Bitlicense: Same Same But Different

Don Lawsky graced the plebes with a press conference last night and announced the final version of the long awaited Bitlicense. The final draft is same same but different. The core requirements remain the same. Some of the more ridiculous provisions were struck. The initial reaction by many was that the revised version is a necessary evil and slightly better than expected.

Those expecting a blockbuster announcement of a major financial institution that now will be accepting or trading Bitcoin were disappointed. Bitcoiners need to realise that large financial institutions do not care about regulations. If it was profitable to trade and accept Bitcoin, they would already be doing it.

Monetary historians will remember how and why the Eurodollar market originated in London. Since FDR’s ascension to power in the 1930’s, America has been a centrally planned and controlled economy. The free market exists in very few arenas. Banking swung from a free for all, to a collection of heavily regulated legacy banks. There were interest rate ceilings and severe restrictions on the issuance of commercial paper and foreign exchange trading. American banks (who loved the regulations so much) decided to issue dollar denominated debt without restrictions from London. The Eurodollar market arose in the 1950’s to escape onerous US regulations. Morgan Stanley was one of the most active players in the new space.

From Investopedia:

U.S.-dollar denominated deposits at foreign banks or foreign branches of American banks. By locating outside of the United States, eurodollars escape regulation by the Federal Reserve Board.

Everyone else followed and the global liquidity centre for FX and derivatives became London. To this day London regulations on derivatives of all sorts are much lighter than American ones. Remember the “London Whale”? He was the trader responsible for JPM $6 billion dollar loss on exotic credit derivatives a few years back. His whole team sat out of London, far away from the prying eyes of the coterie of ineffective paid-off American regulators. Most large financial institutions book and house derivatives on London banking chains.

The Bitcoin community needs to wake up. Large financial institutions will get involved in Bitcoin when there is enough money in it for them. Hopefully that happens soon. Regulations are only meant to extract rent from certain industries, and trick a gullible public that their over paid government overloads actually care about their well being.

The lack of a price pop after the Bitlicense announcement is worrying. Expect the downtrend to continue, and a retest of $220. Sell XBUM15 with a downside target price of $220. If $220 breaks, look to cover at $213.

Don’t Be Fooled, Bitlicense Is Not A Game Changer

Don Lawsky is set to unveil the long awaited Bitlicense. Bitlicense will codify how virtual currency businesses are to conduct themselves vis-a-vis New York State residents. The first draft of the edict was released last summer. The reaction by many businesses and crypto enthusiasts was overwhelmingly negative. Businesses and individuals were allowed to submit their comments in hopes that Don Lawsky would take pity on his vassals.

The final version is expected to be released any day now. For some odd reason, many traders think that Bitlicense will create the conditions for a rally. Regulatory clarity is certainly a good thing for Bitcoin, but it is no secret what provisions and restrictions will be in Bitlicense. Bitlicense will not make it easier or more difficult for people to obtain Bitcoin. itBit obtained their blessing to conduct business across America before and without Bitlicense. The price since itBit’s “historic” launch in the US is much lower, and looks to retest $220. Some also think Bitlicense is a good omen for an eventual launch of an ETF. The SEC is not going to suddenly approve a retail investment product for Bitcoin just because one state has some rules for Bitcoin businesses. Save your Hopium for Hilldog 2016, cause your going to need it.

Any price rally attributed to Bitlicense should be sold into. If you believe a final version will be released this week, go long weekly volatility using BVOL7D. Rise or fall, the increase in volatility will make you money. If the price rallies consider selling XBTM15 above $230, with a downside price target is $220 and an eventual retest of $213.

California Gets A Clue, Decides Not To Regulate Bitcoin

I had to read the article twice. I could not believe my eyes that an American regulator passed on the chance to extract rent from a new industry. Californian regulators have listened to prudence and decided to allow the industry to develop before it hammers it with unnecessary regulations. Unfortunately Californian regulators are a minority in the land of freedom.

From Bloomberg:

“It remains to be seen whether Bitcoin and the virtual currency industry will fulfill the growth prospects forecast by backers,” Dresslar said by e-mail. “Prudence dictates we take a deliberate approach and let the market further develop. That will better ensure any regulatory regime California ultimately adopts works effectively for consumers, businesses and the market.”

Bitcoin startups should be fleeing New York state like the plague to other parts of America that aim to nurture innovation. Playing in Don Lawsky’s sandbox is quite expensive, just ask itBit.

Bitcoin Regulatory Capture Has Begun

Mafia Don Lawsky will be stepping down as the head of the NYDFS next month after spending 4 years at the agency. During his tenure the Don Lawsky shook down everyone from BNP Paribas to Bitcoin startups to a tune of $6 billion. But what remains for Don Lawsky after he leaves government office? Bloomberg has just reported that he will be opening a digital currency consulting agency.

The 45-year-old regulator plans to set up his own consulting firm in New York, advising financial institutions on matters related to technology, cybersecurity and virtual currency. He will also become a visiting scholar at Stanford University’s Cyber Initiative starting in the fall.

Bitcoin has become just like any other industry. The former regulators will now for a fee make sure that you can navigate the assbackwards regulations that they themselves help create. For a fat fee Don Lawsky can bless you as a Bitcoin or crypto currency business. VC firms can rejoice as their precious cash can now find a more direct route into the regulators pockets.