This week’s bitcoin review takes a look at some of the recent statements against the proposed New York “BitLicense” regulation.
Will New York face a bitcoin blackout?
The bitcoin community is gearing up for a grassroots rebellion or an all-out war right now, depending on who you talk to.
On July 23, the New York Department of Financial Services posted its proposed BitLicense regulations for how the state plans to deal with the cryptocurrency and its business. The regulations, to put it plainly, are pretty broad and fairly strict. When they first came out, I wrote that it’s a turning point for bitcoin — its supporters need to accept being regulated, or burrow back underground. If it wants to be a store of value, and have companies store that value for other people, there will have to be some sort of oversight even if its contrary to the ethos of bitcoin.
Now that the 45-day comment window is in the back-stretch, prominent voices from the bitcoin community are starting to weigh in on the proposed BitLicenses. Both Sean Neville and Jeremy Allaire of Circle made their comments public this week on posts to Medium and the Circle blog, respectively, although other big bitcoin companies like Coinbase and BitPay have yet to publicly release theirs.
Circle’s CEO Allaire cautioned that his company would not be able to do business in New York if the regulations passed as-is:
However, as it stands, the BitLicense is likely to have the opposite impact—radically limiting those who can participate in this industry, pushing firms offshore and into sometimes shadier jurisdictions. Furthermore, as currently written, it would be technically impossible to comply with the BitLicense proposal. Without some material changes, Circle will have no choice but to block New York customers from accessing our services.
One large question looms though: Can you just ignore New York by moving its bitcoin businesses and blocking its IPs?
A BitLicense panel at Draper University in Silicon Valley on Wednesday showed there were many answers to the question. On the one hand, Constance Choi of the Digital Asset Transfer Authority made the point that there are 50 states, and that can all write their individual regulations. “What is encouraging that there are 50 states and this is the first salvo,” Choi said. Each state will be responsible for writing their own and bitcoin businesses may move elsewhere. Just because New York was the financial capital of the 20th century, one audience member pointed out, doesn’t mean that capital can’t move somewhere else in the 21st.
That being said, David Kaufman of Capital Advisors stressed that New York’s importance both as a financial capital and the first to take a stab at bitcoin regulation can be downplayed. “As being one of the first movers on this type of regulation is going to put them in the position to influence all the other states in the country,” Kaufman said in his panel. “The impact of just blocking all of New York is a first step, I guess, but you can’t block an idea. And these regulations are an idea that bitcoin needs to be regulated this way – and it’s this way or the highway.”
Although there were a few cries of “regulation was meant to be broken” at the panels, it seems like the cries have shifted from no regulation to trying to limit the harm to the bitcoin world if the BitLicense does pass.
Neville, Circle’s CTO and co-founder, acknowledged that in his own analysis of the regulations:
We’re realists. If we seek broad mainstream adoption — which is not the only path, but it is the path that interests us — then some form of regulated consumer protection is inevitable, and required for attaining banking, auditor, and underwriter relationships and operating fiat-crypto gateways (gaining such relationships today are impossible for most). Unfortunately the proposed “BitLicense” makes this worse, not better.
The market this week
Bitcoin reached its lowest price since May this week, when it momentarily dipped below $500 to reach $496.26. That was a short blip — so short that CoinDesk’s reporter Pete Rizzo had seen the price rebound back to $512 by the time he published his story — but it was a telltale sign of where the price is going. Although the market closed at $508, prices have continued to fall, dipping once more below the $500 mark, where it’s now $495 at 2:15p.m. PST.
For background on why we’re using Coindesk’s Bitcoin Price Index, see the note at the bottom of the post.
In other news we wrote about this week:
Here are some of the best reads from around the web this week:
- Satoshi Nakamoto may be the famous name of the inventor of bitcoin, but the other name you should know is Gaven Andresen. MIT Tech Review has the story of the man who Nakamoto charged with building bitcoin after he handed over the reigns in 2010.
- A problem with bitcoin mining has always been energy costs — sometimes the cost of the power to mine bitcoin is more than you make back. However, a new German startup has developed a new chip that requires a lot less energy to mine, reported the Wall Street Journal.
- Spiderwoman and the Winklevii? Bloomberg reported that the Winklevoss twins have recruited Spiderwoman, aka “industry legend” and lawyer Kathleen Moriarty, to help bring their ETF to realization.
- It seems like Jed McCaleb and Ripple Labs have come to an agreement to put the past behind them, according to CoinDesk. When McCaleb announced he was intending to sell all of his XRP, he single-handedly tanked Ripple’s price by 40% in May. This new agreement between McCaleb and the company looks to limit that damage by stretching out the sell period over seven years.
- If you’re interested in the newest thing in cryptocurrency, here’s a meme explainer of Stellar because the internet can’t help itself sometimes.
Bitcoin in 2014
The history of bitcoin’s price
A note on our data: We use CoinDesk’s Bitcoin Price Index to obtain both a historical and current reflection of the Bitcoin market. The BPI is an average of the four Bitcoin exchanges which meet their criteria: Bitstamp, BTC-e, LakeBTC and Bitfinex. To see the criteria for inclusion or for price updates by the minute, visit CoinDesk. Since the market never closes, the “closing price” as noted in the graphics is based on end of day Greenwich Mean Time (GMT) or British Summer Time (BST).