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Regulatory Considerations running an ILP node (Re: [Ledger] Bootstrapping Interledger)

From: Adrian Hope-Bailie <adrian@hopebailie.com>
Date: Wed, 9 Nov 2016 23:00:07 +0200
Message-ID: <CA+eFz_KLHW7Gwk--9BCAqyifdQjQtjLDg_SUeskLknnrEHp=eA@mail.gmail.com>
To: Tony Arcieri <bascule@gmail.com>
Cc: Andrew Bransford Brown <andrewbb@gmail.com>, Tom Haas <tjhaas@gmail.com>, Interledger Community Group <public-interledger@w3.org>, Interledger Mailing List - IETF <ledger@ietf.org>
As I mention in the wiki, the goal is to test the capabilities of the
protocol by bootstrapping a real network of ILP nodes (not create an
unregulated payment network).

I think it's important for this to be a network moving real value otherwise
it's difficult to motivate people testing things built on top of the
protocol to even consider ILP. We're only going to test this properly when
there is some skin in the game, we just need to make sure nobody stands to
lose more than they can afford to risk.

As I have also said in the wiki, we have the advantage of a number highly
valued crypto-currencies that offer us "permission-less innovation" and the
opportunity to move real value without (in most cases) breaking any laws.
If your particular situation prohibits you from running an ILP node for
fiat currencies but you can transmit and exchange crypto legally then
that's the way you can move real value.

Obviously, every person that chooses to run an ILP node should evaluate
their own situation and not do anything illegal. For some, that might mean
sticking to fake money initially or developing a community currency system
between small groups of peers.

Most importantly though, we should continue to only move small amounts both
because we don't want anyone to risk more than they can afford to lose in
helping to bootstrap this project (which is still under heavy development)
but also because we don't want to raise the ire of regulators when our
immediate goal is to test the protocol not become an unregulated payment
network.

Finally, and this may be obvious, but I want to be clear, that by running a
node and exchanging real value using this immature protocol, you are taking
a risk. I (and I think I speak for everyone else involved in the project)
take no responsibility for any losses anyone incurs, whether direct or
indirect, in being a part of this. We are being pioneers and there are
risks.

Be responsible, only exchange small amounts and make sure you understand
the applicable regulations for your specific case before you proceed.


On 9 November 2016 at 21:59, Tony Arcieri <bascule@gmail.com> wrote:

> On Wed, Nov 9, 2016 at 11:42 AM, Andrew Bransford Brown <
> andrewbb@gmail.com> wrote:
>
>> I'd suggest a State exchange to avoid SEC regulations while building the
>> market.  Once you cross state lines, then pass the SEC regs.
>>
>
> It's a little more complicated than that. Individual states within the US
> have their own money transmitter laws, which often apply to money transfers
> within the state in addition to transfers between states or countries.
>
> Setting up a test network with a fake currency that has no actual value
> sounds ok, but if you are moving real money, even within a single state
> (state laws providing), you'll want to have a money transmitter license
> before you do so. For transmitting money between states, you'll need
> licenses for every state you plan on operating in.
>
> --
> Tony Arcieri
>
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Received on Wednesday, 9 November 2016 21:00:40 UTC

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