California Assembly Moves Forward With Idiotic Plan To Make All Bitcoin Startups Apply For A License

from the this-won't-end-well dept

Back in March, we wrote about a really bad bill that had been proposed in California by Assemblymember Matt Dababneh, called AB 1326. As we noted, it would basically destroy the ability of new startups in the Bitcoin space to build their businesses in California. Specifically, it would require any startup in the broadly defined "business of virtual currency" to first need to get licensed by "the Commissioner of Business Oversight" and then comply with a long list of other regulations -- including regular audits by the Department of Business Oversight. Well, unless you're a big bank or financial institution. Then you can carry on and experiment with Bitcoin all you want.

In short, the bill would reverse decades of how Silicon Valley has lead the world in innovation -- by switching from a world of rapid innovation and permissionless innovation, to one in which any startup even contemplating doing anything with Bitcoin would have to go plead their case to clueless regulators in Sacramento. It's hard to see how anyone could possibly think this is a good idea for innovation or the California economy. And yet... the assembly's committee on banking and finance has now voted the bill out of committee, sending it on to the appropriations committee and then on to the floor of the legislature.

Of course, perhaps it's not so surprising that the committee on "banking and finance" would approve this bill -- considering it gives a free pass to big banks and financial services companies while hindering startups, entrepreneurs and innovators. However, any of the many startups in California that are doing some amazing and interesting things with Bitcoin should speak up now, because California is about to tell them to move out of the state entirely.

Filed Under: ab1326, bitcoin, california, california assembly, innovation, matt dababneh, permission, regulations, virtual currency


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  • icon
    Mason Wheeler (profile), 1 May 2015 @ 1:34pm

    Meh. Bitcoin's a bad joke, with a long history of fraud and scams from beginning to end, and the sooner that end comes, the better. If California manages to discourage its residents from getting involved in it, so much the better.

    The underlying blockchain technology solves some interesting problems and might (maybe?) become something useful in the future. But trying to use it as a currency/investment/whatever-they're-saying-Bitcoin-is-now belongs in the "this won't end well dept" much moreso than attempting to discourage businesses from getting caught up in it!

    reply to this | link to this | view in chronology ]

    • icon
      Gwiz (profile), 1 May 2015 @ 1:47pm

      Re:

      Meh. Bitcoin's a bad joke, with a long history of fraud and scams from beginning to end...

      Do you know what has a much longer and larger history of fraud and scams? Dollar bills. Do you wish those to come to end also?

      Blaming a currency for how it is used doesn't really make much sense to me.

      reply to this | link to this | view in chronology ]

    • identicon
      Joe K, 1 May 2015 @ 1:55pm

      Re:

      Man. Bitcoin stories are quite the FUD magnets, aren't they?

      reply to this | link to this | view in chronology ]

      • identicon
        Danielle, 2 May 2015 @ 7:16am

        Why the negativism

        People are often afraid of change, and bitcoin is a big change in how money works. When you grow up with the current system, and how you get paid and spend it is essential to your life, the fear factor can loom pretty large.

        So people will toss out reasons why bitcoin is bad to keep other people away from it, and prevent it become mainstream.

        reply to this | link to this | view in chronology ]

    • identicon
      RD, 1 May 2015 @ 2:07pm

      Re:

      "Meh. Bitcoin's a bad joke, with a long history of fraud and scams from beginning to end, and the sooner that end comes, the better"

      "This will just be used by criminals to buy drugs!"

      As if cash doesn't get used by the same people for the same nefarious reasons.

      reply to this | link to this | view in chronology ]

    • identicon
      TimTayshun, 1 May 2015 @ 10:03pm

      Re: Mason Wheeler's comment

      Wrong. I send money around the world, particularly to Africa. I send it instantly with bitcoin and it cost me about 3 cents, despite the amount. The recipients mostly either use a digital wallet called Coinapult, which allows them to "lock in" their bitcoin value, or they "flip it" through a 3rd party vendor working with the local telecom and turn it into local digital money, such as MPesa, instantly. So, if my budget is to send $100, they receive $99.97. I have paid between 10.6% and 14.6% from Western Union. BIIIGGG Difference.

      reply to this | link to this | view in chronology ]

      • icon
        lfroen (profile), 2 May 2015 @ 1:56am

        Re: Re: Mason Wheeler's comment

        >>> BIIIGGG Difference.
        No not really. You know why nobody created cheaper Western Union? That's because all this "money stuff" is regulated.

        Bitcoin is not (yet) regulated, and thus - lot of fraud.

        Anyway, your use case "send $100 to Africa" is not very common. More common case of "buy stuff for $100 in China" is solved pretty well by Paypal and its friends.

        Expect bitcoin (in present form) to disappear as any fraud form before it.

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 2 May 2015 @ 8:22pm

          Re: Re: Re: Mason Wheeler's comment

          No not really. You know why nobody created cheaper Western Union? That's because all this "money stuff" is regulated.
          Not just that. They do actually have to build offices and pay staff, and they have to be pretty good at verifying ID to avoid fraud. Bitcoin gets rids must all of that.

          Things like Paypal and credit cards work pretty well in developed countries, although they're quite expensive even there and we frequently hear about Paypal cutting people off for no good reason. But in some countries and some businesses (e.g. pornography) they're notoriously difficult to work with and have much higher fees.

          reply to this | link to this | view in chronology ]

    • identicon
      Danielle, 2 May 2015 @ 7:25am

      Re: Startups

      > belongs in the "this won't end well dept"

      Most start-ups don't end well. It is only by trying and often failing, learning from the failures, and trying again, that successful businesses and technology grow. How many operating systems and office suites went by the wayside before Windows/MS Office won out? How many online shopping sites faded away until Amazon was the clear winner?

      Bitcoin itself isn't a fraud or a scam. It's merely a distributed accounting ledger with a protocol and scripting language to update it. You can certainly build frauds and scams on top of it, but you can do that on top of Excel spreadsheets too. You are blaming the crowbar for what the thief does with it.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 2 May 2015 @ 8:07pm

      Re:

      The underlying blockchain technology solves some interesting problems and might (maybe?) become something useful in the future. But trying to use it as a currency/investment/whatever-they're-saying-Bitcoin-is-now belongs in the "this won't end well dept"
      Many people assume these aspects to be separable, but I don't agree. There have been timestamping services, distributed systems, and digital currency before. None of the cryptography is new. Bitcoin's biggest innovation was getting people to run it. Most distributed networks die off as people lose interest, or never get big enough to avoid attacks. Look at BitTorrent swarms for an example—they've got short-term incentives (the tit-for-tat algorithm) but most torrents over a few months old are unseeded.

      If Bitcoin's technology didn't allow currency speculation, it would be as dead as the original Chaumian cryptocurrencies. We certainly wouldn't have people building Bitcoin ASICs, so it would be much more vulnerable to CPU/GPU mining botnets and other attacks. Probably nobody but hardcore cypherpunks would be using it (cf. Mixminion).

      "We" certainly shouldn't be investing in Bitcoin. Buy a little when you need to make a purchase, and sell some when you accumulate too much, and you'll be able to take advantage of its useful properties (e.g., sending any amount to anyone for about 1 cent, even if the recipient is in a "bad" country or is doing something credit card companies don't like). Let someone else take most of the speculation risk—but I think someone does have to.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 1 May 2015 @ 6:29pm

    Bill entirely designed so a startup says "we plan to do X, and here's a plan for it".

    'Committee member' then accidentally sells the startups entire business plan to Apple.

    This entire rule was written by (and for) Apple, as they have well-placed spies ready to (illegally) give them all the startup info they could want so they can crush competitors earlier than they are currently.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 3 May 2015 @ 3:05pm

    The mighty dollar is losing.

    reply to this | link to this | view in chronology ]


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