"Acting as a custodian should require a high-bar, including appropriate security safeguards that are independently audited and tested on a regular basis, adequate balance sheets and reserves as commercial entities, transparent and accountable customer disclosures, and clear policies to not use customer assets for proprietary trading or for margin loans in leveraged trading. It does not appear to any of us that MtGox followed any these essential requirements as a financial services provider."
Did I miss the part where Coinbase, Kraken, Bitstamp, BTC China, Blockchain.info, and Circle met those essential requirements?
I guess those things are just essential now, not in the past.
It sounds like self-regulation. If exchanges would just prove solvency periodically (which is possible with the blockchain), the whole world could see it. Wouldn't it be nice if you could see the balance sheet of your bank, in a way that accountants couldn't lie about it?
There are historical instances of self-regulation working. The movie and video game industries control their own content ratings and before the invention of dynamite, nitroglycerin was commonly used as an explosive in construction. Shipping NG is very dangerous because of its instability and many accidents occurred. They industry eventually developed extensive standards regarding shipping that vastly improved the safety of shipping NG.
> movie and video game industries control their own content ratings
Not sure you're helping yourself here. The established movie industry uses its content rating system as a bludgeon against independent filmmakers. The video game industry's content controls are largely a joke, assigned arbitrarily by people who never actually play the game.
Short version: Most cinemas and other outlets in the US won't carry your movie if it's unrated, so in effect those who control the ratings control which movies can get distributed. Also most cinemas in the US won't show NC17 rated movies so the ratings people can also use that as a way to prevent your movie being shown to a large cinema audience if they want to.
In the one case the life of the engineers and not the execs bonuses were on the line. In the other created one of the more potent systems of censorship (it is largely invisible and encourages self censoring the content) and preventing new/small guys from entering.
The difference between PG-13 and R in many cases is completely arbitrary.
The ratings lump many kinds of movies together and says absolutely nothing about their content.
No movie can be NC-17 or unrated because that is a kiss of death. No theaters will play it, no big box stores will sell it. I think what R can get away with has broadened considerably because of that.
If you have appropriate regulations to support self-regulation it can work very well.
For example, here in Indonesia, if I buy eggs at the supermarket I don't really have to worry about them carrying salmonella. Why? Because truth in labelling laws and demand for salmonella-free eggs means that the farms that sell to the big food distributors all get tested so they can label their eggs as salmonella-free.
One really wonders why this hasn't taken off in the US. I can think however of a few reasons (it's not just too much or too little regulation but the wrong regulations).
s/libertarianism/bitcoin/ and I agree with you as a Distributist.
As a Distributist, my feeling is that successful regulation supports decentralization. The problem with the regulation vs deregulation dichotomy is that regulation is usually pushed as a centralizing power, while deregulation is usually also pushed as a centralizing power.
Solvency, the ability to pay what you owe people when it falls due, is easy to prove at any point in time. The state of insolvency occurs the first time you have an obligation to pay, which you cannot satisfy.
The thing is, if you're a de facto bank (by virtue of holding customer demand deposits) then your future expectations of solvency could turn out to be wrong because everyone wants their money at the same time (i.e. there's a bank run).
MtGox isn't supposed to be a fractional-reserve Bitcoin bank, so, modulo server capacity problems and modest transaction delays due to offline Bitcoin storage, why, in principle, should everyone wanting their Bitcoins at the same time pose a problem?
My point about solvency was a general one (applying to all people and companies) but I overlooked an important point: the Bitcoins entrusted by customers to MtGox do not become MtGox assets. The Bitcoins are always owned by the customer (not owed to the customer). They are less like bank deposits than they are the contents of safety deposit boxes at a bank branch.
Why must that require regulation? They're calling for a meme that informed actors probably wouldn't do business with exchanges that don't provide those "requirements".
That's regulations with a multilateral peer enforcement mechanism. Conveniently enough it serves as a barrier to entry to new competitors. So if you were wanting to start a bitcoin exchange, you may have missed the boat.
I think the bitcoin community at large is interested in standardization for the greater good not regulation enforced through tyrannical political institutions.
Well, who decides what the "greater good" is and how to achieve it? If the BitCoin exchanges get together and decide on a set of standard procedures and policies that are in any way enforced or monitored, then voila: "Governments are instituted among [BitCoin Exchanges], deriving their just powers from the consent of the governed", aka "tryannical political institutions" and regulation.
I think the Bitcoin community at large has a certain set of values that it regards as sacred (security, anonymity, freedom from state regulation)
Perhaps I'm wrong though.
Regulation is often associated with political states and are often enforced through brute force. I think if we could, as a community, regulate without any state intervention that would be ideal.
Without doing a lot of due diligence, it might be hard to figure out which exchanges are well run. And its not like lying to auditors etc hasn't been done before.
Maybe the exchanges can join together and offer something like FDIC Insurance?
• Receipt of insurance is contingent on meeting requirements for insurance, so it's not blind assistance in the face of incompetence. The 3 years of account thefts reported to have occurred at Mt. Gox would, hopefully, have been detected. Even collaborating on more secure storage and trading systems. There's a precedent for this: it's how the large credit card companies (BankAmericard, I mean, Visa and Interbank/Master Charge, I mean, MasterCard), were formed.
• Rates would correspond to perceived risk, providing a market feedback mechanism.
• Some risks are incidental and random. Weaknesses in protocols, problems in network or technology stacks (independent of individual exchange software).
• The end result is a greater level of trust in the entire marketplace as a whole, so: more transactions, more members, more profits.
Did I miss the part where Coinbase, Kraken, Bitstamp, BTC China, Blockchain.info, and Circle met those essential requirements?
I guess those things are just essential now, not in the past.