6 ms·

Square’s federal comment letter regarding FinCEN’s proposed rulemaking

76 points by freerk 6y ago

seibelj 6y ago
One way to look at blockchain technology (let's specifically look at Ethereum) is that it's an open source platform for value transfer. It's an even stronger claim than that - it's not like Stripe open sourcing all their code but still running all the servers. Ethereum is an open source platform that is totally permissionless, decentralized, and everyone can join it. In this way, it is similar to the internet itself. What a major US Federal Regulator just announced is that all banks can use blockchains (like Ethereum) to move value, just like they use Swift or ACH https://www.coindesk.com/occ-banks-stablecoin-payments https://www.coindesk.com/occ-banks-stablecoin-payments As smaller companies now have basically no barrier to entry in the bare metal rails of payments, finally serious innovation in this space can happen outside of heavily financed / licensed / oligopolistic / connected entities. Banks can then voluntarily choose to integrate with one or more open source value transfer networks (blockchains). Look at USDC https://www.circle.com/en/usdc https://www.circle.com/en/usdc This is a regulated token fully backed by audited reserves (unlike Tether (USDT)). There will be some banks, such as for international settlement, that will find this technology better than the existing. There will be some people in foreign countries who prefer a cryptocurrency wallet on their phone to paper cash USD or their (corrupt) banking system (Venezuela, Lebanon, etc.). Even if you are skeptical of blockchain, is it clear to you why this is useful? It's the Linux vs. Windows debate, open source vs. closed source, except in finance and payments. Finally, just as every API added to the internet increases the value of the platform itself exponentially (network effect), every new tool and smart contract on the Ethereum network increases the value of the whole network to its users. It is an operating system for finance! This is the value proposition of the Ethereum experiment.
- toomuchtodo 6y ago
  > What a major US Federal Regulator just announced is that all banks can use blockchains (like Ethereum) to move value, just like they use Swift or ACH https://www.coindesk.com/occ-banks-stablecoin-payments https://www.coindesk.com/occ-banks-stablecoin-payments I see this as a way for Brian Brooks at the OCC to appear to be a “thought leader” as a crypto proponent. I have had to interface with his type more than once (most unfortunately), but luckily it doesn’t appear the Biden administration will confirm him for the role the current administration has been pushing him for. Many other countries have instant payment networks without the need for crypto or blockchain networks. Zelle already supports instant payments in the US, and the Federal Reserve is rolling out their own instant payment service in 2023. FedWire and similar institutional services are arguably superior when compared to distributed ledgers and their abysmal transaction rates. Are banks not going to keep reserve accounts at the Fed (which is where they’d net and settle)? And with central banks all moving toward digital accounts for citizens, and most of those central banks not considering crypto, this doesn’t seem like that big of a deal. Ethereum is built for a financial world where trust doesn’t exist, and you must build your logic into smart contracts instead of your application. Very few jurisdictions where the rule of law and trust in the financial system doesn’t exist. I think there’s benefit in open sourcing the components that drive financial services and infrastructure, but believe it’s disingenuous to conflate that with the need for tokenized finance, distributed ledgers, and similar Rube Goldberg mechanizations.
  - seibelj 6y ago
    You could be right that Ethereum will (at best) be a niche in the banking space. However my experience shows that open protocols tend to become entrenched and eventually overwhelm the proprietary solutions. If you look at all the payment networks you mentioned, all of them are regional and not peer-to-peer. Ethereum is wide open and can be used peer to peer. Every country, institution, business, and individual doesn't need to trust each other - they just trust the network. And adding new applications to this open network, which is wide open and permissionless, can be done by ramen-powered startups on shoe string budgets. This is why I am so bullish on Ethereum. It's open source finance vs. closed source. As you observe regulatory entities, even the USA, bend in various ways to crypto, you can see the foothold it has. And I believe it will continue to grow because novel solutions will sprout up from brand new companies accomplishing things no one thought possible.
    - toomuchtodo 6y ago
      At my day gig, I am required to interface with and report to financial regulators in the US. I don’t share your optimize based on my experience doing so. Financial regulatory frameworks and “they just trust the network” are incongruent. My personal opinion is a desire for more open financial systems to drive towards utility costs (central bank digital currencies held at central banks, for example), but I don’t see crypto as the mechanism by which to arrive at that (as long as the law and legal frameworks supersede technologies). Just sharing my ground truth. I could be wrong long term. The longer your timeline, the more difficult predictions are.
      - seibelj 6y ago
        You are more likely right than not, and this is coming from someone who has devoted the majority of his professional career to crypto / blockchain and whose license plate is 'BCOINS'. So I have fully drank the kool aid! However you must admit despite your (justified) cynicism that this is very intriguing technology, and no one expected it to grow as much as it did as quickly as it did, and get official regulatory approval in so many ways. I am very optimistic in its future its potential for brand new businesses and ideas to be created and flourish in ways that no one expected.
- darawk 6y ago
  This is exactly right, and it's something that i've been trying to explain to anti-crypto people since forever. Crypto democratizes trust. It's true that anything you can do on Ethereum you can do inside of JPMorgan. JPMorgan can execute financial contracts for you easily. However, in order for you to trust JPMorgan do execute them faithfully, it has to be huge in size, and heavily regulated. Ethereum allows anyone to be as trustworthy (more, actually) as JPMorgan, without any massive upfront capital investment, or centuries of continuous operation. If you can't see the value in that, I don't know what to tell you.
- deleted 6y ago
  [deleted]

76 points by freerk 6y ago

One way to look at blockchain technology (let's specifically look at Ethereum) is that it's an open source platform for value transfer. It's an even stronger claim than that - it's not like Stripe open sourcing all their code but still running all the servers. Ethereum is an open source platform that is totally permissionless, decentralized, and everyone can join it. In this way, it is similar to the internet itself. What a major US Federal Regulator just announced is that all banks can use blockchains (like Ethereum) to move value, just like they use Swift or ACH https://www.coindesk.com/occ-banks-stablecoin-payments https://www.coindesk.com/occ-banks-stablecoin-payments As smaller companies now have basically no barrier to entry in the bare metal rails of payments, finally serious innovation in this space can happen outside of heavily financed / licensed / oligopolistic / connected entities. Banks can then voluntarily choose to integrate with one or more open source value transfer networks (blockchains). Look at USDC https://www.circle.com/en/usdc https://www.circle.com/en/usdc This is a regulated token fully backed by audited reserves (unlike Tether (USDT)). There will be some banks, such as for international settlement, that will find this technology better than the existing. There will be some people in foreign countries who prefer a cryptocurrency wallet on their phone to paper cash USD or their (corrupt) banking system (Venezuela, Lebanon, etc.). Even if you are skeptical of blockchain, is it clear to you why this is useful? It's the Linux vs. Windows debate, open source vs. closed source, except in finance and payments. Finally, just as every API added to the internet increases the value of the platform itself exponentially (network effect), every new tool and smart contract on the Ethereum network increases the value of the whole network to its users. It is an operating system for finance! This is the value proposition of the Ethereum experiment.

toomuchtodo 6y ago
> What a major US Federal Regulator just announced is that all banks can use blockchains (like Ethereum) to move value, just like they use Swift or ACH https://www.coindesk.com/occ-banks-stablecoin-payments https://www.coindesk.com/occ-banks-stablecoin-payments I see this as a way for Brian Brooks at the OCC to appear to be a “thought leader” as a crypto proponent. I have had to interface with his type more than once (most unfortunately), but luckily it doesn’t appear the Biden administration will confirm him for the role the current administration has been pushing him for. Many other countries have instant payment networks without the need for crypto or blockchain networks. Zelle already supports instant payments in the US, and the Federal Reserve is rolling out their own instant payment service in 2023. FedWire and similar institutional services are arguably superior when compared to distributed ledgers and their abysmal transaction rates. Are banks not going to keep reserve accounts at the Fed (which is where they’d net and settle)? And with central banks all moving toward digital accounts for citizens, and most of those central banks not considering crypto, this doesn’t seem like that big of a deal. Ethereum is built for a financial world where trust doesn’t exist, and you must build your logic into smart contracts instead of your application. Very few jurisdictions where the rule of law and trust in the financial system doesn’t exist. I think there’s benefit in open sourcing the components that drive financial services and infrastructure, but believe it’s disingenuous to conflate that with the need for tokenized finance, distributed ledgers, and similar Rube Goldberg mechanizations.
- seibelj 6y ago
  You could be right that Ethereum will (at best) be a niche in the banking space. However my experience shows that open protocols tend to become entrenched and eventually overwhelm the proprietary solutions. If you look at all the payment networks you mentioned, all of them are regional and not peer-to-peer. Ethereum is wide open and can be used peer to peer. Every country, institution, business, and individual doesn't need to trust each other - they just trust the network. And adding new applications to this open network, which is wide open and permissionless, can be done by ramen-powered startups on shoe string budgets. This is why I am so bullish on Ethereum. It's open source finance vs. closed source. As you observe regulatory entities, even the USA, bend in various ways to crypto, you can see the foothold it has. And I believe it will continue to grow because novel solutions will sprout up from brand new companies accomplishing things no one thought possible.
  - toomuchtodo 6y ago
    At my day gig, I am required to interface with and report to financial regulators in the US. I don’t share your optimize based on my experience doing so. Financial regulatory frameworks and “they just trust the network” are incongruent. My personal opinion is a desire for more open financial systems to drive towards utility costs (central bank digital currencies held at central banks, for example), but I don’t see crypto as the mechanism by which to arrive at that (as long as the law and legal frameworks supersede technologies). Just sharing my ground truth. I could be wrong long term. The longer your timeline, the more difficult predictions are.
    - seibelj 6y ago
      You are more likely right than not, and this is coming from someone who has devoted the majority of his professional career to crypto / blockchain and whose license plate is 'BCOINS'. So I have fully drank the kool aid! However you must admit despite your (justified) cynicism that this is very intriguing technology, and no one expected it to grow as much as it did as quickly as it did, and get official regulatory approval in so many ways. I am very optimistic in its future its potential for brand new businesses and ideas to be created and flourish in ways that no one expected.
darawk 6y ago
This is exactly right, and it's something that i've been trying to explain to anti-crypto people since forever. Crypto democratizes trust. It's true that anything you can do on Ethereum you can do inside of JPMorgan. JPMorgan can execute financial contracts for you easily. However, in order for you to trust JPMorgan do execute them faithfully, it has to be huge in size, and heavily regulated. Ethereum allows anyone to be as trustworthy (more, actually) as JPMorgan, without any massive upfront capital investment, or centuries of continuous operation. If you can't see the value in that, I don't know what to tell you.
deleted 6y ago
[deleted]