Luminaries in the bitcoin community have launched a self-regulatory body in an apparent attempt to gain a cohesive voice in the ongoing tussle with financial regulators.
The Committee for the Establishment of the Digital Asset Transfer Authority will "work proactively with regulators and policymakers to adapt their requirements to our technologies and business models," said the new group, in an announcement earlier today.
"We must develop and implement common risk management and compliance standards that address the public policy concerns associated with our businesses. And our firms must build risk management and compliance programs that meet those standards," it added.
The list of backers is a Who's Who of players in bitcoin. Tony Gallipi, CEO of payment processor BitPay, Chris Larsen, CEO of Ripple and founder of OpenCoin, and Patrick Murck, general counsel for the Bitcoin Foundation, are on board. TradeHill CEO Jered Kenna,who has been negotiating licenses with individual states for his high-net worth bitcoin exchange, is also a member.
Other members also have a vested interest in making the regulatory system work. Charlie Shrem, who will keynote at the Inside Bitcoins conference in New York today, is the CEO of the international bitcoin payment processor for exchanges and merchants BitInstant. As of early this morning, BitInstant's site was still down, after announcing earlier this month that it needed to revamp its website in response to customer feedback. BitInstant also reportedly received a letter from the New York Department of Financial Services, similar to the one received by the Bitcoin Foundation from the Californian state financial regulator.
The group published a manifesto of sorts in the early hours of this morning, outlining what it would do. These steps included:
- Developing best practice anti-money laundering standards for virtual currency firms.
- Serving as a source of business and technical standards for responsible conduct of financial transactions.
- Identifying emerging policy concerns early on.
The group will have its own board, including members independent of the industry, it said, and it will have its own oversight process for members.
"We expect that DATA will require its members to obtain all required licenses and registrations, and that its oversight will supplement, not replace, the oversight of statutory regulators," it continued.
Jaron Lukasiewicz, CEO of bitcoin FOREX trading platform Coinsetter, is another member of DATA. Yesterday, he launched a "friends and family" beta trial of his platform (essentially an alpha test, with 100 users). However, he admitted that when fully launched, the system will not initially be available to US customers – a restriction which he hadn't envisaged when he raised a $500,000 funding round in February.
Coinsetter registered with FinCEN – a relatively painless process – but the nature of his business means that the SEC or the Commodity Futures Trading Commission will be the ultimate regulator for the company, he believes. However, this has not yet been decided. In the meantime, companies exchanging bitcoin with fiat currency in the US need to register with every state in which they wish to do business.
One choice was to "do this the hard way – spend a million and a half dollars and 16-18 months going and getting licenses that in two years we won't need," he says.
Instead, the firm is targeting international customers, while courting licensed companies for potential partnerships.
"We have hired a couple of consultants, and I'm also spending all of my time hustling, calling banks. Our strategy is to form an agency relationship with an already-licensed money transmitter or hopefully a bank. I have a feeling that the bank side will work out but it's still pretty early in the game."
Other financial players have expressed similar plans to Coinsetter, especially when tackling notoriously harsh state regulators such as those in New York and California.
The inability to work in the US will impact Lukasiewicz's business, he added, admitting that the future of the company rested on his ability to overcome the regulatory issues in the US or sign an agency agreement. His plight shows the urgency with which bitcoin companies need to fix the regulatory problem.
The full DATA announcement will likely take place officially at the conference today.