I've also been struck by the proliferation of bank-like services without bank-like obligations. This stretches from fractional-reserve and maturity-transforming services like Tether to exchanges/dealers like Binance and ersatz money transmitters like BitPay.
We need AML (edit: anti-money laundering) and tax reporting at those nexuses. If the answer is there should be no AML, KYC (edit: know-your-customer rules) and/or reporting by cryptocurrency companies, we have no common ground on this argument. To date, this is what I have most-commonly heard. If that's what the Senate is hearing, it's unsurprising they consider the debate closed. If the argument is a reasonable tweak to who has to report, or what or the form in which it must be reported, policy makers are listening. (Wyden's amendment is a result of reasonable concerns expressed by miners.)
The controversy here is about this law potentially placing reporting obligations on software developers who never have any custody of client funds. Sort of like requiring the developers of Excel to report on users of Excel using it to manage their money.
> I've also been struck by the proliferation of bank-like services without bank-like obligations. This stretches from fractional-reserve and maturity-transforming services like Tether to exchanges/dealers like Binance and ersatz money transmitters like BitPay.
All these centralized services that have some involvement with crypto already comply with a large number of regulations, and usually do much more stringent KYC than non-crypto payment processors do.
Custody doesn't haven an agreed-upon definition when it comes to crypto. That's the nut of the challenge. If we want reporting, someone who, in a traditional setting, would not have had to report, will when it comes to cryptocurrencies.
> these centralized services that have some involvement with crypto already comply with a large number of regulations
Many do. Many don't. Tether and Binance are exemplars of pathological noncompliance.
It’s fascist to peddle what is effectively magic as truth of reality when it’s just another man-made concept power brokers will (already have?), manipulate for their outsized gain.
Nation state money schemes are low tech and well known; they haven’t changed much. We don’t need to make a meta-value store to exchange for nation state currency, at great material expense. I’d propose the opposite; we stop treating people like concepts we must pressure to import our perspectives and preferences.
It’s unverified, but I’m pretty sure if we just made medicine, offered education, and built technology for those ends rather than moved at the drumbeat of elder rich to validate their once youthful existence, and pipe dreams none of us will live to verify came true, humanity would be in a much better place.
Talk about energy vampires; don’t focus on living a varied and full life! Focus on validating the rich! Focus on consuming what we can make the best margin on! Watch our ads so you never forget us!
And then once they’re empowered… my privacy! My freedom of speech!
Nice work.
this hits the nail on the head, imo. its the central argument. i dont think its as unambiguous as you say, though.
payment processors are _right now_ acting as extrajudicial legislators. many LEGAL business, like porn and weed, are restricted from operating on major payment networks.
this is assuming you and your government are on the same side. there are many places in the world where crypto is a boon to the oppressed.
not to detract from your point. crypto has a clear and direct path to cybercrime. just saying its not so clear.
The thing is, at least for weed companies, that they technically are not legal on federal level where banks are regulated. The Obama, Trxmp and Biden admins simply have chosen for now to ignore the issue on executive level since Congress is completely and utterly dysfunctional, which is something the next admin/President can easily turn over and prosecute everyone involved, even for actions years past.
For porn (as well as, where legal, sex work and gambling), the problem is the immense amount of fraud associated with it. Horny people caught by their s/o's or company expense teams stumbling on CC bills or plain old "post nut clarity" has led to many fraudulent "card has been stolen" chargebacks, as did actual fraud by people using stolen CCs to sign up for porn sites and resell these accounts on the Internet, and additionally to that there are lots of legitimate chargebacks (dark patterns in account signup aka pre-checked "recurring" options, low quality content). And add to that the various issues regarding legality of services rendered (which may be different depending on where the seller and/or the buyer are located and where the service takes place).
And if that wasn't enough, the US likes to enforce their laws on companies based in the US also abroad... which means even here in Europe where sex work, porn and (in sometimes utterly incomprehensible ways) gambling are legal in most our states, we still have the problem that the US companies export their morality codes onto us Europeans (see also: facebook's nipplegate).
The result is legitimate businesses and mixed-content businesses (reddit, onlyfans) being struck by obscene merchant fees or being denied service altogether since it's frankly infeasible for non-local services, especially in physical sex work, to be in compliance with the myriad of rules ranging from global international agreements against drug usage and human trafficking over federal and state law to county/town ordinances.
I agree that these businesses deserve access to banking (alone to reduce the incentive to rob them of their physical cash!), but seriously the solution to that is a reform of banking, sex work and gambling legislation - not cryptocoins.
I still don't understand this. KYC has devolved into something unreasonable and it needs to be removed from the existing system, not extended.
When KYC was originally implemented, your bank was where you deposited your paycheck, paid your mortgage and withdrew some cash every few weeks for your expenses. If your bank knew who you were, they knew where you lived and where you worked. The first is a matter of public record and the second isn't exactly a big secret. Maybe you also had a car loan.
Today it has been extended to everything you buy on the internet or with a credit card, and people now buy everything on the internet and with credit cards. It ties your government identity to the books you read, the medical care you receive, genetic tests, what you eat, the establishments you patronize, your location history if you go anywhere and buy gas or anything else, who else was there at the same time, it's your whole life.
We need the ability to buy a copy of Das Kapital or a drink at a gay bar without being put on a List.
You're right that it's unsurprising that the US Senate does not care about this problem. On the other hand, I'm pretty sure that the cryptocurrency world does not care about the US Senate. This will just end up being another "I promise I'm not a US person" checkbox when you sign up for cryptocurrency services.
Crypto has shown some rules are unnecessary or even harmful. They should be repealed, across the board. In other cases, many cases, it's reinforced some rules' necessity. Their scope should be broadened. That's what's going on here.
If the sole value of cryptocurrencies is in evading the rules, it's going to have a tough time.
> the cryptocurrency world does not care about the US Senate
Whether someone cares about the law isn't relevant to lawmaking or enforcement. (This attitude is also counterproductive. It leads to disengagement, which virtually guarantees more-onerous rules than would have been necessary.)
> will just end up being another "I promise I'm not a US person" checkbox when you sign up for cryptocurrency services
This, alone, is insufficient. AML duties aren't discharged by an "I promise I'm not a money launderer or tax evader" checkbox.
From what I understand of the actual cryptocurrency markets, very few people are actually interested in being their own bank. A lot of the cryptocurrency industry seems to be structured around providing bank-like services to cryptocurrency users.
And that's only for centralized services… permissionless decentralized protocols with no articles of incorporation running on decentralized systems… this diktat is just the senate pissing in the wind…
Might as well be like clergy in the Ottoman Empire standing in the way of the printing press by saying it was a sin and it was invented by infidels…
More broadly, if you've ever wondered how industries can go to Congress with a straight face and argue for crazy regulatory exemptions, this is what it feels like from the other side. I like crypto devs a lot more than I like, say, Exxon, but I still don't think we should have carveouts just to protect their business model.
I'm honestly kind of surprised Wyden's amendment didn't get accepted. I guess I misunderstood the level of support it actually had; it seemed reasonable to me and I thought that most of the interest groups had gotten onboard with it.
Maybe that's an area where I'm just in a bubble.
AML - Anti Money Laundering
KYC - Know Your Customer (i.e. ID verification)
They also benefit the rich and powerful by enabling tax evasion and graft. Pyongyang, Tehran and Caracas make regular use of illicit trade and money laundering to facilitate upward wealth transfer.
Yours is a legitimate point. It's an argument for curtailing the power of law and government. That's fine. We can debate that. But until America decides it doesn't want to collect taxes anymore, the reporting is sort of required.
Depends on the ones you use. Certainly the privacy coins like Monero are the ones that do better than most of the other coins out there.
I understand you only had in mind cryptocurrencies, but there is a far wider issue at play here, that must be discussed substantively.
This is generally about removing the middleman (Big Finance) from transactions, just as, say, scuttlebutt and bittorrent removed the middleman (Big Tech) from communications.
Now, there are (at least) two aspects by which they can be removed. One is control: they can’t prevent you from publishing X or sending Y. This causes people to be free to publish potentially seditious material, or otherwise objectionable or illegal material (eg child pornogrophy, or copies violating copyright law).
The other is removing them from having to collect data and report. Without middlemen, the government has a harder time going after everyone. For example, having every maker of a desktop printer or copier report metadata on what was printed, is infeasible. BUT in the past, when printing machinery was expensive, you could control what was published and sanction those who didn’t have the “letters patent” authorizing the printing of a specific book or magazine. You could make sure to control what was distributed widely. With federated services like Mastodon or Matrix, the government can make a bill tomorrow to require them to report metadata on all speech they host, to make sure none of it is dangerous.
This reminds of the disastrous SOPA bill that HN was pretty much against, but it has the exact same concerns, just in the area of speech rather than financial transactions: https://en.m.wikipedia.org/wiki/Stop_Online_Piracy_Act
So today, if governments allow people to have “unhosted” wallets, there could be a lot of flaunting of capital controls (by sending $2 billion internationally very quickly) and tax evasion (by not reporting certain sales of houses for crypto, for instance). This would have implications for money laundering and funding unsavory groups etc.
At the same time, however, for small amounts, people want to be able to transact freely, such as buying a pizza with cash. This might become impossible to do given where governments are going: they have nearly eliminated anonymous cash transactions and will do so with crypto as well. When it comes to financial transactions, they will insist that everything will be “hosted” by a third party who can be punished if they allow certain transactions to happen. This is in preparstion for massive centralization of the monetary system in the hands of the central banks, you will have an account at the central bank which picks winners and losers, instead of “so-called” stablecoins which present competition to them.
The problem is that this elimination of petty cash can easily lead to a “social credit system” like we have in China, and gradual tightening of screws on any participant in the economy.
Thankfully, the US government has not taken the same approach with speech (probably due to the first amendment) and Big Tech platforms can be disrupted (eg with https://qbix.com/blog/2021/01/15/open-source-communities/)
The only exception the US makes is for copyright enforcement, and there, you can see much the same argument and attempts to ban people from being able to use end-to-end encryption to host files using BitTorret, say. The difference is, there are no “gateways” to the regular system so the battle was lost.
However, that is NOT true in other countries, which have less respect for freedom of speech. If we as a global community allow these governments to insist on NEVER replacing middlemen with technology, if we let them ban end-to-end encryption until anyone using it is suspicious in and of themselves,then they will ALWAYS have someone to squeeze to make sure the “wrong” types of transactions or speech is chilld - no matter how small - until it is eradicated.
To all the downvoters who hit the button literally 30 seconds after I posted: can you please maybe comment as to why?
This is an unreasonable contortion of the OP’s comment. Conflating cryptocurrency (an industry rife with scams) to cryptography (a branch of discrete mathematics) belies precisely the reason people don’t take cryptocurrency boosters seriously.
I think the simpler answer is that when a word has two meanings, one a widely used category of financial instruments and the other a narrowly defined branch of advanced mathematics, the former will almost always dominate everyday discussion.
>the following categories do not count as brokers:
>(A) validating distributed ledger transactions
>(B) selling hardware or software for which the sole function is to permit a person to control private keys which are used for accessing digital assets on a distributed ledger, or
>(C) developing digital assets or their cor- responding protocols for use by other persons, provided that such other persons are not cus- tomers of the person developing such assets or protocols.
> responsible for and regularly providing any service effectuating transfers of digital assets
(incidentally, I don't see how category (B) or even category (C) from Wyden's amendment could be reasonable construed as being included in the original text--those are products not services. I will concede that I can see how category (A) can be construed, although I doubt it would be so construed).
[Also note that "digital assets" is defined elsewhere in the amendment, although the news media didn't report on the precise text for digital asset, so I don't have it handy. But it's basically a reasonable definition.]
If you think of it as the same idea of gold, the government can't make more it. They can limit transactions to a degree, but they can't really stop one person from handing another person a suitcase full of gold. They can make laws around it, but they will not necessarily be enforced. There is of course oversight over gold, but the government doesn't have as much control as fiat. Namely they can't make an infinite amount just by passing a bill.
The government can make as many laws as they want, whether they are enforced or not is another matter.
The reason I oppose hamfisted laws in crypto is the same reason I oppose the War on Drugs. Is the government even remotely competent to eliminate illicit drugs or even reduce the supply of illicit drugs? Not even close. But is the government capable of finding a few poor bastards and ruin their lives to make publicity stunts? Absolutely.
Just like with drug laws, the primary victims are going to be the disadvantaged and disconnected. Just like with drugs, the elites will be able to insulate themselves from the rules. Two out of three of our past presidents suffered no consequences from their admitted illicit drug use, while millions of poor minorities were locked up.
I’m a professional crypto dev, and I’m not sweating this at all. Our venture funded startup can easily afford high powered lawyers to make sure we’re compliant. Now what about the 17 year old hacker who quickly uploads a smart contract that he thinks does something cool, and all of a sudden is looking at two decades in federal prison because Elizabeth Warren wants to nail a sacrificial “shadowy super coder” to the wall.
There are no vc funded cocaine or heroine companies.
The government has the guns[1]. And a structured (albeit imperfect) way of having the people's voice be heard. It could never be independent in the way that coiners dream.
To a rounding error nobody wants the government not to be able to control the money.
Child support, theft, jury-awarded penalties, etc… etc…
People actually do want a judicial system. Is that controversial now?
[1] And don't give me 2nd amendment. This is what Biden meant when he said that the USG has nukes. It's not a threat, but a statement of fact that the people cannot outgun the armed forces. The USD is ulmitately backed by the nuclear triad, with many layers before that.
LOSERS: Smaller service providers. They cannot afford the now-required overhead because they don't have sufficient economies of scale.
LOSERS: Criminals who saw so much hope in trivially laundering their ill gotten gains now see that as slightly less likely.
“The Treasury Department, the nonpartisan Congressional Joint Committee on Taxation and others believe that the current language is clear and that the reporting requirements only covers brokers, but my view is that we should work to clarify this given the potential for confusion on an extremely important issue. In particular, we want to be sure miners and stakers and others now or in the future who play a key role by validating transactions, or sellers of hardware or software for digital wallets, or node operators, or others who are not brokers are clearly exempted.”
Video: https://youtu.be/p0auPbbDQnY
AND YET the Warner-Portman-Sinema (note the Portman in there!) amendment doesn’t specifically exclude stakers or validators who may now or in the future secure the networks, and certainly not the catch-all “others who are not brokers”? Only exempts proof-of-work miners? Yet he claims it was already “clearly exempted” in the proposed bill at the time of his speech and the amendment was supposed to clarify that??
I wonder if the Senator’s own words on the floor, and assurances that the Treasury and others hold the same view, could be used in court cases to clarify the meaning of “broker” later on, in favor of the defendants (Ethereum proof of stake miners, say) when they will invariably be served papers and prosecuted for not reporting.
Seriously, how can you say one thing and do another so blatantly? This is worse than “if you like your plan you can keep it”.
Will the Treasury and others likewise say one thing in private (as he reports) and quickly flip when it comes to making examples out of non-reporting POS miners?
• https://www.senate.gov/legislative/LIS/roll_call_lists/roll_...
• https://www.finance.senate.gov/imo/media/doc/Wyden%20Lummis%...
Thank you for the direct link to the Wyden/Lummis/Toomey amendment.
I don't know how anyone can keep track of what a final bill would look like - seriously need something like Git to even keep up.
I think I understand now when folks in Congress complain they "don't know what they're voting for". They need better tools.
Here are all 505 if anyone is interested: https://www.congress.gov/amendment/117th-congress/senate-ame...
The situation is probably worse for adults. Why go through the hassle of developing dapps when it means dealing with the IRS and potentially jail, etc.? Personally I've abandoned working on completely harmless dapps because of threats from the state. It's stifling for independent development.
On the other hand, when people compare this to China banning mining, I think the USA is far friendlier to crypto than China, because, as the ascending fiat superpower, China has much more to lose. As the dollar continues to devalue, the USA would most likely prefer a future based on Ethereum rather than the Yuan.
Not all coding is the same. If you want to work to code in a regulated industry, you need to play by the regulations. Finance is a regulated industry, not a sandbox.
This legislation does or does not impact other cryptography use cases?
My concern comes from government's long standing opposition to personal cryptography. eg Clipper chip in phones.
Is this reporting only, or will it result in additional taxes?
This seems light on details, and I really don't know what opinion to have on this without understanding what the requirements are. Nothing I've read succinctly explains this.
It's not just the environmental concerns from PoW; I have concerns about privacy, about how coins have derailed (in my mind) more legitimate efforts to improve modern financial systems. And I have cultural concerns about how this plays into some of the worst instincts of modern society towards speculation and artificial scarcity purely for their own sake, disconnected from any problems or utility. NFTs are the type of technology that honestly shouldn't have been developed, they're pointless and exploitative.
But as much as I do kind of want cryptocurrency to crash and die, I really don't want to do it this way. I've seen some people argue that this wouldn't apply to software developers, but I don't like that the question is under debate at all. The idea that it theoretically might is terrifying, if it's not intended to apply to developers why wouldn't we clarify that in the bill to assuage those fears? And even where miners are concerned: I would like to see mining (particularly PoW mining) eventually become unprofitable, but pushing those people into the category of brokers seems really problematic and short-sighted.
My worry is both that this will open the door to a lot more unnecessary data collection, and that further down the road it might hinder efforts to make better alternatives to the current cryptocurrency industry. The financial concerns are real, but the really troubling part to me is the reporting requirement. Software developers shouldn't be collecting this kind of information, neither should miners.
I also haven't seen a lot of consensus about what technologies the label "digital asset" could apply to in the future, and that worries me a lot as well. I am not a legal expert, I don't feel qualified at all to speculate on how this stuff is determined. A smaller group of people saying that "obviously X made-up digital token or point system or game item wouldn't count" -- that's not super-reassuring to me because I'm not smart enough to evaluate the accuracy of their claims. I want to see more qualified legal experts weigh in. I don't want to see games suddenly collecting a lot of personal information just because technically someone could sell a digital item to another player for money.
I like Wyden's amendment: it still goes after brokers, but it makes it clear who a broker is (and importantly, isn't). And I thought that there was pretty decent bipartisan support for Wyden's amendment. It's really frustrating that support seemed to only be good enough to get 29 votes.
I'm not so optimistic. I've seen too many technological experiments unleashed on humanity, such as Facebook, to where I am much more skeptical about the original intentions of their inventors.
Crypto will be just fine.
Why would this not effect the market in a similar fashion. As far as I understand it, this effectively bans crypto mining in the US. Am I missing something?
Bitcoin price is lead mainly by retail demand. Speculators are quick to panic on the way down, but the return of retail demand end up in a new bubble. This is mostly the byproduct of lack of faith on the foundations of the price. These effects are less felt now that the market has matured.
Of course this is purely my opinion and observation. So take that with a bag of salt.
So I guess now we're back to the previous previous discussion where the EFF was decrying the bill as a privacy disaster: https://news.ycombinator.com/item?id=28045227
If they kill barter, then we've got serious problems.
If you think things like decentralized finance, storage and identity have the potential to improve our lives and offer some of the only genuine alternatives to an increasingly privacy-hostile status quo, please look into the shambolic legislative process that threatens the entire blockchain industry in the United States. This is the time to act and ensure that cryptocurrency provisions are debated meaningfully in Congress before any relevant legislation is passed. What the Senate is doing right now reeks of both outright incompetence and malice. There are many, many companies and builders active on HN who are about to have their existence challenged.
Most of us do not believe either of those things. At the moment I apllaud any legislation that outs the brakes on current crypto currencies. The damage they have been doing to the world so people can gamble/speculate has been immense, its a tragedy. Money transferring to the lucky all while burning through energy.
It will drastically slow down innovation, and keep the majority of crypto activity on electricity guzzling proof of work chains. Already major Ethereum community members are discussing delaying or canceling the transition away from proof-of-work scheduled for the end of the year.
I can see how it might for the companies - people who use crypto for tax and authority avoidance seem likely to stop using any service that complies with this law.
I don't see how this bill threatens any human's existence.
It doesn't.
> How does being required to track data about taxation challenge the existence of the builders you mention?
Suppose US law says that it is illegal to "mine" a block of bitcoin unless you keep records of the true name, address, and social security number of every person whose transaction occurs within that block and provide that information to US banking regulators on demand.
Since the information available to miners does not include true name, address, and social security number, the only way to comply with such a requirement would be to not mine blocks for bitcoin.
(There's another option -- go ahead and violate this law. If the US government doesn't have a beef with you then they'll just choose not to prosecute you. If they DO have a beef with you then you can try arguing in court that the law is unconstitutional. This will take years and extremely large legal fees and it might or might not be successful.)
I don't have a problem with requiring Coinbase or Biance to maintain records of information available to them. I DO have some concerns with mandating that no transactions may be done anonymously except those done in cash -- although I understand that some may disagree on this. But I strongly oppose imposing impossible-to-meet requirements on those who write code for cryptocurrencies, perform "mining" of cryptocurrencies, or who hold and/or spend cryptocurrencies themselves.
