The Chamber of Digital Commerce, also known as the “Digital Chamber” or “DC” for short, is seeking supporters to sign their petition to Benjamin Lawsky, New York’s Superintendent of Financial Services, asking him to extend the comment period on the proposed BitLicense regulations through the end of 2014. The petition states:  “An extension is necessary to allow the industry time to formulate proposals that address the NYDFS goals of providing guardrails that do not threaten this nascent technology.”

Perianne Boring is the founder and President of the newly formed Chamber of Digital Commerce. Opening its doors just a few weeks ago at The North American Bitcoin Conference, the DC is embarking on a bold mission to promote the acceptance and use of digital assets and digital currencies among government and the general public.

Just two days before launching, the New York Department of Financial Services (NYDFS) proposed their BitLicense rule and regulations. The Bitcoin community has largely expressed major concerns over the proposed regulations, and Boring has boldly jumped into the debate:

“We did not have plans to get involved with policy initiatives this year, rather the next several months have been dedicated to setting up our office, recruiting membership, and hiring and training staff.  However, the New York proposed BitLicense regulations are so important to the future of the industry that the Digital Chamber is getting involved on a grassroots level. “

The DC previously issued a call to action urging the industry to submit comments to the NYDFS.  Their user-friendly petition provides an easy way for people to lend their voice in shaping digital currency policy.

Other than the petition, how can people get involved? What would you recommend doing?

We encourage submitting personalized comments directly to NYDFS Office of General Counsel Dana V. Syracuse, New York State Department of Financial Services, email: dana.syracuse@dfs.ny.gov.

What about BitLicense is most concerning to you?

BitLicense has the potential to choke off small business. On November 14, 2013 Mr. Lawsky issued a Notice of Intent to Hold a Hearing on virtual currencies where he said that the NYDFS seeks to set up “guidelines for virtual currencies” and that “it is important for regulators to balance both allowing new technologies and industries to flourish, while also working to ensure that consumers and our country’s national security remain protected.” Despite Lawsky’s public declaration, the proposed regulations are broad based, which often leads to favoritism towards the larger, more established players and discrimination towards startups and entrepreneurs.

Section 200.8 (b) should also get an honorable mention.

“Each Licensee shall be permitted to invest its retained earnings and profits in only the following high-quality, investment-grade permissible investments with maturities of up to one year and denominated in United States dollars:

certificates of deposits issued by financial institutions that are regulated by a United States federal or state regulatory agency;
money market funds;
state or municipal bonds;
United State government securities; or
United States government agency securities.”

In other words, this provision forces Bitcoin companies to invest their profits into traditional investments and prohibits companies from investing profits back into the industry they are operating in.

This is like telling a micro-brewery that they must only invest in Anheuser Busch.

Why can’t they hold their profits in Bitcoin?  The logical explanation from the NYDSF would be that they are trying to lower company’s risk by holding investment grade securities.  However, Bitcoin is an alternative to these fiat-based systems. These regulations will inherently prohibit what the NYDSF states they would like to achieve, namely “allowing new technologies and industries to flourish.”

If you were a legislator — what laws or legislation would you create regarding Bitcoin?

No one knows Bitcoin better than the people who have been instrumental in creating Bitcoin and building a market for it.  That is why trade associations, like the Chamber of Digital Commerce, are so important.  The creators and entrepreneurs need a seat at the regulatory table, to educate legislators about this currency.

I spent a considerable amount of time and resources conducting the market research necessary to build something that has never been seen before, a political organization for a non-political industry, a centralized communication channel for a decentralized technology, and firewalls for encrypted security protocol.

To avoid catastrophe, the industry should establish basic consumer protections and security protocols. Note, these do not have to be issued by government, they could simply be agreed upon by the industry and regulated by the industry. If the community can come together and assure government that their concerns are met through self-regulatory mechanisms, we might be able to avoid draconian measures, like BitLicense.

This initiative is great.  It’s nice to see someone standing up for Bitcoin. We need more people to get involved.

The work I am doing at the Chamber of Digital Commerce is very important to the future of the industry, but the real heroes in Bitcoin are the CEO’s, small business owners, programmers, developers, and entrepreneurs who have sacrificed cushy corporate jobs to build this industry.  Just as there is a lot of regulatory and public affairs work to do in Washington, there is also a lot of development work to do to build up the infrastructure of the industry. As the industry grows and changes, the Digital Chamber will play an important role in educating government and the general public about the intrinsic benefits of digital currencies.

Bitcoin attracts the brightest and most proficient human capital, which says a lot about the integrity of the technology.  Top talents are leaving Facebook, Microsoft, Twitter, and other top tech companies and law firms to join this burgeoning project.  This is what motivated me to form the Digital Chamber.  I wanted to be a part of this community, full-time, 100 percent.

Huge thanks to Perianne for her time to do an interview with us about BitLicense and the Digital Chamber. Like always, we will keep you updated as time progresses.

Following up from our part one interview with Kyle Drake, we are back again with part two which gets even better. This time around we cover topics revolving around New York’s BitLicense, multi-sig Bitcoin addresses, and a little bit more on BitcoinJS.

Your take on multi-sig and what’s your favorite alt-cryptocurrency?

I like multi-sig and definitely see it’s appeal for protecting theft and creating multi-group stores of value. They’re a useful tool. But in practice, I find multi-signature transaction to be a little too complicated for most people to understand. I’m a bigger fan of things like BIP38 (encrypted paper wallets) for protecting user funds than I am with multisig. There’s a lot of snake oil security out there, where people claim that multisig is somehow going to magically stop wallet theft. But if all you’re using multisig for is to sign a transaction with a second key on the server, and that process is automated, how does that prevent an attacker from stealing your funds? The claim that this ends theft is a little over-optimistic to me, and you still run into the problem if trustlessness.

What do you think of New York’s proposed BitLicense regulations?

I’m deeply troubled by them. They require massive privacy interventions in Bitcoin users, make it even harder to transact, and will do absolutely nothing to prevent their stated goals. They will force out web wallets that don’t manage their customer’s keys (a more secure way to make wallets) and replace it with extremely dangerous server wallets/exchanges, which will inevitably lead to more colossal Mt. Gox-like failures, making everyone less safe and reducing Bitcoin’s credibility. And they require profits to be stored in USD, which will choke Bitcoin’s flagship feature: a store of value that is resistant to inflation. Many of the startups out there are profitably solely because of the increase in value of their Bitcoin holdings, and that has allowed them to get better leverage in capital rounds, or avoid rounds altogether, which has allowed for more autonomy to do the right things. I realize that this can go both ways, but why force that choice away from Bitcoin startups?

The regulations (this is something that not a lot of people are talking about yet) are illegal under US law. The fourth amendment of the United States constitution is pretty clear here, it’s not legal to create generic financial dragnets that suck in everyone’s data. “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

Where are the warrants in these financial dragnets? Is probable cause reasonably defined here? I would love to see someone take this to court and challenge it on it’s constitutionality.

But the must concerning thing about BitLicense (and the current FinCEN requirements) to me, is the attempt to make trading Bitcoins between individuals and small groups illegal. This is how Bitcoin became successful – through organic, person-to-person or person-to-small-group trade. If we make it illegal, we’re stuck with the giant centralized exchanges like Mt. Gox. And we saw how well that turned out. Again I don’t care how well run the site is – it’s still a risk, and a single point of failure.

One exception that would make these regulations much better would be to set thresholds, so that anyone dealing with under, say, $500,000 a year are not subject to them. That would give individuals, small organizations and startups some breathing room to be competitive in the space. If I was going to make one change, that would be it.

That said, the regulations in their current form are not very reformable. There are much better solutions here. In Illinois, there is a bill pending to make virtual currencies not have legal tender status. It will exempt Bitcoin users and startups from onerous regulatory requirements, and it’s exactly one paragraph long. I hope all the states introduce and pass similar legislation, and much credit to Elizabeth Hernandez for proposing it. Take a look: http://www.ilga.gov/legislation/fulltext.asp?DocName=&SessionId=85&GA=98&DocTypeId=HB&DocNum=5886&GAID=12&LegID=&SpecSess=&Session=

I’m also extremely disappointed with the endorsement of this regulation from many of the startups in the Bitcoin space. And I’m not alone – BitLicense has exposed the bad players in the Bitcoin space that want to hurt their customers, and I’m happy that people are finally standing up to them.

These regulations would have made it impossible for most of the startups now supporting it to get to where they are today. This is textbook “regulatory capture”, where big players try to smash out the competition using the legal system. Why do these startups even like Bitcoin now, if not for sheer greed? If they have their way, all Bitcoin becomes is a slightly cheaper way for banks to send money to each other. If that happens, what’s the point of using Bitcoin? I strongly recommending boycotting the startups endorsing this regulation until they stop hurting their customers, and stand with us to protect reasonable right to privacy in the Bitcoin ecosystem.

Any last comments? Thanks again!

I wish there was more donor funding for projects like BitcoinJS that enable better wallet solutions, and I wish there was more work to fight things like BitLicense. The “Bitcoin server account” startups that want to use BitLicense to regulatory capture Bitcoin have raised tens, perhaps a hundred million dollars to make the work we’re doing illegal to use. We’ve received less than $100 to work on BitcoinJS. We are really out-gunned right now, and it feels like a losing battle for anyone that wants to use Bitcoin the way it was intended to be used. If the early Bitcoiners don’t contribute to Bitcoin freedom, we’re definitely going to lose this one.

[BitLicense image via]