1/
Long thread regarding the rumours of the US rushing out regulation regarding self-hosted crypto (#Bitcoin) wallets.
Talking from experience and how it played out with our regulator in the Isle of Man back in 2015.
Long thread regarding the rumours of the US rushing out regulation regarding self-hosted crypto (#Bitcoin) wallets.
Talking from experience and how it played out with our regulator in the Isle of Man back in 2015.
https://twitter.com/brian_armstrong/status/1331744884856741888
2/
For the purpose of simplicity and to keep it on the experience we went through, I’m going to avoid “DeFi, smart contracts, etc etc” and stick to Bitcoin simply being withdrawn from an exchange.
For the purpose of simplicity and to keep it on the experience we went through, I’m going to avoid “DeFi, smart contracts, etc etc” and stick to Bitcoin simply being withdrawn from an exchange.
3/
In 2015 we were working with the Isle of Man FSA on regulation that would make crypto businesses fall under firstly “The Proceeds of Crime Act”, then secondly “The Designated Business Act”. During this process it highlighted to them that we may not know...
In 2015 we were working with the Isle of Man FSA on regulation that would make crypto businesses fall under firstly “The Proceeds of Crime Act”, then secondly “The Designated Business Act”. During this process it highlighted to them that we may not know...
4/
..where the customer is withdrawing their Bitcoin to (Sanction/criminal reasons etc).
..where the customer is withdrawing their Bitcoin to (Sanction/criminal reasons etc).
5/
So they wanted confirmation from the customer that the funds they were sending was going to a wallet “they controlled”. Screenshots were an obvious thought (Something I now believe the Netherlands have introduced @100trillionUSD -
So they wanted confirmation from the customer that the funds they were sending was going to a wallet “they controlled”. Screenshots were an obvious thought (Something I now believe the Netherlands have introduced @100trillionUSD -
https://twitter.com/100trillionUSD/status/1331884814102900737)
6/
We mentioned “sign and verify messages” via Bitcoin’s built in feature, which they were happy for us to use rather than screenshots. We figured we could automate from our side, so we agreed to do a 1 month trial to see how it affected the business.
We mentioned “sign and verify messages” via Bitcoin’s built in feature, which they were happy for us to use rather than screenshots. We figured we could automate from our side, so we agreed to do a 1 month trial to see how it affected the business.
7/
The process:
▪️ Customer enters a withdraw address
▪️ We give a random message for them to sign on their withdraw address using their keys
▪️ They sign it with their own wallet
▪️ They enter the signature after signing into our website
▪️ We auto validate the signature
The process:
▪️ Customer enters a withdraw address
▪️ We give a random message for them to sign on their withdraw address using their keys
▪️ They sign it with their own wallet
▪️ They enter the signature after signing into our website
▪️ We auto validate the signature
9/
As we expected this caused chaos for our customers, they didn’t understand what signing was, they were using wallets that didn’t offer signing functionality, they couldn’t buy products from websites using Bitcoin, etc etc.
As we expected this caused chaos for our customers, they didn’t understand what signing was, they were using wallets that didn’t offer signing functionality, they couldn’t buy products from websites using Bitcoin, etc etc.
10/
Education (cut down version)
We explained a lot about how Bitcoin worked and that due to the nature of Bitcoin a customer could circumvent this prevention in a number of ways, deeming it a useless exercise...
Education (cut down version)
We explained a lot about how Bitcoin worked and that due to the nature of Bitcoin a customer could circumvent this prevention in a number of ways, deeming it a useless exercise...
11/
..For example
▪️ Get their friend/criminal/etc to sign the message for them
▪️ Send to their own wallet completing the process - then send from their personal to the friend/criminal/etc
..For example
▪️ Get their friend/criminal/etc to sign the message for them
▪️ Send to their own wallet completing the process - then send from their personal to the friend/criminal/etc
12/
We went through other real world equivalents, banks aren’t required at an ATM to check who is withdrawing the cash, I can give my friend my card and pin withdraw and off he goes. I can withdraw it and give it straight away to my friend, this has never been a problem...
We went through other real world equivalents, banks aren’t required at an ATM to check who is withdrawing the cash, I can give my friend my card and pin withdraw and off he goes. I can withdraw it and give it straight away to my friend, this has never been a problem...
13/
.. so why push this requirement onto Bitcoin?
@MrHodl highlighting this very thing - (
.. so why push this requirement onto Bitcoin?
@MrHodl highlighting this very thing - (
https://twitter.com/MrHodl/status/1331998040438288394?s=20)
14/
We explained doing this at the time would have forced us to relocate to a jurisdiction that doesn’t require this as it would have killed our business, new technology needs the freedom to thrive with innovation, not be strangled by pointless rules preventing nothing.
We explained doing this at the time would have forced us to relocate to a jurisdiction that doesn’t require this as it would have killed our business, new technology needs the freedom to thrive with innovation, not be strangled by pointless rules preventing nothing.
15/
They were reasonable and realised this is something that actually prevents nothing, just moves a “problem” away from us and onto the next person. If we can really call it a problem. 5 years later we’re still operating with no issues that this rule would have related to.
They were reasonable and realised this is something that actually prevents nothing, just moves a “problem” away from us and onto the next person. If we can really call it a problem. 5 years later we’re still operating with no issues that this rule would have related to.
16/
The short of this, is if regulation cannot keep up with innovation, then rushing uneducated rules out is something that should be avoided at all costs. It WILL affect businesses and customers, while solving nothing.
The short of this, is if regulation cannot keep up with innovation, then rushing uneducated rules out is something that should be avoided at all costs. It WILL affect businesses and customers, while solving nothing.
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