Square obtains NY State cryptocurrency license | Hacker News Reader

Square obtains NY State cryptocurrency license

reuters.com

196 pointspetethomas64 comments

The Square Cash app has had this feature for a few months now. It looks like it just has not been available to residents of New York, Georgia, Hawaii, or Wyoming.

https://techcrunch.com/2017/11/14/square-cash-is-letting-som...

https://techcrunch.com/2018/01/31/square-cash-expands-bitcoi...

Odd feeling when your state has the same restrictions as countries on the OFAC list.

Sometimes it feels like NY will pass and keep almost any law, as long as it hurts somebody who has no powerful friends.

your observation does not lack accuracy

I feel like these higher profile cryptocurrency projects are just still following thru because they’ve been approved at the peak of its hype and fully funded back then.

I think Jack Dorsey's interest in Bitcoin goes a little beyond the current hype cycle.

[1] https://www.ccn.com/i-hope-bitcoin-will-be-internets-native-...

The ICO-scam mania is waining, systems that run those ICOs are cooling (Ethereum), but the need for a system of sound, programmable money remains. This is why Square is pursuing Bitcoin.

> the need for a system of sound, programmable money remains

I understand that the original goal was to have the value of the currency to be not controlled by a central bank.

Is there any other benefit to it? What does it mean that the currency needs to be "programmable" in this context?

Programmable money means that I can download a bitcoin contract that functions as a will without having to pay a lawyer or live in a country with a robust legal system to ensure that: after 180 days of me not moving my funds, my heirs get it, etc

See https://bitcointechtalk.com/what-is-a-bitcoin-merklized-abst...

Programmers capable of auditing such a contract to the same level of reliability a lawyer would get you are vastly more expensive than said lawyer.

Now, perhaps, because it's a highly specialized skill. Maybe it will become commoditized in the future.

Auditing a contract that will be applied by a human judge with common sense and written in more-or-less English seems inherently easier than auditing a contract that will be applied strictly literally by a machine and is written in, well, code.

Maybe I’m in my own bubble but do you really think the following contract is so complex that you need to hire auditors?:

  OP_IF
    <Alice’s pubkey> OP_Checksig
  OP_ELSE
    “3 months” OP_CSV OP_DROP
    <Heir’s pubkey> OP_Checksig
  OP_ENDIF

Would you say that you need expensive programmers to audit/create an escrow contract on Bitcoin? Multisig contracts are simple, battletested and deployed in the blockchain.

> Would you say that you need expensive programmers to audit/create an escrow contract on Bitcoin? Multisig contracts are simple, battletested and deployed in the blockchain.

Given the number of high-profile smart-contract hacks we've seen, yes, you do need expensive programmers. (At least, to a greater extent than you need expensive lawyers. It's perfectly possible to write your own will without a lawyer, and frankly I'd have a lot more confidence in that than in my own smart contract, even as a programmer).

>Given the number of high-profile smart-contract hacks we've seen, yes, you do need expensive programmers.

There have been no hacks of bitcoin multisig addresses. The hacks you're referring to are on ethereum because ethereum is a dumpster fire with a marketing team trying to con people into believing all number of unpractical solutions.

I feel like the counter to this is unfortunately still the court system; if Bob leaves all his millions to an animal shelter in his will via a cryptocurrency smart contract, his heir Alice could still take it to a traditional court and try and get those assets seized on the grounds he was senile, etc.

Ethereum is the robust base layer for a whole bunch of stuff. ICOs are an ok use case for Ethereum today, but when plasma is ready (months not years), the transaction capacity will explode and fees could go to zero within a plasma chain. There will surely be a huge increase of real useful applications, including in the payment space

I think Bitcoin might be useful for storing and holding wealth, whereas Ethereum is much more active protocol, for active communication and interaction

>Ethereum is the robust base layer for a whole bunch of stuff.

Solidity et al are imperative languages which basically turn the never static ethereum blockchain into an absolute nightmare to reason about or write robust code for. See basically the once weekly massive security bugs in ethereum contracts. Turning completeness and imperative languages; I would not call that robust on the code execution level.

Ethereum is also not immutable, see DAO bailout. I would not call that robust.

Ethereum has architected their consensus choices such that miners can increase blocksize to push out competitors. That leads to coercion centralization. I wouldn’t call that robust. Even if we live in a future utopia where coercion isn’t a threat, then The system is a horribly inefficient AWS.

Bitcoin has the lightning network which is already in production and in use today with a few little applications running on top of it.

http://satoshi.place/

* https://satoshis.place/

Your comment implies that the peak will never be surpassed. It is certainly possible you are right, but remember a lot of internet companies declined a lot after the dot com bubble burst, and a few rose from the ashes. It would be silly to not continue to pursue a new technology just because it is not as big as it was late last year.

I think Square has a huge incentive for cryptocurrencies to catch on because almost all their payments and hardware incur credit card fees, licensing fees etc. Not to mention complex and outdated settling mechanisms.

Apparently according to TFA this is the ninth such license that was awarded? Wikipedia page needs an update, they still only list the first five:

https://en.wikipedia.org/wiki/BitLicense

(I was only aware of the one that I knew Coinbase held.)

Somebody just updated it[1], ironically from NY state.

[1] https://en.wikipedia.org/w/index.php?title=BitLicense&action...

I wonder how Reuters got all the way up to nine!

> With the Square approval, DFS has now approved nine firms for virtual currency charters or licenses, while denying those applications that did not meet DFS’s standards. DFS has also granted licenses to Xapo, Inc., Genesis Global Trading Inc., bitFlyer USA, Coinbase Inc., XRP II and Circle Internet Financial, and charters to Gemini Trust Company and Paxos (formerly itBit Trust Company).

from the Wiki citation [21]

https://www.dfs.ny.gov/about/press/pr1806181.htm

looks like two are charters, not sure how that's different than a full BitLicense.

One interesting product decision with Square Cash and Robinhood Crypto services is that customers can't transfer off as BTC ( to another exchange / hardware wallet) . When I asked Robinhood they said it was so customers didn't user BTC for illegal activity as they hadn't built out specific anti-money laundering measures.

I don't think that is true for Square Cash. I can withdraw to a different address off Square - I needed to verify by DL first though.

That's correct, you can transfer off Cash app. However, you can't deposit BTC to your Cash app.

Yeah. I found it. https://squareup.com/help/us/en/article/6307 The menu is pretty hidden.

Wow, "BitLicense" cryptocurrency licenses (in NY) are thing now:

https://www.dfs.ny.gov/legal/regulations/bitlicense_reg_fram...

I would never have become a Coinbase user except for all of the press when they got theirs, while I was living in NY.

Centralized exchanges are not really my thing, but legal compliance is pretty alright by me, and NY is a notoriously difficult regulatory climate. When I heard that Coinbase might be sending my information to the IRS, it was actually a relief.

(Given: I have managed to make not very much on crypto for someone who has been involved in the ecosystem for a while.)

There is a "crypto" documentary on Netflix which goes into detail about how this came to be. Spoiler: the sanctioning board have basically all left Gov't to consult privately on best practices to getting the license.

How are they going to handle this? Will they be holding coins a la an exchange or will they host multiple full nodes and post txes to the chain?

> New York State legalizes a scam

news at 11

It's a shame that Square is getting caught up in this scam. It makes me no longer want to do business with them.

Square is a payment processor and all payment processors are presented with an opportunity to use existing blockchains as the rails for a cheaper money transmission system. Blockchain networks have the capability to be cheaper than the offerings of the SWIFT system, ACH and VISA networks, for the payment processor.

Given the state of the technology today, taking advantage of these cost savings in the most network-aligned way requires massive liquidity. Square creating a liquidity solution helps them and grants their customers something they want.

I'm not buying the cheaper argument. Which part of transacting on the Bitcoin network is cheaper exactly? Mining is cost-intensive, and transaction fees are at least an order of magnitude higher than Visa. Equating SWIFT to Visa is also disingenuous as the former is meant for cross border settlements where the restrictions are regulatory (AML), not technology. Switching to Bitcoin doesn't mean Square or any other institution can simply ignore AML laws.

I see this mainly as a service they wish to provide to a segment of their customer. I also expect it to be a loss leader and shut down over time.

No chargebacks?

Is that meant as a positive or a negative, as chargebacks help the consumer, as does non-repudiation. The general public wants these features in our exchange mediums.

It forces arbitration with the business in the case of a dispute. Wouldn't payment processors and businesses want that?

Consumers don't want that.

You can build a system that allows charge backs on a system that doesn't allow charge backs but you cannot build a system without charge backs on a system that does allow charge backs.

These escrow products already exist for customers on Bitcoin.

That's not a feature it is a drawback.

It is actually a feature. From the original Bitcoin whitepaper:

> Transactions that are computationally impractical to reverse would protect sellers from fraud.

https://bitcoin.org/bitcoin.pdf

As a buyer I wouldn't use it then.

Mmm. I am not sure if Square actually lets you transact using Bitcoin or if this is just about purchasing and selling it to hold it as an investment. I haven’t actually tested it out.

maybe they'll get on the Bitcoin lightning network

https://techcrunch.com/2018/03/15/lightning-labs-just-raised...

"transaction fees are at least an order of magnitude higher than Visa"

Transaction fee on bitcoin presently is an average of 60c [1]. Visa is around 2% + 0.10. Thus for transfers over about 25 USD, bitcoin (presently) is cheaper. And that's not considering terminal fees, payment gateway fees, annual fees, monthly fees, early termination fees, statement fees and so on.

[1] https://bitinfocharts.com/comparison/bitcoin-transactionfees...

So instead of using ACH which uses a currency with a fairly stable value and has a resolution process, they should use the blockchain instead, hope there are no major security issues in the near future, and hope their transaction eventually settles?

> Square creating a liquidity solution

How is putting transactions across the blockchain instead of ACH or Swift "more liquid"? I mean, I suppose if you want to evade taxes maybe, but I'm not clear how that actually helps the payment processor. Square doesn't benefit from "liquidity".

ACH is built on 70s technologies and fails more often than not. Storing transactions on an MS Access DB is probably safer and faster.

Really?

I've a system that has for years swapped NACHA files with a major bank for hundreds of thousands of accounts each day, and without fail it has worked 100% of the time! Guess what we use? SFTP whitelisted to specific IPs. A fixed width GPG encrypted file. That's it.

Can't say the same for most of these rubbish REST of an APIs out there that I've had to suffer through.

Some 70s technologies btw are great. There's nothing wrong with a well defined fixed width file with checksums. I wish all data files were those or CSVs.

> SFTP whitelisted to specific IPs. A fixed width GPG encrypted file.

Which is not part of the ACH spec... though I agree it is a good implementation

In other parts of the world you can transfer between accounts in almost real time, nobody uses checks anymore for rents or interpersonal transfers or intercompany money transfers.

Meanwhile the US still uses checks. ACH is jurassic.

> In other parts of the world you can transfer between accounts in almost real time

Real-time transfers under $5,000 are free between most American banks. For real-time irreversible transfers up to any amount, the Fedwire system is available. Most banks let large account holders send and receive domestic wires for free. ACH is used for low-cost, gross-settled transfers--it is the cheap, reversible option.

This myth of slow, expensive bank transfers dies slowly.

It works incredibly well even though it is archaic and a pain in the ass behind the scenes. Making it blockchainy solves nothing.

I understand that some people don't see value in blockchain tech, but boy, this is just naked hyperbole.

Yeah, they should avoid New York state and their scammy, rent-seeking, regulators as much as possible. The idea of a cryptocurrency license is absurd and an affront to the very concept.

No totally, they should exclude the state with a 1.1 trillion dollar GDP, the 3rd highest in the United States and the same as the entirety of Mexico because they needed a license. Good point, I hadn't considered that.

I thought that the sentiment at Square was hostile to cryptocurrencies . They stopped accepting bitcoin and also patio11 was skeptical about cryptocurrencies but those views could have been his.

patio11 works for Stripe not Square

They stopped accepting bitcoin for good reason, not hostility. Why would anyone ever want to pay in bitcoin with the massive transaction fees.

It has gotten better (I actually am of the impression that the transaction volume has gone down, and that's largely to credit for the fact that fees are back down, perhaps because of Lightning and/or Segwit; but regardless of the reason why, there is nobody left who is paying $15-30 in fees for each BTC transaction on the chain today)

This great visualization[1] showed up on my feed yesterday, you can see that most of the BTC transactions' fees are being measured in single-digit USD cents again. It compares BTC to BCH, and you have to wait a while to see what's happening, but I think it's a fairly unbiased and basically informative view of how the two on-chain transaction scaling strategies actually work.

(Spoiler: the number of BTC transactions is still massively outpacing the number of BCH transactions, in case you didn't guess that.)

[1]: https://bitcoinsubway.cash/

[edit: http_s_]

What has changed in the past 3 months? A co-worker of mine decided to throw a few bucks into the crypto craze and the fees were about the same as what he wanted to buy.

The TX (on-chain transaction) fees have absolutely changed in the last 3-6 months. Before Jan 1, the average TX fee had peaked at about $55USD. In February you could get a transaction on the chain for about $2. Since that time, they've implemented the Lightning network, which is a way to transact over a channel rather than putting every transaction on the chain. I don't know enough about that feature to explain how it works, but that should be easy enough to find information about if you're asking what technologically has changed... but in terms of raw numbers and actual prices, you can find that information too:

https://bitinfocharts.com/comparison/bitcoin-transactionfees...

At the present time, a transaction can be reasonably assured to be mined in the next 1-6 blocks by adding a fee of $0.20 for next block (or down to $0.10 for within ~6 blocks.)

https://bitcoinfees.info/

This is not the only fee you pay when buying and selling, but it can be... exchanges like GDAX permit you to pay a fee to place a market order (buy/sell from the current limit ceiling or floor), or pay no fee to place a limit order (wait for the market price to cross your own preferred price), and those different kinds of exchanges will all have different fee structures, but most markets supporting limit orders I think should not charge fees. This kind of buy/sell fee is basically always a percent, maybe with a flat fee floor (eg. $1 min fee.)

The market order fee is really probably pretty insignificant unless you're actively trading all the time, in which case you'll definitely want to avoid paying them. On Coinbase, for example, you only buy and sell at the market price with a roughly percent-based fee structure, and the fees are low.

Ostensibly you can understand what's changed to be that, now that there are no-fee options available for high-volume traders, all of the high-volume traders are using those options so there is more room on the chain for small-time simple consumers to pay a low fee and keep things simple, doing their transaction in the traditional way. I don't want to run a Lightning node, but I can still benefit from the existence of that protocol through lower fees, because it means there's simply a lot less traffic on the chain.

I don't have numbers to back any of these assertions up about how it happened, other than the actual links I provided regarding the average fee value paid... but all of this reasoning about 'how' is hypothetical and I'm probably wrong about something.

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