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> So literally everyone is flying blind, while the well funded fiat-interfacing crypto service has the most comprehensive view of the law because of their expensive lawyers.

This is literally the case with anything. Well funded tech monopolies have the most comprehensive view on...everything.

Yep. A lot of crypto detractors levy standards at crypto things that they seem to not know apply to things they respect or ignore.

So its just worthwhile spelling out whats happening and how its happening. Many people don't know that the crypto space is and has been so comprehensive already behind the scenes, since its more of an entertainment sector in front of the scenes, so people underestimate it.

The solution to that conundrum is you tell the lawyer "come talk with us". It's Administrative Law. It is what the regulator says it is. And no, an attorney cannot with old that information. That is what they call, "bad faith".

The tough part is actually sitting down, combing through the paperwork, and coming up with questions. Regulation is as much a descriptive as a prescriptive exercise.

So guilty whenever the bureaucrat wants you to be?

Is this an actual stance that you hold?

That's pretty much what a regulator does. Using the pejorative "bureaucrat" doesn't change that.

Regardless of what you call the person, doesn’t that seem a bit on the “rule of man” side (as opposed to the “rule of law” side) ?

I recognize that in the end decisions need to be made by people, but, under the principle of the rule of law, it should be feasible to understand the laws relating to your likely activities to a sufficient degree that one can determine what things won’t get one in legal trouble? (Of course, some things might be somewhat ambiguous, but, still.), right?

That is Administrative Law sadly. One of the saddest realizations of my life. Congress ceded fine-grained lawmaking to executive agencies established under statute for that purpose. It's just how it works.

Regulators won't ruin your day during onboarding, unless you're not even trying to be legit. Even then, they'll evaluate where you are at, and help you develop a compliance roadmap consistent with best practices.

Now if you fail to meet that or drag your feet...

The flip side of that it is: Allowable as long as no specific law spells out it is illegal. That's great for civil liberties of individuals. In finance, that's how crashes happen.

In finance, crashes happen because large numbers of people are putting their money into something without realizing that it's overvalued, and then they all find out at once.

The 2008 housing crisis was caused by banks buying insurance against borrowers defaulting. They used a bunch of banking words to make it sound complicated, but that was it. Just nobody thought about what it would do to the bank's incentives. Not the insurance companies, not the regulators.

So the banks lent money to a bunch of uncreditworthy people because they were insured, and inflated a housing bubble. Then when they all started to default, the bubble popped and bankrupted the insurance companies and therefore the banks.

The Savings and Loan Crisis in the 1980s was caused by the government propping up failed banks. The banks were then insured by the government (sound familiar?) so they took on a bunch of bad risks because if they paid off they made money and if they didn't it was the taxpayer on the line.

The theme here isn't banks doing creative accounting, it's moral hazard. They do just what you'd expect them to do if you insulate them from risk.

But importantly, none of this has anything to do with KYC/AML regulations, which aren't supposed to prevent financial crashes. They're high cost low benefit regulations that don't even do the thing they're intended to do: https://www.icij.org/investigations/fincen-files/

This is... how Administrative Law works.

Don't shoot the messenger. I don't like it, but it is what it is. If it's any comfort, I don't find it comforting or desirable at all. Unfortunately, this is just the way Congress settled on doing things at the Federal level.

Or don't bother at all. Binance made it to $90 billion in liquid-enough assets before this Reuters article over the course of 4 years.

This is without any revenue multiple applied or anything. The hit pieces are coming out because of admissions that Binance is considering an IPO and now people are surprised at how big it already is, while being effectively stateless. Binance has to fix the statelessness to provide confidence to stock investors. Other people are open to hampering their ability to find anywhere comfortable.

Binance is going to zero, the bubble has already started to burst and after it’s all over the truth will come out. They will never IPO because an IPO would involve conforming with securities law.

An entity can conform with securities laws for listing, which are mostly just accounting practices, while being in violation of other securities laws around the assets they hold and trade do not.

They cannot survive that level of scrutiny.

The funny thing is that regulators pull the same stunts with lawyers. Not finance/crypto, but I’m battling a regulator to release the legal opinion they’re (suspectedly) using to deny a service that the law clearly (to me) requires them to provide.

Yeah thats true I’ve seen that periodically too, in non finance/crypto contexts.

Wasn’t enough to fool Singapore’s MAS, who are likely the most capable regulator in this space.

It’s no surprise the vast majority of companies who applied for a license ended up silently withdrawing or having it rejected, even Binance.sg who have significant investment from Temasek (state linked investment arm)

Re #1: in theory, could we require companies like Binance to disclose how they are structured, and to declare a priori the legal rationale for why this is allowed? The idea here is that they would be bound to that particular legal theory in the event of regulatory investigations.

Or does this run afoul of some constitutional issues?

Its more of a business decision of the government, as well as risking the need for a complete overhaul of contract law.

Jurisdictions are in competition with each other. While the business can always form a local subsidiary shielded from the rest while pooling most processes. Binance already has Binance US, for example.

A lot of people dont like the idea of governments having overlapping conditions of a business, but it is something you can rely on.

They can shoot themselves in the foot all they want.

A no action letter from the SEC, for example, does limit a business to a specific unchanging structure and circumstances. But people arent going to risk going to the regulator to find out. I get that you are thinking of a requirement in advance. Bye bye businesses if you try that.

That would simply be ridiculous.

It’s the governments job to explain why something you are doing is illegal, not the other way around.

Suppose the company needs to get regulators to approve something. Couldn't they just say "no" to anything new that they don't understand?

All I know about it is what I learn from reading Matt Levine, but it's my understanding that for most finance companies, cooperation with regulators is important.

Binance has Binance US a local subsidiary for that purpose.

Everywhere else, it depends, as usual on any legal matter. I could talk all day about what happened in Malta. Every jurisdiction is different, and at that point in time.

I'll bite, what happened in Malta?

Summary: Microstates within new monetary unions have higher masters. Eurozone’s masters are in Brussels and Frankfurt who are both skeptical of Malta and also into heavy regulation and not into crypto. So Malta would be down for whatever but they also have to try remain in the graces of their masters. Malta is also not a competent jurisdiction, its a pirate den with sovereignty, so whenever they bandwagon jump on an industry they try to attract they mess up the regulations because they dont know what a comprehensive approach looks like. Their crypto regulations fell into a mixture of incompetence and appeasing brussels.

Other microstates like Leichtenstein, for example, are not Eurozone and also competent. They are in a monetary union with Switzerland who is also very crypto friendly at all public sector levels except the incumbent banking private sector. So Malta dropped the crystal ball and is in a less geopolitical circumstance to repair it.