Lawsky keeping the VC at bay.

Armchair policymaking is a favorite college pastime of mine. I thought I might write a piece on what the purpose of regulation ought to be, how “consumer protection” has been twisted, how governments of the world as a whole have fallen to regulatory capture by the financial services industry. I could have produced a tome on all the problems with the BitLicense. Instead, I will propose that Lawsky is a political mastermind and we’re all simply pawns in his game.

People are up in arms about the BitLicense, and rightfully so. As proposed it’s a mother of a clusterfuck. Fellow Bitcoiners have expressed concern to me that they might actually have to move out of New York to continue their important work, for the sake of their very lives. It’s going to be like Poland in 1942, Cambodia in 1975. Get out while you can! Brainwallets n’ shit!

My response is “chill”. The purpose of the proposed BitLicense is not to regulate Bitcoin in New York. Lawsky would have to be a lunatic to exclude his state from the largest and inevitable transfer of wealth in history, from the largest business opportunity and economic engine since the Internet. Lawsky is not a lunatic, nor is he an evil genius hellbent on making a dystopia of his state. Let’s give him some credit, or not give him too much credit, and let’s imagine that the purpose of the proposed BitLicense is something more mundane.

I don’t know what Lawsky’s political ambitions are but it’s not a stretch to believe he’ll be running for NY Attorney General in the next cycle. He’ll need political support for such a campaign, and he’ll need to keep his job until then. NY Governor Cuomo, who appointed Lawsky, is up for re-election and he’s certainly got an electorate and donor base to please. Any bad moves on Lawsky’s part surely would reflect poorly on Cuomo. Cuomo don’t play dat.

With the election only a few weeks away, Lawsky’s approach is optimal.

Door-in-the-face, over-the-top initial proposal will make whatever he comes back with next seem reasonable by comparison. Attack on every possible choke point shows financial incumbents that Lawsky’s on their side. This may be important to Cuomo’s re-election effort and Lawsky’s career going forward. Attack on every possible choke point forces bitcoin industry to defend every possible choke point, which will give Lawsky support vs. financial incumbents, if he ultimately wants to side with innovation. He’ll need a scapegoat. The defenses will actually help in crafting intelligent regulation (if that is not an oxymoron). Timing of the original proposal and comment period leading up to the election, and final outcome not being realized until after the November 4th election allows both incumbents and innovators to remain hopeful going in. By dragging the process out, Lawsky stays in the spotlight, which, ceteris paribus, will benefit his career.

So, of course the BitLicense. It had to be. If your goal is to further your own political career, it makes complete sense. Anything less would have been sub-optimal.



After speaking with Jan Owen, Commissioner of the California DBO, a few weeks ago about how California is approaching Bitcoin regulation, I don’t think we as an industry have anything to be worried about. Jan seems tech savvy, open minded, encouraging, empathetic and concerned only with the exposure consumers have where they don’t control their own private keys. California will not be following New York, and neither will most other states. And neither will most other countries in the world be following the US at all—they’ve already moved on.





New York will come back with a reasonable proposal, or it will ostracize itself from the rest of the world and fade in to irrelevance as the rest of the world passes it by and its most capable citizens extricate themselves.

My only concern is what effect this will have on San Francisco rents. So, chill. If I’m wrong, I’ve got room on my floor for a few NY Bit-refugees. :)

I leave you with NYDFS' spokesperson's official response to BitLicense criticism.



