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Bitcoin Lightning node and FinCen: ‘It’s just silly. Honestly, people, stop with this stuff,’ says Legal Officer

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Bitcoin Lightning nodes & FinCen Guidance: 'It's just silly. Honestly, people, stop with this stuff,' says Legal Officer
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The Financial Crimes Enforcement Network [FinCen] issued its guidance on the ‘Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies’ on May 9, 2019. The guidance elucidates how money transmission regulations apply to a business involved in providing convertible virtual currency services. This includes P2P exchanges, wallets, hosted and un-hosted wallets providers, multi-sig wallet providers, kiosks, providers of anonymity-enhanced convertible virtual currencies, and more.

This created a lot of buzz in the crypto-verse, with several influencers speaking about the impact this would have. Emin Gun Sirer was one of them and stated that this was “mostly bad news”. Others included the Chief Legal Officer of Blockchain, Marco Santori, who went on to explain that this would have “major implications for wallets, exchanges, ICO issuers, dApps, DEXs”.

Marco Santori tweeted,

Further, the Legal Officer spoke about the guidance’s stance on wallets, stating that non-custodial wallets were not going to be considered as money transmitters in the United States, adding that they would be unregulated. The officer said,

“This is an historic day for @blockchain, @Ledger @BRDHQ , @EdgeWallet and all the rest. I’ll confess to personal delight here, too […] Why? Because, even if many crypto users rely on their availability, they do not *control* funds any more than an operating system or a mobile device does.”

Santori also spoke about what the guidance meant for exchanges. He stated that usually, banks send customer’s personal identifying information to the receiving financial institution when the customer makes a transfer. He added that this was for “backup purposes”, a way for the FinCen to gain access to data even if “one of the banks goes bust”. The Legal Officer said,

“FinCEN says crypto exchanges have to do this too […] How is the exchange supposed to know whether it is for another FI or just a noncustodial wallet? There is no real way to implement this without an interstitial (mandatory?) layer over the core network, just so that FIs can message each other […] Anyway, that’s a nightmare.”

Further, Santori also spoke about the most controversial topic surrounding the guidance, Lighting nodes and money transmitter license. On this, he stated that FinCen did not mention anything pertaining to the Lighting nodes nor will they. He said, “It’s just silly. Honestly, people, stop with this stuff.”

However, the guidance did shed light on its regulatory stance on Decentralized Exchanges [DEX].

This was followed by Satori explaining its impact on ICOs and developer applications, stating that according to FinCen, ICO sellers could fall under money transmitter regulations in a few situations. Importantly “only if they actually transmit money”. He said,

“FinCEN mostly speaks in jargon here so I’ll boil it down: software development? not regulated. *deploying* software? still not regulated deploying software that transmits money? Very much regulated Not super helpful but as good as their guidance gets.”

To this, Riccardo Spagni, the lead developer of Monero [XMR], said,

“FinCEN comes out swinging, and confirms that Bitcoin, Monero, and others are safe in developing and deploying cryptocurrency software.”





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Priya is a full-time member of the reporting team at AMBCrypto. She is a finance major with one year of writing experience. She has not held any value in Bitcoin or other currencies.

Bitcoin

ErisX goes all hands on deck to launch a Bitcoin Futures market

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ErisX goes all-hands on deck to launch a Bitcoin Futures market
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ErisX’s CSO, Matt Trudeau, detailed the company’s four important plans for the future, which includes launching a spot market, to secure a Bit License, DCO, and to launch a futures market.

ErisX currently has a DCM contract, which is a Derivative Contract Market that allows ErisX to run a CFTC-regulated futures exchange. However, ErisX aims to get a DCO [Derivatives Organization], which will effectively allow it to run a CFTC-regulated clearinghouse. A clearinghouse would mean that ErisX can take control of the custody of the assets and clear and settled trades.

The CSO explained the benefit of this, stating,

“There is some efficiency for firms like producers [like mining companies]; if they need to hedge their inventory or need liquidity on a spot market, they could do that conveniently on a single platform. “

Trudeau added that from the “post-trade standpoint” and “the collateral management standpoint,” ErisX would have cash, crypto, and the futures, all stored in their clearinghouse. This would boost efficiency since it would be available for all customers under a single platform. The CSO added,

“… so there is some efficiency in terms of managing collateral, if you don’t have assets on  multiple platforms, it can all be in our clearinghouse.”

Apart from the aforementioned plans, Trudeau added that the crypto-industry needs to mature more and that ErisX plans to make a significant contribution to that. He added,

“The market is professionalizing and we think that in terms of what institutions are expecting from a trading/custody experience, we will bring some of the solutions to the market and that’s really the foundational pieces that they are looking in order to build their businesses on top of us.”

Apart from ErisX, LedgerX has also received a go-sign from the CFTC to settle Bitcoin Futures in Bitcoins. Other exchanges include Intercontinental Exchange’s Bakkt and Seed CX.





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