Poloniex Leaves New York Due To BitLicense

Another Bitcoin business is leaving New York due to the BitLicense. Poloniex the U.S. based Altcoin and Bitcoin exchange is shutting its doors to New York residents on August 8. Customers of the site have been issued an email warning letting them know they must remove funds if they reside in NY.

Also Read: Ben Lawsky's Revolving Door

“In accordance with the New York State Department of Financial Services, Poloniex will no longer be allowed to provide services to residents of the State of New York starting on August 8th, 2015. If you are a resident of New York, please take appropriate measures to withdraw your funds by 11:59pm Eastern Daylight Time on August 7th, 2015. For more information or for further assistance, please contact our support staff by going to poloniex.freshdesk.com.”
— Poloniex Bitcoin Exchange

With the BitLicense full steam ahead lead by Ben Lawsky and lawmakers people are starting to worry about this stifling innovation and business. On the 24 of June the BitLicense was adopted by New York legislation and is now recognized by The New York State Department of Financial Services (NYDFS). Businesses operating with Bitcoin and virtual currencies must apply for the license within 45 days from its initial announcement. August 8th is the deadline for all Bitcoin companies to comply. The transcript reads:

"Any person engaged in virtual currency business activity that fails to submit an application for a license within 45 days of the effective date of this regulation shall be deemed to be conducting unlicensed virtual currency business activity."
— BitLicense Transcript

Shapeshift the crypto exchange based in Switzerland has also halted services in the State of New York due to the BitLicense. Founder Erik Voorhees believes the license is unethical, and exposes personal user information. Following this decision Voorhees created Please Protect Consumers a website that is against mass data collection and the sharing of personal user info. Voorhees company was applauded by many in the Bitcoin community to be the first to not comply with the state's regulations and data collection. Notably Andreas Antonopoulos tweeted out to fans after this announcement his perception of what Shapeshift did:

“Kudos to ShapeShift for refusing to become a honeypot of PII just to satisfy NY regulators.” — Andreas Antonopoulos via twitter

Recently former Superintendent of Financial Services of the NYDFS, Ben Lawsky who introduced the BitLicense stepped down. Lawsky has been a staunch supporter of its regulations has been accused of setting it up for his own newly created legal firm, The Lawsky Group. The group is said to be working directly with cryptocurrency and online security so its not a very far fetched allegation. However in an interview with American Banker Marc Hochstein Lawsky denied this accusation from the community. Lawsky says since leaving his post he is unable to work with anything BitLicense related which is against the law. Covering his recent resignation in the interview he does counter this argument, although it raises the question of his prior work and huge pushing for the license itself which seemly looks rather crony to the eyes of many Bitcoin supporters. Lawsky told Hochstein:

“The rules are very clear. I can't work at all for life on anything I ever worked on. If anyone said 'I want to hire you to help get a BitLicense from DFS', no can do.”
— Ben Lawsky Interview

Given that Lawsky in the same rebuttal still said he would work with Cryptocurrency related situations he had left himself a loophole in regards to the law he created. With the clock ticking faster towards August 8th many wonder if more businesses will refuse to operate with New York. It seems that regulations created by the BitLicense and Lawsky’s team are far too harsh for some companies to deal with.

The data collection is believed by the community to be unethical. With revelations given by Edward Snowden it's no wonder why the public is not too pleased with data collection this day in age. Cronyism as well is rampant in this country perverting capitalism in the worst of ways. The mixing of corporation/business and law is very crony when its meant to help the creators of the License. The community is not happy with Lawsky creating a handbook of laws created by fallible men and then suddenly starting a cryptocurrency law firm and his denial was not well received. It will be interesting to see what businesses use Lawsky's new legal firm or if he becomes boycotted in the same fashion as his recently created BitLicense.

“Financial regulators and policymakers need to recognize that when it comes to digital currencies and other new payments technology – the genie is already out of the bottle.”
— Ben Lawsky BitLicense Speech June 3, 2015

Eyes are watching for more companies to follow suit with Shapeshift, and Poloniex’s measures. The Genie is out of the bottle, yet many Genies are also leaving the bottle of New York state and its heavy regulation. Other harsher regulatory states such as California is also looking to enforce law on the virtual currency as well.

Do you think the BitLicense is cronyism? Let us know in the comments below.

Images courtesy of Shutterstock, reddit and Redmemes

Krugman Is Clueless about Bitcoin

In this video clip, Paul Krugman demonstrates once again that prizes don’t make you an expert on everything. Indeed, his poor prognostications happen so frequently that one wonders if Krugman is an expert on anything. I don’t say that to be unpleasant. If you’re going on TV and enjoying a lavish lifestyle by pretending to know what you’re talking about, shouldn’t you be held to a higher standard?

Let’s pass over for a moment how woefully wrong Krugman was about the Internet. What about the internet of money?

Krugman first says: “At this point bitcoin is not looking too good.”

It is true that investment often follows the Gartner hype cycle. So bitcoin has indeed fallen from great heights and is probably just now making its ascent out of the “trough of disillusionment.”

But so what? There is nothing inherently wrong with bitcoin. In fact, some very savvy, patient people are building an unbelievable set of technologies within and around the blockchain. And if you believe Gartner, most really interesting tech goes through this cycle.

Let's look back at the Internet. When the dotcom bubble and subsequent burst looked like this:

Do we conclude that because in 2002 the Internet wasn’t “looking so good” that TCP/IP was not viable? That would have been a very short-sighted thing to say, particularly about a system that is a robust “dumb network“ like the internet.

Bitcoin is also a dumb network. But don’t let the “dumb” part fool you, says bitcoin expert Andreas Antonopoulos. "So the dumb network becomes a platform for independent innovation, without permission, at the edge. The result is an incredible range of innovations, carried out at an even more incredible pace. People interested in even the tiniest of niche applications can create them on the edge."

Then Krugman goes on to ask, “Why does a piece of paper with a dead president on it have value?” Answering his own question he says “Because other people think it has value.”

And this is not untrue. But the problem with this line of thinking is — subjective value notwithstanding — the value of money is also contingent. You might say the value of fiat money is too contingent — especially upon political whims, upon the limited knowledge of the folks at the Federal Reserve, and upon the fact that its unit of account is no longer anything scarce, such as gold.

By contrast, bitcoin has standard of scarcity programmed into it. So, bitcoin is in limited supply, thanks to a sophisticated algorithm.

In a fully decentralized monetary system, there is no central authority that regulates the monetary base. Instead, currency is created by the nodes of a peer-to-peer network. The bitcoin generation algorithm defines, in advance, how currency can be created and at what rate. Any currency that is generated by a malicious user that does not follow the rules will be rejected by the network and thus is worthless. (To learn more about this algorithm, visit “Currency with a Finite Supply.”)

Perhaps you don’t trust this algorithm. Certainly Paul Krugman does not. That’s okay, because digital currencies compete, so you can find one you do trust. One crypto currency is backed by gold and funnily enough, it’s called “the Hayek” after the Nobel laureate who wrote about competing private currencies.

Now, what shall we make of the magic of the dollar? Krugman says it is “the fact that you can use it to pay taxes.” That’s sort of like saying that the Internet works because of eFile. Let’s just assume Krugman was kidding.

But Krugman thinks, without irony, that bitcoin “levitates.” That is to say, he’s okay with the idea that the dollar has value because other people value it, but he’s not okay with the idea that bitcoin has value because other people value it, which is a rather curious thing to say in the same two-minute stretch. He goes on to argue that bitcoin is built on libertarian ideology, and that it doesn’t do anything that digitizing the dollar hasn’t done.

And that’s when we realize that Krugman doesn’t have any earthly clue about bitcoin.

But Freeman columnist Andreas Antonopoulos does:

Open-source currencies have another layer that multiplies these underlying effects: the currency itself. Not only is the investment in infrastructure and innovation shared by all, but the shared benefit may also manifest in increased value for the common currency.

Currency is the quintessential shared good, because its value correlates strongly to the economic activity that it enables. In simple terms, a currency is valuable because many people use it, and the more who use it, the more valuable it becomes.

Unlike national currencies, which are generally restricted to use within a country’s borders, digital currencies like bitcoin are global and can therefore be readily adopted and used by almost any user who is part of the networked global society.

What Krugman also fails to appreciate is that bitcoin and the bitcoin network is disintermediated. That’s a fancy way of saying it’s direct and peer-to-peer. This elimination of the mediating institutions — banks, governments, and credit card companies — means bitcoin transactions are far, far cheaper. But that also means these institutions could be far less powerful over time. And that’s precisely why it’s being adopted most quickly by the world’s poorest people and countries with hyperinflation.

Hey, look, I understand. In many ways, Krugman is a twentieth-century mind. Keynesian. Unhealthy obsession with aggregates and dirigisme. He believes in big central solutions to problems that robust, decentralized systems are far better equipped to tackle. And he’s not terribly plugged into tech innovation. In fact, here’s that well-played Internet quote in case you forgot:

The growth of the Internet will slow drastically, as the flaw in “Metcalfe’s law” — which states that the number of potential connections in a network is proportional to the square of the number of participants — becomes apparent: most people have nothing to say to each other!

By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.

To grok the power decentralization, you have to have a twenty-first century mind.

This article was syndicated from fee.org
Images courtesy of The Huffington Post and fee.org

Max Borders