Even on account suspension CB let's you remove your current funds. I'm assuming the customers will have a time-period where they can remove those funds.
How does this even work? Meaning if I live in WY, but I bank at "Small Union Bank of Delaware" Does that mean I'm using anything with in the realm of the Wyoming Division of Banking? Would just using an ATM put me under their jurisdiction? Because if I by something from Amazon, the transaction is basically from my bank in DE to WA if there are no Physical Amazon locations in WY. Correct?
But based on the content of the CB Press Release, and the fun we had with NY, I'd say it works as such:
You're a WY resident, and therefore the DE bank must follow the WY policies for your money. Of course this is a BTC/Digital Currency-based regulation, so...
> if I by something from Amazon, the transaction is basically from my bank in DE to WA if there are no Physical Amazon locations in WY. Correct?
Incorrect. What matters is the state (or states) in which the company is "doing business". The exact definition varies from state to state, but in general having customers in WY means that you're doing business there and will (usually) need to register with the state, follow its rules and pay its taxes for your sales in that state.
Your bank is also doing business in DE and will need to follow their laws too, as the other end of the transaction is there.
Slightly OT, but I have an amusing story about Montana-based regulation. I work for an insurance company, and when you price life insurance or annuities, you have two separate mortality tables: male and female. Montana decided that that's discriminatory, so they mandate only using one table. So we use whichever table is more onerous (i.e. male for life insurance, female for annuities). So if Montanan women notice they pay more life insurance, or men pay more for annuities, they can thank their local regulator.
I don't think you can blame the regulator for that. If you wanted you could calculate tables for "people" regardless of gender. Those tables would more accurately reflect the population than purposely choosing the wrong subset of data to use.
That leaves you open to anti-selection bias. It would make men's life insurance cheaper than in any other state, and you'd likely get more men buying in Montana.
European Court of Justice ruled that this is the way it has to be in the EU as well. It means, in some countries, women pay more for driving insurance, and men pay more for life assurance.
I work in annuity pricing (pretty new in my career though, so I could be wrong), and if we were pricing the product, I think that the net effect wouldn't necessarily be wholly higher prices for annuities/life insurance, despite using the higher of the two rate tables. We price our products so that they all have the same ROI, so if we had to use male mortality for life insurance and female mortality for annuities (thus increasing our ROI), to make up the reduced expense from mortality, we'd make it up by increasing interest credited in the annuity case, or decreasing the cost of insurance in the life insurance case.
There would generally be more variance in mortality income, but I think that the net effect would be pretty small to both the insurer and the consumer.
Women would be paying more for life insurance than they "should" be (relative to men--men would be paying less than they "should" be), and men would be paying more for annuities than they "should" be (and again, vice versa).
So generally Montana is small enough that you just ignore it, so you price it with separate tables and then Montana gets hosed. If Montana were bigger you might go through something like the process you're talking about.
My male Montana cousins always had cheaper car insurance than I did (also a male) so some companies must be using a different table. Everything else about us (age, grades, miles driven, etc.) was similar.
Huh. I'm about to go read the the books, but that sounds like a wild interpretation. That sounds like some odd parity reserve, rather than the fractional reserve system common in almost any other domain.
No, it's standard for "money transmitters" to have to maintain 100% reserves. Coinbase isn't a bank. They're not a lender. "Fractional reserve" means that a fraction of a bank's assets are in cash, and the rest are in loans owed them. That's fine unless a lot of loans go bad all at once, as in 2008. Even then, it eventually worked out when the economy came back.
Here's Wyoming's law:
"Each application shall be accompanied by a surety bond, irrevocable letter of credit or other similar security device acceptable to the commissioner in the amount of ten thousand dollars ($10,000.00) or two and one-half (2) times the outstanding payment instruments, whichever is greater. The commissioner may increase the required amount of the bond or security device to a maximum of five hundred thousand dollars ($500,000.00) upon the basis of the impaired financial condition of a licensee as evidenced by a reduction in net worth, financial losses or other relevant criteria."[1]
For most money transmitters, this isn't a big deal. They don't hold the money for long. The whole point of the business is to get funds from A to B quickly. So they don't have a large obligation to their customers at any one time.
Coinbase's "hosted wallet" service makes them a depository institution - customers have funds on deposit with them. Given the track record of Bitcoin "hosted wallet" companies, most of which have failed, requiring reserves as a consumer protection measure makes good sense. Coinbase could post a bond from an insurance/bonding company, but they'd have to convince the insurance company of their financial soundness. That they can't easily do so is a bad sign.
Coinbase should still be able to do their business of converting Bitcoins to dollars for merchants. They only hold the money for a few hours, and should be able to have reserves for that float.
If Coinbase became a bank or a broker, they'd be subject to US Federal regulation and audits, but would no longer need state licenses. They're trying to sleaze by as a "money transmitter", while acting as a depository institution, and it's not working out for them.
California requires 100% reserves up to $7 million.[1] For a real "money transmitter", this isn't a big deal, because money stays in their system for about a day, often less. For Coinbase, which is trying to be a broker on a money transmitter license, it's a problem. They hold customer assets for long periods.
Coinbase ought to register with the SEC as a broker/dealer. That would free them from state regulation. Then their customers would have SIPC insurance. Of course, Coinbase would have to accept FINRA audits and regulation. Right now, they don't even publish financial statements.
CA Fin. Code sec. 2037(e): "A licensee that engages in receiving money for transmission shall maintain securities on deposit or a bond of a surety company in an amount greater than the average daily outstanding obligations for money received for transmission in California, provided that such amount shall not be less than two hundred fifty thousand dollars ($250,000) nor more than seven million dollars ($7,000,000)."
A surety bond is an insurance policy good for the full amount of the bond. A bonding company[2] will have a lot of questions to ask a Bitcoin business before taking on that risk.
This is kind of odd, and one reason I'd like to see the actual interpretation from the Division of Banking -- and not just Coinbase's "understanding" of it.
There's nothing there that seems to support the 100% reserve requirement identified as Coinbase's understanding of Wyoming rules. Even with the next section after the bit you quote [0] that allows substituting deposit for the security bond, it uses the same amount. Since the amount is actually $10,000 or 2.5 times the "outstanding payment instruments", whichever is greater (and, on renewal, is calculated based on the average daily balance of the prior year [1]), I don't see where any 100% requirement comes from. If we assume that bitcoins held in hosted wallets are "outstanding payment instruments", it would actually be a 250% requirement -- either for the amount of the surety bond or the deposit in lieu.
> Huh. I'm about to go read the the books, but that sounds like a wild interpretation.
Well, its not an interpretation from anything that Coinbase is willing to publicly point to from the relevant agency, its what Coinbase "understands" to be the agency interpretation, these three things are all potentially different:
1. Regulation,
2. the Division of Banking interpretation of regulation,
3. Coinbase's understanding of the Division of Banking interpretation.
Reading #3 and #1 isn't going to tell us if #2 is reasonable.
Wyoming has something like 0.2% of the US population. I wonder if the number of Wyoming-based active accounts at Coinbase even reaches into the triple digits.
I think at least 10% of active bitcoin users in the US have coinbase accounts, in which case they'd have over 15,000 accounts, over the quadruple digit figure.
Or take coinbase's number directly from https://www.coinbase.com/about, which says 2,200,000 users. Maybe perhaps at least 1% are active accounts?
Coinbases numbers are all vanity metrics and numbers that will not go down even if usage does. Number of wallets isn't number of users. I have a handful myself created at various times. MAU figures are universally missing in the Bitcoin world.
They still don't require anything more than an email address for either.
Given the communities willingness to artificially inflate[1] any metric they can find. I have no faith those numbers are anywhere near real. When they release MAU figures I'll be impressed.
[1] reddit.com/r/bitcoin/about/traffic check out the new user subscriptions chart for an idea of what happens when someone shuts off/turns down their bot(It's less easy to see now but new subscriptions were constantly around 250-300 and then they dropped to ~100 overnight)
I didn't make that claim. I honestly have no clue what % are active(I've been asking for MAU numbers from a number of bitcoin companies on every bitcoin related forum I participate in for close to a year now with none releasing them) and wouldn't even make a guess though I know there are a lot of former users in the community for a variety of reasons.
If it was showing anywhere near as good of numbers as their wallet or user counts you can bet it would be released tomorrow.
For a company that accidentally released something similar look at Bitpay which had staff bragging for the first half of last year about how they were doing $1m a day in processing only to release their 2014 EOY figures showing an average which was less than half of that.
It is very common for companies to not release MAU numbers especially in their initial years, even if they are being very successful. I challenge you to find Gmail's MAU numbers released in the first 3 years of its existence.
If you can't understand why MAU is a sensitive metric, then yeah I understand why you make up theories in your head why they must be "covering up" something.
MAU was rarely used back then so I wouldn't expect to find it.
Now it's recognized as basically the only useful metric for sites like this. GPlus, Instagram, Whatsapp, Tinder, Snapchat, and Twitter(well 4 years but close enough) all release MAU within that 3 year from launch timeframe.
So if Twitter took 4 years to release MAU, would you have accused them for 4 years that they have "something to hide"? Now you get my point. It's sensitive. Sometimes you wait years before feeling comfortable releasing this number.
Yes actually and I wouldn't be alone. Pretty much everyone was claiming Twitter was hiding numbers during that time to cover for the fact that they had mostly inactive accounts.
Yet Twitter experienced phenomenal growth, going from zero to tens of millions of MAU in their first 4 years, proving your logic wrong (paraphrasing you, you said "if growth was so great surely a company would release MAU"). So if you apply the same criticism you make against Coinbase to Twitter, you would have said in these first 4 years "Twitter's metric are all vanity metrics" and you would have rejected Twitter's claims of growth. Well you would have been misguided, as we now know for certain Twitter WAS growing during these first 4 years.
This is why you look stupid to reject exchanges' claim of growth. Yes we know MAU is less than number_of_wallets. It's mathematical. But still, it's silly for you to reject their claims of growth as you have no basis for it. Not releasing MAU doesn't mean you are not growing, as Twitter demonstrated.
The thing is while they were refusing to release the data there were strong indications that those numbers were very weak. Seriously go read up about it.
Many people did reject Twitters claims of growth and they were largely proven right when Twitter started releasing MAU.
You call growing from zero to tens of millions of MAU in 4 years "very weak"?! Ridiculous. You are wrong, nobody seriously outright rejected Twitter was growing. The worst critics said was "Twitter is not growing as fast as they claim, but they ARE growing" or "growth has slowed down, but there are still growing".
I can use any other example to prove that not releasing MAU doesn't mean something needs to be hidden. I quoted Gmail earlier because this is a good case of a growing product whose MAU needed to be kept secret due to competitive reasons.
So what you're saying is that Twitter withheld their MAU because the figures were poor?
Why did Gmails MAU need to be kept secret?
As an aside growth at Coinbase in user accounts IS slowing quite dramatically. 350K per month for 2013, 100k per month for 2014, 50K per month for 2014.
If you knew anything about Bitcoin, you would know there are always truckloads of people signing up on exchanges whenever the price is very high. It was above $500 per coin for the first half of 2014 so this pushed user account creation to 90k/month overall for the year. Now we are back to 65k/month which has been quite constant since 2013 with the exception of the bubble craze.
Do you have a source for that number? I've seen recent estimates of about 2.5-3.5 million Bitcoin users, but that's the global total. I have no idea how you could filter that down to just U.S. users.
There are less than 1.5m addresses with more than $2 worth of bitcoin. If you subtract addresses with less than $20 you end up with ~750,000. I'd say thats the upper limit of users.
It has been explained many times users tend to leave their coins on exchanges. So 1 exchange address containing 100 BTC could represent 100 bitcoin users each owning 1 BTC. Therefore your upper limit estimate is invalid.
Except there are also the number of users with multiple addresses which given usage trends from people describing their setup accounts for a large number of active users.
The claim that there are uncounted millions of users hiding out on exchanges only doesn't map up well with the reality of the usage in the ecosystem either and is in my mind a weak excuse for weak growth numbers.
Your logic is flawed. It doesn't matter if even 99% of the addresses all belonged to the wallets of a few hundreds early adopters.
As of today (as of block 350,000) there are 102 addresses with 10,000 BTC up to a few 100,000 BTC in each of them. They represent 2.8 million BTC! Most of these addresses belong to exchanges or online wallets and contain their customer's funds, because no one owns that many bitcoins. So these 102 addresses most certainly represent the 2 or 3 million bitcoin users worldwide that exchanges and online wallets claim they have: http://www.quora.com/What-are-the-future-consequences-of-the...
So of course this single address at the time represented hundreds of thousands of Bitstamp users. Ditto for the other 10,000+ BTC addresses that belong to other exchanges.
It's not sarcasm. It's pointing out I can't prove your wrong so why argue it? It's a waste of time for both of us.
For starters that address is empty. The coins from it are on the list at ~174,000 now.
As for Bitstamp remember that they covered a 19000 coin loss with no problem. There are a lot of coins in big wallets but there are a lot more individual entities holding large numbers of coins as well that you are completely discounting. Between the major exchanges own holdings, lucky early adopters(I've heard estimates of Ver having a few hundred thousand coins, Winkeltwins have >100,000), gambling sites which seem to be extremely profitable in the Bitcoin world, etc,etc. There are a lot of entities with lots of coins. So while large wallets exist to see a number like 2.8m coins and assume it means there are at least 2m users is simplistic at best.
> For starters that address is empty. The coins from it are on the list at ~174,000 now.
Doesn't matter. This one addresses alone represents hundreds of thousands of customers of Bitstamp that you are completely ignoring in your math in your previous posts. I am just pointing out to you that AT LEAST some of these big addresses are bound to represent other exchanges/online wallets.
> So while large wallets exist to see a number like 2.8m coins and assume it means there are at least 2m users is simplistic at best.
It is simplistic for you too to assume that these 2.8 million BTC are all owned by a few individuals.
If you want my estimate, since we don't have much data to rely on, I think that roughly 30-70% of this 2.8 million BTC is owned by individuals and the other 70-30% represents exchange/online wallet customer funds. It's realistic to think that even the smaller portion (30%) of 2.8 million BTC could still represent at least 1 million users. And the ~2 million addresses with smaller funds could represent another ~1 million users (as you yourself estimated, well you said 0.75 million which is close enough). So that's ~2 million users total.
It's obvious "0.05% of the US population" is a valid ballpark estimate that is very conservative: assuming there are 2.5 million global Bitcoin users (your lower estimate) and assuming they all belong to the top half of the richest people of the planet (3.5 billion, which covers all of North America, all of Europe, all of Japan, all of Oceania, most of China & India, and more) then: 2.5 million / 3.5 billion = 0.07% of them would be bitcoin users.
However ForHackernews's idea that Coinbase barely has 4-digit active users is dubious and likely false.
I mean possibly yes. But they also might hope to someday have 4 digit numbers of users and know they can shame states, especially reddish states, by claiming they have too much regulation. Worked pretty successfully for zenefits in Utah.
> They must have something substantial enough to warrant a press release.
Not really. If the purpose is draw community intention, promote a feeling of regulatory barriers as a problem, and create pressure against regulation elsewhere, they don't need either customers in WY or any actual WY government interpretation to make it worthwhile to issue a press release.
Well, unless people actually dig into the supporting facts, in which case it might seem kind of silly if there wasn't anything underneath it.
The state tax regime being what it is, it is not uncommon to incorporate in WY. This is similar to the NV incorporation thing, or commonly credit cards being based out of SD with call centers in UT.
Because of recent regulatory changes, I'm thinking that as new ventures find it harder to take advantage of the double Irish Dutch sandwich arrangement, I may incorporate several project interests there. I'm far from the only one.
That said, MT businesses are hard enough in the US. Exotic ones like Coinbase would be even worse (harder).
No, clearly not. Which is one thing that makes either the interpretation or Coinbase's understanding of it ludicrous; given that we have no source for the actual interpretation by the Division of Banking, its kind of hard to tell which, though.
Indefinitely is a very strong word and goes beyond the initial implications for the (small) population of Wyoming.
Under this interpretation of Bitcoin companies like Coinbase need to hold the equivalent value of their state holdings in a fiat currency (deriving it's value from government regulation), but fiat currency, aka USD, is no longer on the gold standard (a commodity currency) and thus only holds value because our government tells us it does and our collective agreement that it does hold value.
The interpretation of this law would be the equivalent of telling the native americans they need to hold USD reserves to trade in shell money regardless if all people collectively agree that shells hold value as a currency for trade. It's an attempt to continually establish USD being the standard for global currency value.
If more states follow suit set by this precedent than companies like Coinbase can't do business and the US Government crushes legitimate bitcoin uses.
This requires Bitcoin to continually evolved into an increasingly decentralized currency where both individual humans and computers agree on it's value without the inefficiencies of marketplace or government middlemen.
The value of a given collection of bits is whatever you and I agree the value of those collection of bits is. It's a one to one relationship.
The value of USD is not what you and I agree the value is, it's what the government tells us what the value should be. This is not a one to one relationship.
One is based on a transparent mathematical equation between you and I and the other is based on 7 non-elected and appointed board of governors between you and I. That's the difference.
How does the US government dictate how much value you assign to the USD? You could trade me a piece of gum for $1 or a car for $1. In both cases you've agreed with me on the value of $1 and in both cases that value is different.
You have no more control over the market price of Bitcoin than you do the forex pricing for USD.
The whole "Bitcoin as magical Internet money with no restrictions" thing? Not going to happen. We have banking laws for a reason: people need to trust that the money they entrust to others will be there when they want it back. It's not good enough to rely on the honor system, because to someone who has lost their money it doesn't matter if it was through fraud or negligence. So governments ensure that businesses dealing directly in money at least have enough money to allow their customers to cash out.
But I am curious about the interpretation. The IRS considers Bitcoin to be an asset like any other. I personally don't consider Bitcoin to be a currency: by far its strongest use case is as a digital store of value that can be exchanged for a real currency. It's closer to a digital equivalent of gold in that regard.
But regardless of the classification of Bitcoin, this is not an insanely stupid move. Money transmission companies can be notoriously shady, and you don't want a situation where you give them money to transfer and it never arrives because they spent that money on hookers and booze. Coinbase isn't in that category, but if wire transfer companies catch on that they can use Bitcoin to evade the holdings laws. Some of them will be shady.
The problem with the creation of law in the USA is that it unequally favors those who can pay to finance elected officials campaigns and thus non-elected governing bodies.
A transparent financial blockchain is the core difference in philosophy between backroom decisions made on our behalf supposedly with our best intentions in mind by non-elected appointed people and a mathematical equation that we can all see and test. Math we can all trust because it is true at it's core, can we do the same for people?
Yes some payment processors can be shady, but so can some fed officials who are incharge with our entire financial system.
> If we trust the system that pulls the wool over our eyes, should we really trust it?
Blanket statements don't really help to determine if a given set of regulation is useful or not. The system has a lot of bad parts and regulatory capture is a thing, but that does not imply that literally all regulation is poor and need to be ignored. If one wants to make a statement with regards to any set of regulation, it needs to be specific and fact-based; simply issuing blanket statements is useless at best and dishonest at worst.
> A transparent financial blockchain is the core difference in philosophy between backroom decisions made on our behalf supposedly with our best intentions in mind by non-elected appointed people and a mathematical equation that we can all see and test. Math we can all trust because it is true at it's core, can we do the same for people?
This is pretty much nonsense. The statements you are making here are so abstract and broad that they defy any sort of reasonable analysis.
You can consider the Bitcoin algorithm as a mathmatical equation, but that says nothing about whether you can trust the individual entities utilizing Bitcoin. You can't reduce all interactions between people to algorithms, so at some point you're going to have to have rules and norms in place, which will ultimately be decided on by people in some manner. Furthermore, whether the system is encoded as an algorithm (what you're calling math here) is orthogonal to whether it is doing the correct or optimal thing.
The "trust in math" line espoused by Bitcoin advocates does not have the effect they think; it simply makes them appear dogmatic and cultish. Saying that something is math and therefor trustable and unassailable is rather short-sighted.
> Yes some payment processors can be shady, but so can some fed officials who are incharge with our entire financial system.
The existence of shady fed officials has no bearing whatsoever on whether a specific set of rules are good or necessary from a societal standpoint. Its a completely separate discussion. On the other hand, the fact that some payment processors are shady is relevant to the discussion of whether the rules are necessary.
Ultimately, your entire argument is an emotional appeal here. You'd do better to set aside the rhetoric.
I actually agree with you about all of this. And I think that we'll see the blockchain get incorporated into the mainstream banking system eventually because it's got some big audibility benefits that both the banks and the fed would be interested in. But anonymity is not one of those; in fact the blockchain makes the money supply much more traceable.
But the existence of corrupt bankers or government officials doesn't mean that the system doesn't work. It does work for the vast majority of people who are able to deposit money and withdraw it later. Sure, it's broken in ways that allow a select few to ignore the laws and gain an unfair advantage, but that has always been the case with any system of wealth distribution and it's certainly better than it has been in the past.
The idea that there can be a single algorithm that controls a large part of our financial system is a dangerous one. One, it presupposes that the people who built said algorithm have no ulterior motives. Two, it (like any other economic model) assumes that markets are rational. Markets are rational most of the time and then irrational for brief periods of instability -- which is when you need human judgement to identify the cause of irrationality and address it. Third, an algorithm like Bitcoin is unable to adapt to the geopolitics around money supply -- the way that the Yuan and the Dollar are connected can't be described by pure math; and any solution to problems between the two economies are likely to be political or military in nature.
Is the Fed perfect? No; it's not by any means. But judging by our track record against other economies, I would say the Fed is doing something right. It's our Congress that fucks it all up.
This would only make sense if when you moved bitcoins into coinbase they immediately converted them to USD. In that case, sure they would need to have USD on hand to cover your funds.
In the case where you are storing the bitcoins with coinbase and not converting it they just need to make sure they have the bitcoins on hand. Forcing coinbase to both hold bitcoin and USD to cover the value of those bitcoins makes no sense.
> If Coinbase became a bank or a broker, they'd be subject to US Federal regulation and audits, but would no longer need state licenses. They're trying to sleaze by as a "money transmitter", while acting as a depository institution, and it's not working out for them.
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[ 3.3 ms ] story [ 144 ms ] threadBut based on the content of the CB Press Release, and the fun we had with NY, I'd say it works as such:
You're a WY resident, and therefore the DE bank must follow the WY policies for your money. Of course this is a BTC/Digital Currency-based regulation, so...
Incorrect. What matters is the state (or states) in which the company is "doing business". The exact definition varies from state to state, but in general having customers in WY means that you're doing business there and will (usually) need to register with the state, follow its rules and pay its taxes for your sales in that state.
Your bank is also doing business in DE and will need to follow their laws too, as the other end of the transaction is there.
There would generally be more variance in mortality income, but I think that the net effect would be pretty small to both the insurer and the consumer.
Women would be paying more for life insurance than they "should" be (relative to men--men would be paying less than they "should" be), and men would be paying more for annuities than they "should" be (and again, vice versa).
Here's Wyoming's law:
"Each application shall be accompanied by a surety bond, irrevocable letter of credit or other similar security device acceptable to the commissioner in the amount of ten thousand dollars ($10,000.00) or two and one-half (2) times the outstanding payment instruments, whichever is greater. The commissioner may increase the required amount of the bond or security device to a maximum of five hundred thousand dollars ($500,000.00) upon the basis of the impaired financial condition of a licensee as evidenced by a reduction in net worth, financial losses or other relevant criteria."[1]
For most money transmitters, this isn't a big deal. They don't hold the money for long. The whole point of the business is to get funds from A to B quickly. So they don't have a large obligation to their customers at any one time.
Coinbase's "hosted wallet" service makes them a depository institution - customers have funds on deposit with them. Given the track record of Bitcoin "hosted wallet" companies, most of which have failed, requiring reserves as a consumer protection measure makes good sense. Coinbase could post a bond from an insurance/bonding company, but they'd have to convince the insurance company of their financial soundness. That they can't easily do so is a bad sign.
Coinbase should still be able to do their business of converting Bitcoins to dollars for merchants. They only hold the money for a few hours, and should be able to have reserves for that float.
If Coinbase became a bank or a broker, they'd be subject to US Federal regulation and audits, but would no longer need state licenses. They're trying to sleaze by as a "money transmitter", while acting as a depository institution, and it's not working out for them.
[1] http://legisweb.state.wy.us/statutes/statutes.aspx?file=titl...
That being said, given Bitcoin's history, I don't think Wyoming's interpretation is unreasonable.
Coinbase ought to register with the SEC as a broker/dealer. That would free them from state regulation. Then their customers would have SIPC insurance. Of course, Coinbase would have to accept FINRA audits and regulation. Right now, they don't even publish financial statements.
[1] http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin&gr...
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin&gr...
Surety bonds are not 1:1 reserves.
A surety bond is an insurance policy good for the full amount of the bond. A bonding company[2] will have a lot of questions to ask a Bitcoin business before taking on that risk.
[1] http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin&gr... [2] https://suretygroup.com/surety-bond/money-transmitter-bond
There's nothing there that seems to support the 100% reserve requirement identified as Coinbase's understanding of Wyoming rules. Even with the next section after the bit you quote [0] that allows substituting deposit for the security bond, it uses the same amount. Since the amount is actually $10,000 or 2.5 times the "outstanding payment instruments", whichever is greater (and, on renewal, is calculated based on the average daily balance of the prior year [1]), I don't see where any 100% requirement comes from. If we assume that bitcoins held in hosted wallets are "outstanding payment instruments", it would actually be a 250% requirement -- either for the amount of the surety bond or the deposit in lieu.
[0] WS 40-22-106(b)http://legisweb.state.wy.us/statutes/statutes.aspx?file=titl...
[1] http://soswy.state.wy.us/Rules/RULES/8983.pdf
Well, its not an interpretation from anything that Coinbase is willing to publicly point to from the relevant agency, its what Coinbase "understands" to be the agency interpretation, these three things are all potentially different:
1. Regulation,
2. the Division of Banking interpretation of regulation,
3. Coinbase's understanding of the Division of Banking interpretation.
Reading #3 and #1 isn't going to tell us if #2 is reasonable.
Coinbase themselves say https://www.coinbase.com/about over 2 million users.
Or take coinbase's number directly from https://www.coinbase.com/about, which says 2,200,000 users. Maybe perhaps at least 1% are active accounts?
Given the communities willingness to artificially inflate[1] any metric they can find. I have no faith those numbers are anywhere near real. When they release MAU figures I'll be impressed.
[1] reddit.com/r/bitcoin/about/traffic check out the new user subscriptions chart for an idea of what happens when someone shuts off/turns down their bot(It's less easy to see now but new subscriptions were constantly around 250-300 and then they dropped to ~100 overnight)
AFAIK Coinbase hasn't been caught faking numbers like Bitpay so as far as I'm concerned the numbers are real but useless as a metric.
If it was showing anywhere near as good of numbers as their wallet or user counts you can bet it would be released tomorrow.
For a company that accidentally released something similar look at Bitpay which had staff bragging for the first half of last year about how they were doing $1m a day in processing only to release their 2014 EOY figures showing an average which was less than half of that.
If you can't understand why MAU is a sensitive metric, then yeah I understand why you make up theories in your head why they must be "covering up" something.
Now it's recognized as basically the only useful metric for sites like this. GPlus, Instagram, Whatsapp, Tinder, Snapchat, and Twitter(well 4 years but close enough) all release MAU within that 3 year from launch timeframe.
This is why you look stupid to reject exchanges' claim of growth. Yes we know MAU is less than number_of_wallets. It's mathematical. But still, it's silly for you to reject their claims of growth as you have no basis for it. Not releasing MAU doesn't mean you are not growing, as Twitter demonstrated.
Many people did reject Twitters claims of growth and they were largely proven right when Twitter started releasing MAU.
I can use any other example to prove that not releasing MAU doesn't mean something needs to be hidden. I quoted Gmail earlier because this is a good case of a growing product whose MAU needed to be kept secret due to competitive reasons.
Why did Gmails MAU need to be kept secret?
As an aside growth at Coinbase in user accounts IS slowing quite dramatically. 350K per month for 2013, 100k per month for 2014, 50K per month for 2014.
No I am saying the exact opposite: figures where great, but they withheld MAU due to competitive reasons or business sensitivity.
> 350K per month for 2013, 100k per month for 2014, 50K per month for 2014
Ridiculous, your figures are all wrong. Growth is the same as in 2013. Here are the correct ones:
- 65k/month in 2013
- 90k/month in 2014
- 65k/month for the last 6 months (december 2014 to june 2015)
Unlike you I have sources to back it up: 30k user accounts as of https://web.archive.org/web/20130113061404/https://coinbase...., 834k user accounts as of https://web.archive.org/web/20140122052815/https://coinbase.... (note that at the time they changed the name of this metric from "users" to "consumer wallets"), 1800k user accounts as of https://web.archive.org/web/20141201063703/https://www.coinb... (at this point they split the metric, there are slightly more wallets than users), 2200k user accounts as of today (https://www.coinbase.com/about)
If you knew anything about Bitcoin, you would know there are always truckloads of people signing up on exchanges whenever the price is very high. It was above $500 per coin for the first half of 2014 so this pushed user account creation to 90k/month overall for the year. Now we are back to 65k/month which has been quite constant since 2013 with the exception of the bubble craze.
The claim that there are uncounted millions of users hiding out on exchanges only doesn't map up well with the reality of the usage in the ecosystem either and is in my mind a weak excuse for weak growth numbers.
As of today (as of block 350,000) there are 102 addresses with 10,000 BTC up to a few 100,000 BTC in each of them. They represent 2.8 million BTC! Most of these addresses belong to exchanges or online wallets and contain their customer's funds, because no one owns that many bitcoins. So these 102 addresses most certainly represent the 2 or 3 million bitcoin users worldwide that exchanges and online wallets claim they have: http://www.quora.com/What-are-the-future-consequences-of-the...
Your logic is basically some addresses have lots of coins therefore wallets have lots of users. There really is no arguing against that.
You are sarcastic, but it really is the case. Some of these addresses were proven to belong to exchanges, for example these 240,000 BTC belonged to Bitstamp: https://blockchain.info/address/12sENwECeRSmTeDwyLNqwh47Jist...
So of course this single address at the time represented hundreds of thousands of Bitstamp users. Ditto for the other 10,000+ BTC addresses that belong to other exchanges.
For starters that address is empty. The coins from it are on the list at ~174,000 now.
As for Bitstamp remember that they covered a 19000 coin loss with no problem. There are a lot of coins in big wallets but there are a lot more individual entities holding large numbers of coins as well that you are completely discounting. Between the major exchanges own holdings, lucky early adopters(I've heard estimates of Ver having a few hundred thousand coins, Winkeltwins have >100,000), gambling sites which seem to be extremely profitable in the Bitcoin world, etc,etc. There are a lot of entities with lots of coins. So while large wallets exist to see a number like 2.8m coins and assume it means there are at least 2m users is simplistic at best.
Doesn't matter. This one addresses alone represents hundreds of thousands of customers of Bitstamp that you are completely ignoring in your math in your previous posts. I am just pointing out to you that AT LEAST some of these big addresses are bound to represent other exchanges/online wallets.
> So while large wallets exist to see a number like 2.8m coins and assume it means there are at least 2m users is simplistic at best.
It is simplistic for you too to assume that these 2.8 million BTC are all owned by a few individuals.
If you want my estimate, since we don't have much data to rely on, I think that roughly 30-70% of this 2.8 million BTC is owned by individuals and the other 70-30% represents exchange/online wallet customer funds. It's realistic to think that even the smaller portion (30%) of 2.8 million BTC could still represent at least 1 million users. And the ~2 million addresses with smaller funds could represent another ~1 million users (as you yourself estimated, well you said 0.75 million which is close enough). So that's ~2 million users total.
However ForHackernews's idea that Coinbase barely has 4-digit active users is dubious and likely false.
Not really. If the purpose is draw community intention, promote a feeling of regulatory barriers as a problem, and create pressure against regulation elsewhere, they don't need either customers in WY or any actual WY government interpretation to make it worthwhile to issue a press release.
Well, unless people actually dig into the supporting facts, in which case it might seem kind of silly if there wasn't anything underneath it.
Because of recent regulatory changes, I'm thinking that as new ventures find it harder to take advantage of the double Irish Dutch sandwich arrangement, I may incorporate several project interests there. I'm far from the only one.
That said, MT businesses are hard enough in the US. Exotic ones like Coinbase would be even worse (harder).
Does bitcoin have a "face value"? I'm not sure what the legal definition of that term is, but I'd be surprised if it was the same as "market value".
No, clearly not. Which is one thing that makes either the interpretation or Coinbase's understanding of it ludicrous; given that we have no source for the actual interpretation by the Division of Banking, its kind of hard to tell which, though.
http://www.aarongreenspan.com/writing/20131118.hsgacstatemen...
Under this interpretation of Bitcoin companies like Coinbase need to hold the equivalent value of their state holdings in a fiat currency (deriving it's value from government regulation), but fiat currency, aka USD, is no longer on the gold standard (a commodity currency) and thus only holds value because our government tells us it does and our collective agreement that it does hold value.
The interpretation of this law would be the equivalent of telling the native americans they need to hold USD reserves to trade in shell money regardless if all people collectively agree that shells hold value as a currency for trade. It's an attempt to continually establish USD being the standard for global currency value.
If more states follow suit set by this precedent than companies like Coinbase can't do business and the US Government crushes legitimate bitcoin uses.
This requires Bitcoin to continually evolved into an increasingly decentralized currency where both individual humans and computers agree on it's value without the inefficiencies of marketplace or government middlemen.
What exactly do you think the value of a given collection of bits is?
The value of USD is not what you and I agree the value is, it's what the government tells us what the value should be. This is not a one to one relationship.
One is based on a transparent mathematical equation between you and I and the other is based on 7 non-elected and appointed board of governors between you and I. That's the difference.
You have no more control over the market price of Bitcoin than you do the forex pricing for USD.
As opposed to Bitcoins, because ... ?
But I am curious about the interpretation. The IRS considers Bitcoin to be an asset like any other. I personally don't consider Bitcoin to be a currency: by far its strongest use case is as a digital store of value that can be exchanged for a real currency. It's closer to a digital equivalent of gold in that regard.
But regardless of the classification of Bitcoin, this is not an insanely stupid move. Money transmission companies can be notoriously shady, and you don't want a situation where you give them money to transfer and it never arrives because they spent that money on hookers and booze. Coinbase isn't in that category, but if wire transfer companies catch on that they can use Bitcoin to evade the holdings laws. Some of them will be shady.
If we trust the system that pulls the wool over our eyes, should we really trust it?
Have a listen to TAL: http://www.thisamericanlife.org/radio-archives/episode/536/t...
The problem with the creation of law in the USA is that it unequally favors those who can pay to finance elected officials campaigns and thus non-elected governing bodies.
A transparent financial blockchain is the core difference in philosophy between backroom decisions made on our behalf supposedly with our best intentions in mind by non-elected appointed people and a mathematical equation that we can all see and test. Math we can all trust because it is true at it's core, can we do the same for people?
Yes some payment processors can be shady, but so can some fed officials who are incharge with our entire financial system.
Blanket statements don't really help to determine if a given set of regulation is useful or not. The system has a lot of bad parts and regulatory capture is a thing, but that does not imply that literally all regulation is poor and need to be ignored. If one wants to make a statement with regards to any set of regulation, it needs to be specific and fact-based; simply issuing blanket statements is useless at best and dishonest at worst.
> A transparent financial blockchain is the core difference in philosophy between backroom decisions made on our behalf supposedly with our best intentions in mind by non-elected appointed people and a mathematical equation that we can all see and test. Math we can all trust because it is true at it's core, can we do the same for people?
This is pretty much nonsense. The statements you are making here are so abstract and broad that they defy any sort of reasonable analysis.
You can consider the Bitcoin algorithm as a mathmatical equation, but that says nothing about whether you can trust the individual entities utilizing Bitcoin. You can't reduce all interactions between people to algorithms, so at some point you're going to have to have rules and norms in place, which will ultimately be decided on by people in some manner. Furthermore, whether the system is encoded as an algorithm (what you're calling math here) is orthogonal to whether it is doing the correct or optimal thing.
The "trust in math" line espoused by Bitcoin advocates does not have the effect they think; it simply makes them appear dogmatic and cultish. Saying that something is math and therefor trustable and unassailable is rather short-sighted.
> Yes some payment processors can be shady, but so can some fed officials who are incharge with our entire financial system.
The existence of shady fed officials has no bearing whatsoever on whether a specific set of rules are good or necessary from a societal standpoint. Its a completely separate discussion. On the other hand, the fact that some payment processors are shady is relevant to the discussion of whether the rules are necessary.
Ultimately, your entire argument is an emotional appeal here. You'd do better to set aside the rhetoric.
But the existence of corrupt bankers or government officials doesn't mean that the system doesn't work. It does work for the vast majority of people who are able to deposit money and withdraw it later. Sure, it's broken in ways that allow a select few to ignore the laws and gain an unfair advantage, but that has always been the case with any system of wealth distribution and it's certainly better than it has been in the past.
The idea that there can be a single algorithm that controls a large part of our financial system is a dangerous one. One, it presupposes that the people who built said algorithm have no ulterior motives. Two, it (like any other economic model) assumes that markets are rational. Markets are rational most of the time and then irrational for brief periods of instability -- which is when you need human judgement to identify the cause of irrationality and address it. Third, an algorithm like Bitcoin is unable to adapt to the geopolitics around money supply -- the way that the Yuan and the Dollar are connected can't be described by pure math; and any solution to problems between the two economies are likely to be political or military in nature.
Is the Fed perfect? No; it's not by any means. But judging by our track record against other economies, I would say the Fed is doing something right. It's our Congress that fucks it all up.
In the case where you are storing the bitcoins with coinbase and not converting it they just need to make sure they have the bitcoins on hand. Forcing coinbase to both hold bitcoin and USD to cover the value of those bitcoins makes no sense.
> If Coinbase became a bank or a broker, they'd be subject to US Federal regulation and audits, but would no longer need state licenses. They're trying to sleaze by as a "money transmitter", while acting as a depository institution, and it's not working out for them.