Is HN so brainwashed that criminalizing innovation sounds like a good idea? That just goes to show entrepreneurs are a minority on this site. Just a bunch of posers trying to earn geek cred.
It's a pattern. Established corporate interests are threatened by disruptive innovation. Said interest then lobby for regulation to criminalize disruptive innovation. Rinse repeat.
Anyone calling themselves an entrepreneur should be pissed. We ARE the disruptive force bringing about change in the marketplace. This is how we make our livelihood. When change becomes criminal - innovation and entrepreneurship become impossible.
I work for a bank. We spend a LOT of time, money, and attention on satisfying various regulators. Now, I'm not complaining about that: it's part of the cost of doing business in that field, and for the most part the regulations have been put in place for good reasons.
But if "entrepreneurs" are not required to follow the same regulations, then that's just not fair. Am I allowed to call MY company an "entrepreneur" and thereby not be required to submit to strict scrutiny and regulation?
By the way, this comment is intended as a defense of general regulation of certain industries (like banking). I am NOT defending or endorsing California's MTA which I know very little about but what little I know is universally negative.
I just feel regulatory compliance should not be a barrier to entry for innovators. Why not subsidize the cost of regulation for start-ups, or wave the fee until they hit profitability? The U.S hands our freebies to large financial institutions in the form of subsidies and bail-outs, but we can't even make the marketplace fair for the little guy?
Wal-mart could lobby for states to require a 'retail license' that costs one million annually. You would have one camp who says we need to be safe from bad business, but the other camp would see this as a ploy to destroy competition and fatten their market-share.
Why should there be a low barrier to entry when your entire business model is relying on moving money? If you screw up, you're going to screw a LOT more people than any standard startup. The potential for fraud is incredibly high here, which means that a high barrier to entry significantly reduces the potential loss.
The entire point of bills like the California one is to reduce the public's responsibility for when these kinds of startups go belly up and cannot pay out what they owe to all their customers.
I didn't say start-ups shouldn't comply with regulation, but that the cost shouldn't so high as to keep out new-comers. What exactly does minimizing competition do to keep customers safer? I would argue the contrary.
With the current regulations, if the transfer company goes belly up, the state, who would be forced to cover any transfers that were not completed, is not 100% liable for the damages. Customers still get their money moved. The company goes under, but the state isn't left footing the entire bill(like they normally would if the company filed chapter 7).
Let's do a thought experiment between the impact of circa 2005 Paypal versus Youtube(pre-Google) going under. Youtube goes down, people lose cat videos. It doesn't really effect anyone's checkbooks, except for the employees and investors of Youtube.
Paypal goes under. Accounts that were in the process of getting credited suddenly are never going to get their money. Payments stop, which screws over basically every single user that should have been paid their money. Everyone involved with Paypal, from consumers to investors, is out money, and the states have to step in to make sure that all the accounts are closed out and finalized.
There is a seriously high amount of risk for everyone involved. Having a high capital barrier helps to ensure that the risk to the consumer is much less, because they won't be completely screwed out of their money if the company goes under at the wrong time. Also, the taxpayers won't be left footing the bill.
Also, I haven't even touched on fraud or money laundering cases. Having these kinds of barriers to entry helps stop most of these kinds of crimes, because it's just too much risk.
You're falsely assuming scammers cannot get access to capital to comply with regulation. Madoff is just a small time scammer as an example. It's a false sence of security and leads to anti-competitive practices.
>Am I allowed to call MY company an "entrepreneur" and thereby not be required to submit to strict scrutiny and regulation?
Scale is crucial. I think MtGox had market depth >0.5M$ on the bid side. That's one modestly wealthy client account in a bank. No way could you register a bank with that kind of capital, heck even 100x that. If it grows then you can argue about regulation, but if you're going to require everyone to have >0.5M$/year legal teams to enter the market then yes there's going to be very little competition from the small/disruptive innovators and it's using regulation to keeping the competition out. (Not that I think BitCoin is competition but other services could be).
My comment was intended as realpolitik. I want to agree with you, but when I look at activist-entrepreneurs I mostly see people who have failed at both.
Edit: Anyone care to speculate which corporate interest will kill the internet first: copyright holders or financial services?