An act to amend Financial and Corporations Codes relating to digital currency
leginfo.legislature.ca.gov
leginfo.legislature.ca.gov
(d) “Digital currency business” means the business of offering or providing the service of storing, transmitting, exchanging, or issuing digital currency. “Digital currency business” does not include the following:
(1) Transmission of digital currency where the transaction is undertaken for non financial purposes and does not involve the transfer of more than a nominal amount of digital currency necessary to complete the transaction.
(2) Online games or gaming platforms that use digital currency that (A) have no market or application outside of those games or gaming platforms, (B) cannot be converted into, or redeemed for, fiat currency or digital currency, and (C) are not redeemable for real-world goods, services, discounts, or purchases.
(3) Customer affinity or rewards programs that use digital currency that can be redeemed for goods, services, or for purchases with the issuer or other designated merchants, but cannot be converted into, or redeemed for, fiat currency or digital currency that is not part of the customer af nity or rewards program.
(4) Issuance of a credit card voucher, letter of credit, or any value that is redeemable only by the issuer for goods and services provided by the issuer or its affiliate, except to the extent required by applicable law to be redeemable in cash for its cash value.
(5) A person or entity developing, distributing, or servicing digital currency network software.
(6) A person or entity contributing software, connectivity, or computing power to a digital currency network.
(7) A person or entity providing data storage or cybersecurity services for an enrolled digital currency business, if the data storage or cybersecurity services do not store digital currency.
What the hell does "nominal" mean? Is "nominal" measured against some absolute dollar value, or against the scope of the task/services rendered? It's not hard to imagine some massive smart contract transactions that would require a lot of resources to perform, but which wouldn't otherwise have any financial purpose. Would those be deemed too costly, not nominally cheap enough, for this act?
I also wonder about the meaning of "non financial" here. What would this mean for a coin like ETH? ETH does not aspire to be anything more than grease for the Ethereum network. Nonetheless, it's now traded on exchanges for BTC, USD, etc. Does its rising value in trade mark it as "financial" for the purposes of this act, in every ETH transaction on the Ethereum network, even though it's not directly intended for financial purposes?
This is a fundamental feature of most modern democratic bureaucracies: the power of regulators flows directly from the legislature which sets the goals and scope of each agency but it is up to the individuals in each organization, who have spent most of their lives in the relevant fields gaining direct experience, to decide on the specific implementation of the legislators' vision.
Law doesn't work without room for judgement. Enforce rules designed for toy models of reality[1] and people won't respect the law, but rather fear the lash. Of course, a certain type of person likes that, but (presumably) those who want to live in democracies don't.
[1] I'd love to believe that someday, certain economists would figure this out, too.
Off the top of my head, I think the Federal Law for Money Transmitter Business (MTB) carves out businesses for up to $100/day so unless a company is registered as a MTB I think that would be the daily cap.
> (2) Online games or gaming platforms that use digital currency that (A) have no market or application outside of those games or gaming platforms, (B) cannot be converted into, or redeemed for, fiat currency or digital currency, and (C) are not redeemable for real-world goods, services, discounts, or purchases.
raises a question. First note that the three qualifying conditions are joined by AND, not OR, so it seems a game must satisfy all three to escape being a digital currency business.
For (A), "have no market or application outside of those games or gaming platforms", is that limited to official markets? Many an MMORPG has tried to keep their game currency game only, going so far as to ban accounts that are caught trading game currency for outside currency, but nevertheless markets outside the game for their currencies have invariably arisen. If unofficial markets are sufficient, I wonder if any significant game will be able to qualify for the exclusion.
Fingerprinting cryptocurrency company management is a good idea.
[1] http://qz.com/753958/the-65-million-bitfinex-hack-shows-that...
We already have federal MSB regulations, and should solve this at the federal level. The proliferation of state MSB regulations make it incredibly expensive for new fintech companies to compete against incumbents and internationally.
You should also note that Bitfinex used to have a much more secure setup, with most of its Bitcoins being stored in cold, offline storage. However, US regulation required them to use segregated accounts for each user. Under such a requirement, the cold storage variant does not work any more, so they moved to keep everything online so they could physically move the Bitcoins back and forth as they were used for margin loans within Bitfinex. It was too much misguided regulation that made them vulnerable in the first place.
I want the CFTC interference to be the primary issue, though- it certainly fits the narrative and would be a great lesson going forward.
Note: I also lost money on the hack.
And if accounts had to be segregated then losses should have been segregated too, not socialised.
And I got out of Mt. Gox way before it hit the wall because it lacked any similar re-assurances.
Impossible? Hardly. You can count the good ones on your fingers and they are not hard to spot.
The MTA was awful, and this appears to be gutting the parts that was applicable to its overreach.
I see a lot of negativity in this comment section about the changes, as CA is moving to change the law to be used to regulate digital currencies which I believe was the original intent of the MTA (not specifically digital currencies, but anything fiat used as currency).
Also: looks like proposed fee has been increased to $5000 from $500 (didn't look for other details).
Amusing that legalese is essentially similar to code, but without variable declarations (ie, $digitalcurrency := "currency that's traded online, including but not restricted to BTC, etc") it's a bit of a nightmare to parse.
“Digital currency” means any digital representation of value that can be digitally traded and is used to facilitate the sale, purchase, and exchange of goods, services, or other digital representations of value among its users. Digital currency does not include fiat currency, e-money, or currency value of which was fixed by its issuer to the value of a fiat currency.
My Bitcoin is a digital representation of the bits needed to solve a particular block. It doesn't represent value, but a numerical solution to a mathematical problem.
>Playing dumb only makes you look dumb.
That stance is called the rule of law and being technically correct matters. That's the whole point of that court thing.
http://time.com/money/4421955/bitcoin-miami-judge-money-laun...
As one of many factors. The rule of law does not suspend human reason and common sense. SCOTUS recently ruled in favour of original intent over a strictly structural in an ACA case, where the later would have meant literally interpreting a likely typo [1].
[1] https://www.washingtonpost.com/politics/courts_law/obamacare...
You're not really arguing that currency derives its value from the material cost of producing it, are you? Because then everything is a currency. Modern currencies are special precisely because they have much more value than their material cost.
Laws typically don't incorporate definitions of words used when they aren't used in a special sense in the law.
> My Bitcoin is a digital representation of the bits needed to solve a particular block.
No doubt.
> It doesn't represent value,
The "X needed for Y" have value to the extent Y has value; I would suggest that there is considerable evidence which might be marshaled that solving Bitcoin blocks has value.
So, I would think that your explanation of what Bitcoin does represent supports the conclusion that it is a digital representation of value, not that it is not such a representation.
>“Digital currency” means any digital representation of value
You can't classify something as digital currency without knowing what value means or how to measure it.
It may be important to this law, but that doesn't mean that it is used specially (as in, in any but its most contextually-obvious general-use sense) in the law.
I mean, the meaning of "is" is also very important to the meaning of most laws, but is rarely defined in the enactment.
> You can't classify something as digital currency without knowing what value means
True, but that doesn't take a non-standard, law-specific definition.
> or how to measure it.
Untrue -- quantification of value is not relevant to the definition.
Value is being discussed (even though you appear to be using an unrevealed definition) as a quantity (maybe, I am wrong, and it is not a quantity), which means there must be a way to quantify it.
For someone to claim that the numbers I hold represent something else, is an error.
I find it amusing that the exempt e-money while targeting "digital currency". What exactly is the distinction?
Well, they might be digital currency under the definition, but that kind of rewards program appears to be excluded from the (rather lengthy) definition of "digital currency business", which would mean the regulations would generally not apply to them.
> What about stocks/bonds?
What about them?
> I find it amusing that the exempt e-money while targeting "digital currency". What exactly is the distinction?
Again, from the proposed bill at the link:
“E-money” means a digital representation of fiat currency used to electronically transfer value denominated in fiat currency.
I think this is because financial institutions dealing with fiat currencies already have significant regulations that is not intended to apply to.
The interesting part about legalese is that you get to argue with the compiler.
It's a bit like seeing your best friend in an abusive relationship. You almost want to see it go too far, so your friend will finally wise up and break it off. Almost.
Yeah, organize and stop this. But also read this pamphlet on how to get help from an abused industry shelter near you.
http://www.thinkcomputer.com/20140214.cfpbcomment.pdf
OCC has recently expressed interest in regulating financial technology startups at the federal level. So far I'm not aware of any bill in Congress that would actually facilitate their doing so, however. But it's about time.
Until then, here's the "Commissioner of Business Oversight"...
...and her perjuring deputy...
Big caveat, I haven't read this bill or about this bill enough to know if it goes significantly beyond the regulations for financial institutions. If so, clearly, that's different.
"The bill would prohibit a person from engaging in the digital currency business without enrolling in the program and would prohibit the conduct of digital currency business through an unenrolled agent. The bill would require a person seeking enrollment to pay a nonrefundable fee of up to $5,000... The bill would also require the person to provide fingerprints and would authorize the commissioner to deliver the fingerprints to law enforcement agencies."
Fuck this.
I believe this is a better link to the same editing, its atleast easier to parse the changes and it has colours!!