With the release of a proposed “BitLicense Regulatory Framework for Virtual Currency Firms” by the New York Department of Financial Services this morning, I’ve spent much of the day digesting the proposal and working to come up with intelligent things to say to reporters. We’ll be poring over the proposal, of course, and later offer comments more complete than anything we’ll come up with today or this week.
We submitted testimony when the New York DFS held two days of hearing on Bitcoin in January, raising a number of questions about the “BitLicense” idea. One of the questions we asked was: “Is a ‘BitLicense’ technology-specific regulation?” I think there can be no doubt that it is. The DFS proposal regulates a particular technology—digital currency—even though the better practice is to regulate economic functions no matter what means are used to provide them.
“[T]he goal of technological neutrality,” as Marco Santori testified, “is to ensure the same treatment for the same products and services, no matter what technologies deliver them.” Under the “BitLicense” proposal, two firms offering the exact same services, one using Bitcoin and the other using fiat currency, will have different regulatory regimes. A firm that offers customers both options will have to maintain two compliance programs for one financial service—in just one U.S. state.
But I’m a little ahead of myself going into the technology-specific regulation question. As I said, we’ll be going over the proposal and will fully discuss its merits and demerits in comments to the DFS.
The issue that’s appropriate to discuss at this early juncture is process. The DFS deserves praise for conducting a relatively open process, and I’m happy to give it, but the Tweet that rang true for me today was Barry Silbert’s. He said: “[T]he bitcoin industry could certainly use more than 45 days to digest/comment. Extend to 90?”
I’d go a little further than that. Forty-five days is the minimum comment period required by the New York State Administrative Procedures Act. A regulatory proposal does not expire until 365 days after being published or after the last scheduled public hearing. Agencies frequently accept comments for periods of time exceeding the 45-day minimum.
The DFS, of course, took more than six months to put together its “BitLicense” proposal, and these are New York’s financial regulation experts. It seems like the public—non-experts, including startups and small businesses around the nation and world who might want to serve New York customers—should have at least that long to digest the proposal and comment.
The DFS could also improve on the administrative procedures developed in the era of postage stamps, and it could conduct a truly open rulemaking. The Superintendent of Financial Services has made a serious move in that direction by posting on Reddit. (And kudos for that.) Why not take community comments and amendments in a more organized fashion? News Genius is already set up to collect Bitcoin community input, and there’s a copy of the “BitLicense” proposal up on Github. These tools provide the decentralized administrative processes that are appropriate for information-gathering about any Bitcoin regulation.
When it comes to final decision-making, perhaps someone in the Bitcoin community could devise the system that democratically gathers the Bitcoin community’s sentiment—approval or disapproval—of proposed amendments to the “BitLicense” proposal and the final version that emerges after amendments are voted up or down.
I hear tell that this kind of thing can be done using the blockchain… Community?