On Wednesday June 3rd, New York Department of Financial Services superintendent Ben Lawsky gave a speech at the BITS Emerging Payments Forum in Washington DC, announcing that the finalized rules of the long-awaited BitLicense were finally here and in effect (though companies have 45 days to fall into compliance with the new regulations). Lawsky outlined five main changes from previous draft versions of the rules:
- Companies no longer need to seek approval for software and application updates; approval will only be required for material changes in products and business models.
- DFS has no interest in being regulators of software developers, only financial intermediaries; wallet developers aren’t subject to regulation unless they actually have control of user funds.
- Getting both a BitLicense and a money transmitter license is no longer necessary; BitLicense covers both.
- Companies that already file suspicious activity reports with FinCEN do not need to file separate reports with DFS. 5) Companies do not need approval from DFS for every round of investor funding; only investors who wish to be “control persons” in the company need DFS approval.
Those hailing from the classical school of bitcoinomics obviously decried the new regulations as being onerous and detrimental to business. Many believe that bitcoin was created to bypass just this sort of financial regulations. While I understand and sympathize with this point of view, it would be naïve to think that regulators would never touch bitcoin, and ultimately having a stamp of approval from the top regulatory body in one of the world’s financial centers will be more of a boon than a hindrance. And to give the NYDFS credit, they did appear to act in good faith in their attempts to understand the technology and the industry built around it, and to communicate with those in the industry to draft rules that made sense. Lawsky made sure to emphasize that these are the first digital currency regulations in the world, and that depending on what is working or not working the laws may be tweaked in the future.
In a masterful use of the revolving door of politics, Lawsky also announced that his speech at the BITS forum would be his last as DFS superintendent, as he is stepping down from his post this month to start his own consultancy firm that – wait for it – will advise digital currency companies on how to navigate the regulations that his office wrote.
+ PDF: The full text of the BitLicense.
+ Completely unrelated: Warren G ft. Nate Dogg – Regulate
Decentralized peer-to-peer marketplace OpenBazaar announced $1 million in seed funding from firms Andreesen Horowitz and Union Square Ventures, and angel investor William Mougayar. Thus far a not-for-profit software project funded entirely by donations, this fundraise marks the formation of “the first business built on top of the OpenBazaar network,” to be called OB1. The developers of the project made sure to clarify that the underlying software will always be free and under the MIT software license, meaning it is free to be copied, modified, and redistributed.
Andreesen Horowitz and Union Square Ventures have been some of the most staunch advocates of bitcoin in the venture capital world, and this strategic investment seems to be more about helping build out the bitcoin network and increase its utility and less about investing in a slam-dunk business (though the success of the two are closely related). The investment is also a great sign for those who have been looking forward to the emergence of truly global free trade platforms; similar free software projects like DarkWallet and Coinpunk have fallen by the wayside in the absence of funding.
USV managing partner Brad Burnham: “OB1 will offer a set of value added services to buyers and sellers on the OpenBazaar market. They expect others to provide services to the participants on OpenBazaar, and they don’t expect to have any proprietary advantage over those competitors. As investors, we hope that their familiarity with the marketplace and the goodwill they generate as early sponsors of the open source project will give them an advantage but we understand they must execute very well or be left behind.”
In a talk delivered by Gregory Maxwell at the San Francisco bitcoin devs meetup this past Monday, Blockstream finally unveiled the first open source code of their ambitious Sidechains project. The well-funded open source software company hopes that sidechains will make possible all sorts of next-level applications built on top of the bitcoin blockchain.
Or, in the words of Blockstream co-founder Adam Back: “Sidechains are decentralized, peer-to-peer networks that provide useful security, risk, and performance enhancements for global systems of value exchange that don’t need intermediaries, central banks or other third parties. They are distributed ledgers that are interoperable with each other and with Bitcoin, leveraging the most secure blockchain and code infrastructure in an additive way. Sidechains enable innovators to safely develop new applications without jeopardizing Bitcoin’s core code and putting billions of dollars worth of digital currency at risk.”
+ TechCrunch: Sidechains and Lightning, the New New Bitcoin
BITS & PIECES
Wences Casares’ bitcoin wallet startup Xapo announced their hard-hitting advisory board: Visa founder Dee Hock, former Citibank chairman & CEO John Reed, and former US Treasury Secretary Larry Summers. Dee Hock: “Bitcoin represents not only the future of payments but also the future of governance. We live in the 21st century but are still using command and control organizational structures from the 16th century. Bitcoin is one of the best examples of how a decentralized, peer-to-peer organization can solve problems that these dated organizations cannot.”
Overstock issued a $25 million private bond that is powered by the blockchain – the world’s first “cryptosecurity.” The SEC has not yet approved the plan [to sell public stock for bitcoin]. But Overstock is using this same system to issue its private bond, which does not require explicit SEC approval. This can serve as a proof-of-concept for Overstock’s push towards a blockchain-based public stock market. WIRED
+ Overstock CEO Patrick Byrne was the first buyer of the cryptosecurity, purchasing a $500,000 note through his newly-launched T0.com platform. “Those who purchase cryptobonds through TØ.com will be able to track their ownership on the bitcoin blockchain. Trades on TØ.com securely settle same day, as opposed to the customary three day settlement on Wall Street (referred to as “T+3″)”
FT reports that NASDAQ will “step up” their trials of the bitcoin blockchain: “The New York group expects to debut three or four trials of the ledger in trade processing in the next 12 months, in a move that Bob Greifeld, the group’s chief executive, hopes could radically reshape some of the US’s sometimes cumbersome and slow-moving market plumbing.”
Before the sentencing the parents of the victims of drug overdoses addressed the court. Ulbricht broke down in tears. “I never wanted that to happen,” he said. “I wish I could go back and convince myself to take a different path.” Silk Road operator Ross Ulbricht was sentenced to life in federal prison.
Economist Chart of the Day: Despite the closure of the Silk Road, online drug markets are thriving. “Mr Ulbricht’s harsh sentence is intended to serve as a warning to others. Don’t expect it to have much effect.”