, 2014, 04:31:32 PM

Quote from: stan.distortion on July 17, 2014, 03:59:23 PM

200.3 c 2 is nice and clear:

(c) Exemption from licensing requirements. The following Persons are exempt from the licensing requirements otherwise applicable under this Part:
...
(2) merchants and consumers that utilize Virtual Currency solely for the purchase or sale of goods or services

Yeah, this is key. The regs overall basically formalize, into a Virtual-Currency specific charter, what is already required to comply with existing AML/KYC/BSA regs for money-transmitting/exchanging businesses. Thus, the uncertainty is removed, but nothing *really* changes; however, the explicit assurance that consumers and merchants are free to transact without regs is huge - that's really the only avenue a western gov would likely use to attack/constrain bitcoin, so the explicit carve-out is very nice.

That isn't exactly true. At the federal level FinCEN has provided guidance that the exchange of virtual currency constitutes money transmission under federal law and thus entities must register as a MSB with FinCEN. FinCEN's "guidance" is actually very poor and contradicts existing guidance (exchanging USD for EUR is not money transmission). It would have been preferable for FinCEN to do as NY has done and create a new regulated class (or expand "currency exchanger" to cover virtual currencies). They didn't and what is done is done. Still FinCEN's guidance doesn't apply to state regulations. They opened the box and created a huge amount of uncertainty.

No two states even share the same definition of "money transmission" or "money" at the state level and thus the applicability of existing money transmitter regulations on entities that exchange virtual currency for real currency is a huge legal gray area. Only a few states have provided any public information on the applicability of existing regulations. In some states existing regs could apply although that probably won't be certain until after some court decisions. In other states due to the wording it is highly unlikely that the existing regulations could cover virtual currency exchangers without a modification of the statute. This is going to take years if not decades to play out.

Agreed that a federal framework which supercedes states regs would've been preferable....but as you note, that ship sailed already.

On another note, Reddit seems very upset with these regs: http://www.reddit.com/r/Bitcoin/comments/2aycxs/hi_this_is_ben_lawsky_at_nydfs_here_are_the/

A couple valid points made (I'll have to read the regs closer to verify) are:
1) Entities like changetip would fall under this licensing
2) Companies must hold profits and retained earnings in dollars, not bitcoin.
3) Alt-coin exchanges fall under the regs.

I hope the above, plus the bonding issue, are addressed/contested strongly during the 45-day comment period. Also, one thing that would've been nice to see, and which can maybe be addressed in the comments period, is a scaling-up of regulatory burden with increase in business activity (ie, Fred Wilson's "on ramp" suggestion during the hearings in Feb) instead of the regs fully applying to all from day 1.

The folks over at Reddit would be complaining with any kind of regulation that even mentions bitcoin. This is a pretty reasonable compromise. Basically it just applies existing KYC/AML rules to bitcoin companies that are exchanging currency. The fact that it doesn't apply onerous regulations to the average person buying something with bitcoins, or the average company accepting bitcoins in exchange for goods is huge. It sets a good precedent that won't hamper bitcoins growth.

To the points above on Reddit:
1. Changetip is a redundant layer to Bitcoin anyways. The bitcoin protocal already allows microtransactions.
2. The section in question effectively says that these companies (MSBs) can't reinvest profits in other ventures. That's fantastic. If the owners of those companies (Bitpay, Coinbase, etc) want to invest in another business, they can take their profits in bitcoin and start another business. It's reducing the risk that deposits are inadvertedly lost through poor investing. I definitely support that.
3. Why should alt-coins be any different? There's risk on those exchanges also, makes sense that they adhere to the same rules. I'm sure there will always be plenty off-shore crypto-only exchanges to go to anyways.