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Proposed New York State Virtual Currency Regulations [pdf]

dfs.ny.gov

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Re: Proposed New York State Virtual Currency Regulations [pdf]

#42

Post by _delirium »

innguest wrote: post #29
wmf wrote: post #14

Earlier quoted context omitted.

It sounds like you're saying that if I create something I can simply declare it to be exempt from any laws I don't like. The whole point of laws is that they're not voluntary. As for torrents, there is that thing called copyright law.

Yes, and how has copyright law been faring on the face of torrents? What I'm saying is that it's silly to try and regulate things that are mathematically designed to withstand any regulation. I do not believe unenforceable laws are the way to go. If the government prefers that we do things differently then it should lead by example, convince by arguments, etc, just like anyone else. Instead they're acting childishly…

Bitcoin is not "mathematically designed" to withstand regulation. The mathematical aspect of the system involves only its technical operation; it's designed to avoid certain classes of technical attacks on the system. If anything, it's more amenable to certain types of regulation than cash is—paying someone in cash doesn't make an entry in a public blockchain.

Re: Proposed New York State Virtual Currency Regulations [pdf]

#44

Post by zaroth »

Wow, this is down in the weeds. E.g.

  (4)  include procedures for the maintenance of back-up facilities, systems,
       and infrastructure as well as alternative staffing and other resources
       to enable the timely recovery of data and documentation and to resume
       operations as soon as reasonably possible following a disruption to
       normal business activities; 

    ...

  (3)  Source code reviews.  Each Licensee shall have an independent,
       qualified third party conduct a source code review of any internally
       developed proprietary software used in the Licensee’s business
       operations, at least annually.
A lot of these regs may have started out as Best Practices, but shouldn't regulations focus on the What, not the How? Also, the right place for these regs, if we must have them, are under FinCEN at the Federal level. If you watch some of their presentations, some smart people working there whom I'm sure would love to tackle this in a way that doesn't create an quagmire of conflicting and overlapping state regs.

A little passage in some old document about interstate commerce comes to mind.

The great thing about Bitcoin is this only applies to 3rd party companies wanting to assist you in transferring bitcoin, it doesn't apply at all to individual transfers between private entities. So this will do a lot to encourage private wallet software over centralized points of failure and intelligence gathering. For that, at least, you can thank NY.

Re: Proposed New York State Virtual Currency Regulations [pdf]

#48

Post by murbard2 »

wdewind wrote: post #36
murbard2 wrote: post #23

Earlier quoted context omitted.

Please, explain to me what difference the Glass Steagall act will make when commercial banks can issue paper that will be bought by deposit banks? Oh, were you just repeating an Occupy Wall Street meme?

I'm not exactly sure what you mean by commercial banks issuing paper, and deposit banks buying. I think you mean investment banks issuing securities and commercial banks buying? The reason Glass Steagall is important is because it stops commercial banks from needing to behave like an investment bank. Especially with publicly traded banks, you have entirely different types of investors with different expectations inve…

I did mean investment bank, thanks for correcting.

How are investors putting pressure on a bank? Investors are the owners of the bank, they don't "put pressure", they manage their property. Investors will want their property to grow and issue dividends as much as possible - investment bank or not. Calling it a deposit bank isn't going to change that.

The risk profile of investors is also not a consideration. More risk aggressive investors can simply leverage themselves. Investors want the risk level that's appropriate for the business. They may disagree on what that level is, but that disagreement will stem from different strategic outlooks and not from personal preferences.

An again: so ibanks cannot fund investments from deposits? That becomes entirely irrelevant the minute you have a liquid commercial paper market. Instead of investing deposits, the ibank will simply borrow money short term from a bank that has deposits. This is what happened in practice. It even happened with companies like GE which became de faco ibanks thanks to their high credit rating.

And yes, this means the deposit bank will be exposed to the risks the ibank is taking. If you want to regulate that out, you'll have to require banks be entirely in cash or treasuries. Glass-Steagall won't do.

Re: Proposed New York State Virtual Currency Regulations [pdf]

#49

Post by wdewind »

murbard2 wrote: post #48
wdewind wrote: post #36

Earlier quoted context omitted.

I'm not exactly sure what you mean by commercial banks issuing paper, and deposit banks buying. I think you mean investment banks issuing securities and commercial banks buying? The reason Glass Steagall is important is because it stops commercial banks from needing to behave like an investment bank. Especially with publicly traded banks, you have entirely different types of investors with different expectations inve…

I did mean investment bank, thanks for correcting. How are investors putting pressure on a bank? Investors are the owners of the bank, they don't "put pressure", they manage their property. Investors will want their property to grow and issue dividends as much as possible - investment bank or not. Calling it a deposit bank isn't going to change that. The risk profile of investors is also not a consideration. More ris…

The goal is not to make it so commercial banks cannot buy certain securities. The goal is to make it so they don't feel like they have to just to keep up with the Joneses. If they decide independently that they want to run their banks by investing in higher risk securities I'm fine with that, because in the history of banking that's just not what's happened (until, of course, the major parts of Glass Steagall were repealed). Commercial banks tend to have very different customer bases than investment banks, and they have investors* that they can keep happy without investing in higher risk securities.

*Edit: /s/customers/investors

> Investors want the risk level that's appropriate for the business.

How do you determine the appropriate risk level for a business half of whom's goal is to provide explosive growth and half to provide long term, stable, lending?

> They may disagree on what that level is, but that disagreement will stem from different strategic outlooks and not from personal preferences.

I agree entirely. Don't you agree the strategic outlook of an investment bank is entirely different than that of a commercial bank?

Re: Proposed New York State Virtual Currency Regulations [pdf]

#50

Post by murbard2 »

wdewind wrote: post #49
murbard2 wrote: post #48

Earlier quoted context omitted.

I did mean investment bank, thanks for correcting. How are investors putting pressure on a bank? Investors are the owners of the bank, they don't "put pressure", they manage their property. Investors will want their property to grow and issue dividends as much as possible - investment bank or not. Calling it a deposit bank isn't going to change that. The risk profile of investors is also not a consideration. More ris…

The goal is not to make it so commercial banks cannot buy certain securities. The goal is to make it so they don't feel like they have to just to keep up with the Joneses. If they decide independently that they want to run their banks by investing in higher risk securities I'm fine with that, because in the history of banking that's just not what's happened (until, of course, the major parts of Glass Steagall were re…

>Don't you agree the strategic outlook of an investment bank is entirely different than that of a commercial bank?

I do which is why banks will specialize in different niches regardless of regulation.

No law prevents a cement making company from leveraging itself like crazy and invest it all in high risk / high reward biotech research. And yet you don't see that happening.

Also, you fail to address the argument that a liquid commercial paper market gives ibanks de facto access to deposits.

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