A long-simmering feud between crypto companies and regulators boiled over in the Empire State this week. The conflict came to a head when the New York Attorney General’s office issued a report accusing digital currency exchanges of shady trading practices and behaving like scofflaws.
Ordinarily, firms on the receiving end of this sort of thing offer a meek statement to say they’re “reviewing the findings of the report” or “looking forward to working with regulators.” Not this time. Coinbase fired back to say the AG’s insinuation that it engages in prop trading at the expense of its customers is flat-out wrong. Meanwhile, Kraken lashed out with a series of colorful (and probably ill-advised) taunts on Twitter, pointing out the San Francisco-based exchange pulled out of New York long ago.
In these type of dust-ups, it’s normally best to take an industry’s complaints about regulators with a grain of salt. After all, the oil industry regularly complains about the EPA and Big Pharma kvetches about the FDA—but few doubt these agencies are performing a useful function. Sure, the regulators may be heavy-handed in some cases, but overall they do a good job.
It’s not so clear this is the case with the state of New York, which has engaged in a series of actions that appear less about protecting consumers than about turf-guarding and political preening. This started with the infamous “BitLicense” in 2014, whose cost and complexity drove a number of fin-tech companies out of the state. Shortly after, the creator of the BitLicense left government to open (you guessed it) a fin-tech consultancy shop, leading to accusations he had built himself a revolving door. Meanwhile, the BitLicense process remains an opaque and sluggish process with the financial-crats who run it offering little insight into how it works.
The state of New York struck once more this week, filing a lawsuit to block the federal government from granting national banking charters to fin-tech companies like Lending Club and Coinbase. A national charter would spare such companies, which are beginning to resemble traditional banks, from the onerous process of obtaining 50 separate permits from different state regulators. No way, says New York, it’s better to let the state protect the country’s consumers.
This assertiveness is not totally unfounded. After all, New York is home to Wall Street and remains the financial capital of the world. The hometown regulators should have a say, and state laws give them enormous power to have one (see Messari’s excellent rundown of the AG report to learn more). But in the case of the emerging cryptocurrency industry, there are already regulators aplenty—from the SEC to the Justice Department—policing the beat. In this context, New York’s power-play looks power-mad and self-interested. The state should stand down.
Thanks as always for reading. The rest of our round-up, including XRP’s run and Berlin crypto art, is below.
THE LEDGER’S LATEST
Coinbase Poaches General Counsel from Fannie Mae by Jeff John Roberts
Bread Raises $60M to Challenge Store Brand Credit Cards by Jeff John Roberts
To the moon… Crypto OG David Chaum announces a faster, more energy efficient rival to Bitcoin. Powerful new mining chips on the way. Oil giants give blockchain another go. Stripe is warming to crypto. Crypto needs legal help and Congress is on it.
.…Rekt: Crypto miners invade New York town, piss off locals. Hackers use NSA exploit to mine piles of Monero. Bitcoin Core team patches crazy serious flaw. SEC enforcement activity down 7% but agency says it’s on to ICOs. California bans crypto campaign donations.
BALANCING THE LEDGER
Origin is an ambitious protocol to create a decentralized version of marketplaces like Craigslist and Airbnb. Cofounders Matt and Josh dropped by Balancing the Ledger to share their vision.
Ripple is ripping it up. Don’t look now but the price of XRP has started soaring again, likely on rumors of an xRapid launch. The height of XRP’s recent run by the numbers:
$12 Billion: Increase in market cap during latest run.
2: Rank among all cryptocurrencies.
144%: Price increase.
(But remember people, this is crypto. This could all blow away by Monday).
MEMES AND MUMBLES
Crypto art or something. I’ve never been to Berlin but heard a lot about its avant-garde urban culture and art scene. So no surprise to find it was the site of this out-there crypto exhibit that features Vitalik and The Ledger’s own Jen Wieczner among others. Other pictures here h/t @JRossTreacher
FOMO NO MO’
Don’t miss out: Once upon a time, Bitcoin was about controlling your own wealth while staying the hell away from anything representing banks or government. Today, it’s different as “Big Bitcoin” has a growing footprint in Washington DC, replete with PACs and industry associations. Breaker mag’s Brian Patrick Eha has a detailed account of crypto lobbying in the capital. A couple highlights:
If there is a Night’s Watch of crypto, Coin Center is it. I make passing reference to their lobbying on behalf of the “crypto industry,” and Brito corrects me instantly: their allegiance, he says, is to the technology, not to the industry that has grown up around it. Van Valkenburgh looks at me over the tops of his glasses. “We’re neutral brokers,” he says. “We’re not out here to sugarcoat the technology, but neither are we here to whitewash it.” […]
Finally Brito comes up with a nightmare scenario. Just as the FBI and Department of Justice tried to pressure Apple into building a government-friendly backdoor into its messaging system, “you can imagine that some government authority would require that certain information collection be built into the [bitcoin] protocol,” he says.