Chino: “All the banks are scared of the NY rules.”
On October 10 a confrontation is scheduled which may significantly affect the future of bitcoin in many parts of the world. And if you’re a crypto freedom advocate anywhere near New York, bitcoin businessman Theo Chino is requesting your presence at it.
The New York Supreme Court is to hear arguments in his upstart challenge against the infamous BitLicense. Its New York’s onerous but velvet-gloved attempt at regulating bitcoin businesses. Although, as Wikipedia puts it, the regulation does not forbid “merchants and consumers that utilize virtual currency solely for the purchase or sale of goods or services or for investment purposes,” it has (also according to Wikipedia) resulted in at least ten bitcoin businesses announcing they would cease doing business in New York.
A French national who nevertheless has deep roots in New York, Chino developed crypto-commerce of his own there.
“I had installed Bitcoin processing in about 150 bodegas in Northern Manhattan and in the Bronx,” Chino writes. “I figured a way to earn their trust… that is why I was under the radar of so many people… and that is what gives me standing to sue.”
Ernest Hancock from FreedomsPhoenix argues that NY authorities probably thought they were going to close the flap before any “uncontrolled people” had entered the golden tent. Chino, being a small business, may have taken them by surprise.
“I have a bank in a garage,” Chino says, pointing out that this is how Hewlett-Packard got started. “You have to start in the technology world in the garage.”
That is what Chino is standing up for… the ability for crypto businesses to start small and easily do business with banks. He has challenged the license by mounting an “Article 78” lawsuit. As LawNY.org puts it, “An Article 78 proceeding is used to appeal the decision of a New York State or local agency to the New York courts.”
Chino writes that his team will be naming these grievances:
“1. Violation of the Separation of Powers Doctrine and Ultra Vires Conduct
Meaning that the legislature did not give NYDFS the authority to regulate bitcoin.
2. Arbitrary and Capricious Regulation
And even if the legislature did, Bitcoin is ridiculously small that is completely arbitrary (like asking a kid to get a CDL license to ride a Big Wheel Tricycle in the event he decides to get on the Interstate.)
3. Federal Preemption
And if it’s OK with two above, then Dodd Franck has since passed and it’s the Fed that can regulate.
4. Violation of the First Amendment of the U.S. Constitution and the New York Constitution
And after all that, what they are asking I disclose is worse that cigarettes.”
At its core, Chino believes this case rests on the question “what is bitcoin?” He says the New York Department of Financial Services’ argument that it has the authority to “BitLicense” only makes sense if bitcoin is defined as money. He also says it will affect how and sometimes whether crypto-businesses around the world can exist… because of New York’s leverage over banks elsewhere. Nevertheless, he says the issue has been under-reported, even in the “crypto press.”
“The big name reporters… are not saying a single word,” he tells Crypto Insider by e-mail, “They reported on the Bitfinex suing the Wells Fargo; but they are not saying a words on my case nor Morpheus case. From the specialized media: about just underneath of the bare minimum.”
Some blockchainers do not consider the BitLicense a major impediment. The pithy bitcoin bull Richard Heart says regulations like the BitLicense actually helped bitcoin by making it practical for Coinbase.com to, as he put it, “easily onboard millions of new people into the system.”
Chino sees a smaller picture.
“Bitcoin is a censorship resistant store of value,” he writes, “and like every one tells me, is that regardless of what the government does, so what you are doing is useless.”
“Now, the problem, it is resistant however, now and then, the government is able to break it; and each time the government breaks it, it sweeps all those people into jail (at least those who committed what the government considers illegal).”
“If we don’t fight, we accept that the government will be snooping into our shit and we will always looks into our back to make sure that the government is not monitoring us regardless of what we use Bitcoin for.”
“Bitcoin is not censorship resistant since the government made it illegal to create a business if one doesn’t apply AML/KML rules (know your customer). And if you decide to use it outside AML/KML, the government will target you as someone doing something illegal. That is why (Arizona bitcoiner) Morpheus is in jail.”
He also believes the BitLicense limits the growth of “bit-businesses” all over the world.
“Ask Bitfinex,” he writes, referring to this incident.
“Any business that does bitcoin that need a bank, will never get one, because all the banks are scared of the NY rules. Bitfinex transfer had nothing to do with the United States (somewhere in Africa to Taiwan I believe) but the money was frozen in the US. So it doesn’t matter where you are in the world, the NYS rules will apply to any bank doing business with you.”
Chino says the impact of a victory for his side would be “restoring the censorship-resistant aspect of crypto because the government will be prevented to establish rules. [sic]”
Chino has been crashing speeches by NY bitcoin regulators… questioning officials on camera. Toward the end of this video he interrupts the District Attorney. Others pressure him to pipe down, but both officials do answer at least one of his questions and maintain a calm, respectful demeanor toward the activist. Chino reports that to his knowledge, no officials have yet attempted to intimidate or retaliate against him.
In one of Tom Clancy’s novels, a politician accidentally cements the legitimacy of an allegedly-illegitimate president by filing a suit against him which names him as… president. Could a Chino victory have its own unintended negative consequences for crypto users? Could it stem the arguably healthy decentralization process in which promising finance institutions are leaving and avoiding New York? In attacking flawed local over-regulation by somewhat-accessible, somewhat-limited New York officials – arguing this is at least partly a Federal matter – could it help cement or grow the rule of a much less accountable Power, the central government?
Anything bad is usually possible, but the BitLicense situation is sufficiently stifling that there may not be much to lose by losing it. As Wikipedia puts it: “… as of January 2017 only three BitLicenses were awarded, multiple applicants also tried to receive it, but were all denied.” That was after the license had been in effect for over two years. If U.S. historical precedent is any indication, a defeat for the BitLicense would tend to discourage that type of regulation from spreading to other states. It would presumably provide a morale boost and a sense that the bitcoin community is now a hardened legal target (somewhat like Apple) capable of peaceably defeating unusually powerful authorities with only a tiny segment of its community engaged.
The practical nature of bitcoin is about more than just price… we already knew drugs went up in price when outlawed/over-regulated… but we simultaneously know that this can make them more dangerous and comes with a massive human cost. Bitcoin prices might benefit from or withstand laws that restrict how people use it. But the little people trading it or looking to start businesses… won’t.
“They should care,” writes Chino.
The court event has already been rescheduled at least once, so you may want to check the Meetup page for updates and changes before trying to attend.
Featured image from Pexels