W3C home > Mailing lists > Public > public-webpayments@w3.org > September 2013

Bridging the regulatory gap (Re: Tradehill Bitcoin exchange shut down for 2nd time in 2 years)

From: Manu Sporny <msporny@digitalbazaar.com>
Date: Mon, 09 Sep 2013 21:33:03 -0400
Message-ID: <522E76CF.2080005@digitalbazaar.com>
To: Melvin Carvalho <melvincarvalho@gmail.com>
CC: Web Payments CG <public-webpayments@w3.org>
On 09/09/2013 08:40 PM, Melvin Carvalho wrote:
> Bitcoin has a test network of coins that carry no value, but in
> other aspects are almost identical to real bitcoins.  They can be
> good for testing solutions without having as many regulatory issues.
> The net can be reset from time to time, but this happens once every
> few years, rather than, every few months.

Right, but that's not the problem. :)

We've been operating systems like https://dev.payswarm.com/ for years
now (we had a Bitmunk P2P test network in operation for years before
it). We can add on any feature that we'd like to in that system and
there are absolutely no regulatory concerns raised when you run a system
like that. You can deploy technologies in a test environment, but that
is not a convincing argument to financial institutions (large or small)
when it comes to adoption.

The problem isn't with having a test network, it's with integrating the
systems we're building with the real financial systems in use around the
world and being able to say "Yes, this system is live, we've run $X in
fiat currency transactions using it, and it is integrated with the
global financial network."

There are a whole slew of problems that doing something like that
exposes a technology stack to. For instance, even though PaySwarm
transactions happen within milliseconds, at some point you have to move
money to and from bank accounts and credit cards (the "legacy" financial
network). Doing so has a number of hazards like chargebacks, ACH
disbursement errors, anti-money laundering reporting, know your customer
requirements. Building a technology that isn't exposed to those sorts of
complexities ends up being a simplified version of reality and thus, not
very helpful in bringing the worlds financial network forward.

I guess what I'm trying to say is that we already have a test network
for all of the technologies that we're talking about. Bitcoin, PaySwarm,
Ripple, Firefox Marketplace - they all have test networks of one kind or

The real problem (at least from my perspective) is how you bridge the
gap from the test network to the real world without triggering a barrage
of regulatory hurdles, which as we've seen, have killed a number of
Bitcoin-based start-ups just this year. How do we get these technologies
into the hands of millions of people without every single one of them
needing to have a money transmitter license.

-- manu

Manu Sporny (skype: msporny, twitter: manusporny, G+: +Manu Sporny)
Founder/CEO - Digital Bazaar, Inc.
blog: Meritora - Web payments commercial launch
Received on Tuesday, 10 September 2013 01:33:33 UTC

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