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In Fifty Days, Payments Innovation Will Stop In Silicon Valley

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Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#91

Post by mattmanser »

18pfsmt wrote: post #78
mattmanser wrote: post #43

Earlier quoted context omitted.

And most startups don't go into banking. Seriously, if you're going into that kind of business you should have that kind of money behind you.

You realize Google Checkout is often lamented on HN because it doesn't operate in many European countries? It is exactly for these reasons. Much like copyright laws are abused for business protection, so are regulations. Certainly within the US it would be better to have a federal license framework in order to minimize friction.

What, that Google doesn't have money to put up bonds or buy the necessary expertise? I don't get your point.

More likely it's Yet Another Google Product They Can't Be Bothered To Finish (TM).

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#92

Post by nupark2 »

dpatru wrote: post #70
potatolicious wrote: post #51

Earlier quoted context omitted.

I wouldn't go as far as to say all regulation stifles innovation. A completely unregulated market may very well stifle innovation also - i.e., when consumer trust of that market is so low as to discourage economic activity. That is a rather extreme case, though. I think the more relevant point is that all regulations have overhead - even ones that don't charge a $500K bond. This is something governments sometimes see…

An unregulated market will spawn entities that provide the services it needs. This includes security and trust. Insurance companies, for example, are entities that people trust to protect them against loss. Rating agencies are entities that people trust to provide risk assessment. The difference between non-coercive (private) entities and government is that non-coercive entities adapt better. So, for example, if you'…

An unregulated market will spawn entities that provide the services it needs.

Information and resource asymmetry are not easily overcome; how is your argument any different than a naive assessment of economics that fails to take into account the impact of information asymmetry on the decisions of otherwise rational actors?

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#93

Post by olalonde »

urbanjunkie wrote: post #75
dpatru wrote: post #70

Earlier quoted context omitted.

An unregulated market will spawn entities that provide the services it needs. This includes security and trust. Insurance companies, for example, are entities that people trust to protect them against loss. Rating agencies are entities that people trust to provide risk assessment. The difference between non-coercive (private) entities and government is that non-coercive entities adapt better. So, for example, if you'…

"An unregulated market will spawn entities that provide the services it needs. This includes security and trust. Insurance companies, for example, are entities that people trust to protect them against loss. Rating agencies are entities that people trust to provide risk assessment." Do you have any examples from reality where this has happened? Are insurance companies and ratings agencies really trusted agencies that…

All those work on the principle of trust despite not being regulated:

- http://en.wikipedia.org/wiki/Certificate_authority

- eBay feedbacks

- http://www.escrow.com

etc.

Furthermore, magazines, blogs and retail store all act as rating agencies in some ways. Magazines have a strong incentive to only recommend quality products since their reputation is at stake. The same goes with retail store. They make sure they sell quality product because their reputation is at stake and they don't want to lose business.

Of course, the incentive for building those kind of companies is very low given the uncertainty that the government might decide to assume your role, putting you out of business.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#94

Post by handrake »

pilif wrote: post #38

Here in Europe, PayPal (which is acting like a bank) had to get a banking license (like any other bank). As far as I know they didn't go bankrupt yet, so it can't be a wholly bad thing. If I drive a vehicle that acts like a car, I need a drivers license. If I run a service that acts like a bank I need a banking license. I really don't see a problem here.

I completely agree to this. PayPal somehow has been evading this problem for a decade but finally the government is stepping in to square away this mess. How many horror stories have we heard about PayPal locking up people's accounts for no good reasons?

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#95

Post by rglover »

A bit of a red scare here. All the time I was reading I was led to assume that companies like PayPal and Square (imperative mechanisms for freelance these days) were to be affected, ultimately though, this was dismissed toward the end. I can understand the frustration here, but like a lot of people are saying, those are the rules. Also, for the FaceCash folks, if you intend to disrupt the financial industry in any fashion (in this case circumventing traditional forms of cash transfer) you should be ready for a significant amount of red tape and "fuck you."

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#96

Post by sorbus »

joezydeco wrote: post #88
18pfsmt wrote: post #83

Earlier quoted context omitted.

How much larger does the Bitcoin economy have to get ( I believe it's currently ~$30M) before the same money transfer companies will start pushing for them to be regulated. Remember the cab companies going after UberCab? How about the Louisiana Funeral Directors going after the monks for making caskets[1]? [1] http://www.techdirt.com/articles/20100825/11152810773/funera...

I'm still new to the bitcoin thing but how can it be regulated?

With difficulty. The most likely way I can see is regulation of exchange markets (which could actually be beneficial to the markets, as a way of showing credibility).

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#97

Post by 18pfsmt »

tptacek wrote: post #90
olalonde wrote: post #89

Earlier quoted context omitted.

You're right but in this case, the detail doesn't really matter. The point is you need a lot of capital to enter the market. Once you are licensed, nothing prevents you from committing a fraud except for the potential risk of losing your bond. This risk could be insignificant given a large amount of money to defraud. All this law does is guarantee that from now on, only rich people are allowed to commit fraud.

Is the bond too small? Is that what you're arguing with that second sentence? I can't follow.

His point is that the bond is too large, and that's _just_ for California. In the linked quora post, it was specifically pointed out that there are 43 other states where one has to do the exact_same_thing where the bonds vary from $10k-$1M.

Edit: Check out PayPal's list: https://www.paypal-media.com/licenses

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#98

Post by tptacek »

lutorm wrote: post #72
pilif wrote: post #38

Here in Europe, PayPal (which is acting like a bank) had to get a banking license (like any other bank). As far as I know they didn't go bankrupt yet, so it can't be a wholly bad thing. If I drive a vehicle that acts like a car, I need a drivers license. If I run a service that acts like a bank I need a banking license. I really don't see a problem here.

I'm not saying the idea is totally pointless, but the $500k needed regardless of the scale of the business seems a bit excessive. Maybe there should be a sliding scale, so that if your transaction volume is $10k, you need a bond for $10k, etc, up to a ceiling? That would at least make it possible to start out testing whether it works without dumping a huge amount of cash.

It does scale with transaction volume, but the floor is $500k. But it's explicitly payable via a surety bond, which works like insurance; applicants with good credit history might pay just a few thousand dollars to get one.

There is also a class of money transfer company ("A licensee that engages in receiving money for transmission") that only needs a $250k bond.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#100

Post by tptacek »

dgallagher wrote: post #71
hristov wrote: post #16

In the interest of correctness I should point out that the half a million fee is not a fee but a bond. The state does not take it but it is kept in a trust for people that may be injured by the particular money transmission business that gets a license. Thus, if a money transmission business steals someone's money you can sue them and when you win you can take your money from the 500,000 bond so you are sure they wil…

Couldn't you buy insurance that covers the bond? Typically this is much less than a bonds face value.

You can get a surety bond [see 1817(c) of this law], which functions somewhat like insurance --- you pay percentage point premiums to keep the amount on file. This seems to be how most people handle licensing bonds.
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