Onerous capital and ID requirement for wallet providers or anything with a wallet in it.

[thang2162]

The 1 to 1 capital requirements and requirements that the identities of the sender of an amount of crypto must be known are too tough to be complied with. If not revised it going to make it impossible for wallet providers and innovations such as the Dogecoin mmo voidspace (http://steamcommunity.com/sharedfiles/filedetails/?id=269740803) to operate.

Check out: http://www.wired.com/2014/07/ny_bitcoin/

[markdavidlamb]

How should we solve this? What in the license can we change to make this more accessible to people?
Do we remove the 1-to-1 capital requirements (I think 1-to-1 cap requirements can be a great thing in certain cases), remove the requirements for wallet providers to need licenses or what?

[thang2162]

There needs to be exemptions put in place for these businesses as the capital requirement don't make any sense since these providers don't risk any of their customers deposits (i.e. Lending). The Bitlicense already provides for strict security requirements and regular account audits so all the 1 to 1 requirement would do is make it too expensive to run any business that uses a crypto wallet. Remember, not even banks are required to keep that level of their customers deposits on hand and they actually risk their deposits by lending it out. Wallet providers such as Hive and Pheeva aren't earning any money on that balance and usually don't charge transaction fees either. As for the ID requirements, those simply need to be removed as they represent a complete lack of understanding of how bitcoin works. If you received crypto from someone using a QT wallet how are you supposed to identify them cause there is no way to verify an identity on a QT wallet. Do you just give up on accepting payment from them?

[markdavidlamb]

@thang2162 , very interested to learn which country you live in where banks are only required to hold 10% of their customer deposits on hand. Recently in the US, banks capital requirements were increased to 5/6% source.

[thang2162]

Thanks for pointing that out, I made a mistake in numbers. The point is it's less than the proposed legislation since the bitlicense requires that businesses keep an additional 100% of customer deposits of the business's own money on hand to cover the deposits of which those businesses aren't making any money off of. There are already security requirements and regular audits in the legislation to ensure wallet integrity. So if you've already certified that the security is sound where could the money possibly go? Remember, the Mt. Gox and Flexcoin incidents were caused by inadequate security. Trying to cover crypto deposits the same way as regular bank deposits isn't doing work since the banks have the FDIC and crypto providers don't. Even if they did have access to something similar to FDIC how would the wallets providers pay for it since they don't lend and most don't charge transaction fees. Why are crypto wallet providers held to even stricter standards than banks when Paypal, the company most similar to crypto wallet providers, isn't even considered a bank?

Check out: http://www.forbes.com/sites/timworstall/2014/07/19/how-to-stop-bitcoin-banking-give-it-a-bitlicense-in-new-york/

[pmlaw]

This seems like it would be best addressed by limiting the scope of the proposal to the actual "exchange" function of fiat currency for digital currency. That would exempt wallet providers from these requirements.

Now it could be argued that if you are providing a hosted wallet solution (ie not multi-sig or client-side encryption) that perhaps you shouldn't be allowed to engage in fractional reserve operations. We've certainly seen the consumer harm from that...