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Voluntary transparency is a superior self-regulatory mechanism that could substantially enhance consumer protection and prudential oversight.
On a panel called ‘What Keeps Regulators Up at Night’ held at the Money Transmitter Regulators Association conference in Boston last November, three experienced state examiners from Virginia, Wyoming and Texas laid out in clear terms the key issues they face when vetting money transmitters in their states. Their primary concern: the accuracy and integrity of a license holder’s financial and accounting reports, which are the basis for ascertaining a company’s true financial condition and for ensuring there is sufficient liquidity to meet “transmission obligations.” That’s right, we’re in the second decade of the 21st century, and regulators still rely on after-the-fact, paper-based reporting. Further, regulated financial institutions seem incapable of providing unimpeachable transactional and financial reports to ultimately demonstrate their solvency.
It is a widely known fact that regulation always lags behind technological innovations, Continue reading
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Last November, the New York State Department of Financial Services issued a notice communicating its intent to hold a hearing on virtual currencies, with the purposes of reviewing “the interconnection between money transmission regulations and virtual currencies,” and considering “the potential issuance of a BitLicense specific to virtual currency transactions and activities.” The hearings are scheduled to be held on January 28 and 29 in downtown Manhattan.
I thought it would be useful to start a conversation on this topic by offering my experience-based perspective on the New York state licensing and examination process, and by posing a few trigger questions.
By way of background, the reason virtual currencies, New York and licensing appear in the same sentence is that in March of 2013, the United States federal government issued guidance equating virtual currency exchangers and administrators with money transmitters, a category of non-depository financial institution that in the United States, to the chagrin of crypto-preneurs worldwide, is subject to licensure by individual states. Licensing is intended to subject industry participants to a supervisory authority primarily for purposes of Continue reading
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Interview with David Landsman, Executive Director of the National Money Transmitters Association (NMTA) – PART ONE
In the past couple of weeks I have noticed in my conversations with cryto-preneurs a growing, yet begrudging acceptance of the inevitability of having to comply with United States regulation if their ventures are to be viable. However, many remain unperturbed and some even defiant.
After writing extensively on America’s convoluted regulatory regime, and the challenges ahead for Bitcoin entrepreneurs, this week I thought I would seek the thoughts and opinions of someone I respect a lot, who knows the money transmitter industry inside out, and who has for decades advocated for regulatory rationality and fair play –David Landsman, head of the National Money Transmitters Association, a U.S. industry advocacy group for small and medium-sized operators who toil through some of the same issues as the Bitcoin community is facing today. Continue reading
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On March 4, 2013 I gave a talk titled just like this post at the New York City Bitcoin Meetup. The talk blurb read:
If you are a Bitcoin ecosystem participant (user, entrepreneur), you may be aware that there is a myriad of rules and regulations, at the federal, state and even international level, that may apply to you. Why? Because Bitcoin is technically a “value transfer” system, and such systems are heavily regulated to protect consumer rights and deter financial crime, including the financing of terrorism. Join us for a lively discussion of potential obstacles to the growth of the Bitcoin ecosystem.
The rather hyperbolic title attracted a few dozen very smart (and gracious) entrepreneurs and geeks, most of whom, unsurprisingly, were not aware that the United States has a very convoluted and onerous regulatory regime that can potentially stifle innovation or, at a minimum, slow down the spread of virtual peer-to-peer value transfer systems like Bitcoin. Continue reading
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