Comments: 1208 • Responses: 29 • Date: 2014-02-20 17:05:59 UTC
BenLawsky216 karma2014-02-20 17:50:12 UTC
This came up a lot at our hearings. We face similar problems in our regulation of smaller community banks. Dodd Frank, for example, was designed to address problems created by our largest institutions but at times has hit these smaller banks (who had little to do with the causes of the financial crisis) disproportionately in terms of compliance costs, etc. We've had some success in getting these regulations amended so they don't crush smaller community banks. Any regulations we issue for virtual currency firms will have to be carefully tailored with this in mind. Thanks for raising this.
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BenLawsky125 karma2014-02-20 18:33:47 UTC
First, let me compliment your screen name. Probably my favorite line from Dune.
Your questions are all good and I hope my previous answers mostly addressed them. Just a few additional notes: 1. We hope regulatory clarity will attract exchanges to the United States. I suspect that they are staying offshore right now because they don't know what the rules of the road here are or will be. 2. We do hope that regulation will create a level of certainty that could incentivize banks to promote not stifle these innovations. I also suspect there are banks who are quite interested in the technology but are being risk averse for now in the absence of regulatory clarity. 3. I think Secretary Lew was expressing that money laundering, in whatever form, needs to be dealt with seriously.
BenLawsky117 karma2014-02-20 18:21:02 UTC
Thanks. And sorry the answers are coming a little slow. Your questions merit thought before I type (and I'm not the greatest typist).
BenLawsky114 karma2014-02-20 17:34:15 UTC
I can't tell you exactly why particular banks are taking certain actions but they may have some concerns related to Bitcoin being new, its price volatility, as well as the recent criminal cases. I think new, careful regulations, especially related to preventing money laundering, will make banks more comfortable with Bitcoin-related activity over time.
BenLawsky111 karma2014-02-20 17:41:48 UTC
I was giving a hypothetical at the hearing that used a very stark choice in order to underscore how important it is for all of us that we get the balance right and ensure that we have appropriate bsa-aml protections in place while at the same time not stifling innovation. In context, I was also trying to emphasize that money laundering is not to be taken lightly -- in many ways it is the lifeblood of terrorism around the world. My hope is that if we can get appropriate guardrails in place to prevent money laundering, we can take a deep breath and really focus on trying to ensure that virtual currency firms flourish and continue to develop and innovate. I'm very excited about what the future could hold for this very powerful technology.
BenLawsky105 karma2014-02-20 17:53:05 UTC
I don't. But I hear Preet (Bharara) is looking to offload some!
BenLawsky100 karma2014-02-20 23:50:53 UTC
At DFS, we're regulators not prosecutors. So we don't have indictment power or bring criminal cases. However, we do have an obligation to help ensure the integrity of the financial system and as part of that to prevent money laundering. It is worth repeating that without massive money laundering it is very hard for terrorism to thrive. So we see our anti-money laundering (AML) work as one of our more important obligations. Now that doesn't mean we should be undertaking unreasonable and/or ineffective means to find and address money laundering. But the Know Your Customer (KYC) rules we have for banks are important. The key is finding the most effective methods to root out and deter money laundering without having an overbearing impact on those who are just trying to use the system legally and without driving firms out of business with extraordinary compliance costs.
BenLawsky80 karma2014-02-20 18:08:07 UTC
I don't think the two are mutually exclusively. We do a lot of work on money laundering at banks. The money laundering that goes on at banks is awful and we treat money laundering, wherever it occurs, with the utmost seriousness. I'm a former prosecutor who (a bunch of years ago) worked on terrorism cases in the years after 9-11. So I think we pay extra attention to money laundering issues in all its forms at DFS. I doubt you all have patience for a regulatory agency tooting its own horn, but if you are interested in some of the work we've done related to bank money laundering, this CoinDesk article runs through some of it. Most importantly, our work in this area in continuing and will remain a top priority.
EDIT: Sorry, adding link: http://www.coindesk.com/ben-lawsky-friend-foe/
BenLawsky75 karma2014-02-20 18:17:31 UTC
Hard to put the genie back in the bottle. I can't predict the future but Bitcoin is certainly a new powerful technology that holds a lot of promise for the future if we can mitigate some of the potential negatives like money laundering.
BenLawsky74 karma2014-02-20 23:39:31 UTC
I think financial privacy is an important value. I certainly don't love the fact that when I purchase something online, I quickly receive a bunch of email solicitations which clearly show that my information has been sold to other companies. At the same time, there is an important competing value in preventing money laundering which often requires that those engaging in financial transactions (especially when large) provide some identifying information so we can make sure we're not permitting things like terrorist financing. The tricky question is whether we can come up with smart rules that might require personal identifiers for certain transactions at certain entry points into the system while still protecting financial privacy while moving around within that system. We're obviously still in progress on this topic.
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