One line from the immortal comic by Calvin Hobbes reads: “Good engagement drives everyone crazy.” When it comes to laws for cryptocurrencies, The authorities usually make pretty big commitments because they are trying with their best of intentions to figure things out. While this is a rapidly evolving area of law that is frankly a joy, it means it is evolving quickly in terms of the law, not technology.
There is an innate conservatism in everything that has to do with people’s way of dealing with their money. This also applies to the laws that govern how money and investments work. As a result Anything that regulators associate with cryptocurrencies is developing more slowly than the industry absolutely wants.
However, It is not an inappropriate instinct for regulators to set up determined ecosystems and testbeds for all developments before they are released into the wild. However, the limitation of the technological possibilities of cryptocurrencies requires some compromises. This week’s main news has seen this dynamic around the world as it all comes down to a test case.
PayPal crypto payments test New York’s conditional BitLicense and vice versa
After months of rumors PayPal officially announced that the platform would include crypto payments.
While the price of Bitcoin jumped on the news, there is a catch. The PayPal cryptocurrency is blocked on the platform. No tokens inside or outside, a real Alcatraz. PayPal is meanwhile operated on a trial basis.
PayPal’s crypto platform has been given the green light for the time being by the New York Treasury, arguably the world’s largest subnational financial regulator and issuer of the famous BitLicense. In this case, however, this license is subject to conditions. Just as PayPal is testing crypto in extremely limited capacity, DFS is testing its new format to test companies that want to get this coveted license.
A fascinating by-product of this new system is that it connects companies looking to do crypto in New York with existing BitLicensees, in the case of PayPal, Paxos. This creates a dynamic where established crypto companies act as mentors to companies that, like PayPal, can be far more important in every other area of your business. This is great for the industry and puts any existing BitLicensee in a very advantageous position as more mainstream companies follow PayPal’s path.
The Bahamas Sand Dollar goes live
In a global race for a central bank digital currency (CBDC), the Bahamas appear to have won. The island’s “sand dollar” was introduced nationwide earlier this week.
Pilot programs with working sand dollar wallets run for months. But as with many things to do with the Bahamian system, The central bank’s announcement was pretty opaque and consisted of a Facebook post in just two sentences. The obvious limitation to national use is interesting. The country’s limited accounting standards have made it a popular place for shell businesses and money offshoring. The limited scope may be an attempt not to add further to that reputation.
The announcement came at a time when US and Russian government officials were issuing statements denying the need to be the first to publish a CBDC.. Indeed, liability for the Bahamian dollar is not the same as liability for the US dollar, for fear of being a condescending American. However, given its large role in international funding, the Bahamas faces the same concerns as larger economies developing their own CBDCs. The central bankers of such economies will certainly watch the sand dollar closely.
The US money laundering watchdog FinCEN fined Larry Dean Harmon to $ 60 million for operating the mixed services Helix and Coin Ninja.
This is the first time FinCEN has cracked down on a blender or tumbler, services that mix and distribute cryptocurrencies over wide wallet links to improve privacy by hiding your transaction history. Often, as you can imagine, this is because the coins were involved in illegal activity.
While FinCEN has long claimed that cryptocurrency companies must keep the same customer records as banks, targeting a mix operator increases the stakes significantly in reality. It’s really inconceivable that the Blender’s business model embraces the types of AML information that FinCEN needs.. Even if you don’t assume that the coins involved are involved in a deal anywhere on the spectrum from dreary to awful, the function of a blender is to rid the coins of any traits that may be tied to their owner.
To be fair Harmon is a very easy target. An Ohio resident, he has been prosecuted for his blenders since February. As a result, FinCEN had access to sources of information about Harmon’s mixer that the Justice Department investigation had already uncovered. Not to mention that FinCEN obviously knew where to find it.
Despite the convenience of the action, it is obviously shocking news, especially for anyone running a privacy-enhancing cryptocurrency service, but in general for anyone who believes that not all transactions should possibly be packaged with personal information.
The Electronic Frontier Foundation welcomes new reports from Coinbase on its government interactions and compliance initiatives.
Vinson Elkins attorneys are discussing the DOJ’s framework for cryptocurrency enforcement, which was released earlier this month.
In her podcast “Unchained” Laura Shin looks at the Justice Department’s methods of tracking down crypto criminals.
The government is frustrating because when it works right nobody gets exactly what they want. Weighing priorities, managing risks, improving compliance: to write about the law, you have to traverse swamps with such harmful jargon to find a grove of what people are actually saying. Which is usually a compromise.