Coin Center: State Bank Supervisors Proposal Good for Lawyers, Bad for Consumers and Innovators

Bitcoin Magazine
Coin Center: State Bank Supervisors Proposal Good for Lawyers, Bad for Consumers and Innovators
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The Conference of State Bank Supervisors (CSBS) released its model framework for states to use in designing regulations and made it clear it wants to see state governments take a proactive and rigorous approach to licensing and supervising “virtual currencies” businesses.

The Conference report said:

“…CSBS concluded that activities involving third-party control of virtual currency, including for the purposes of transmitting, exchanging, holding, or otherwise controlling virtual currency, should be subject to state licensure and supervision.”

Coin Center, a Washington based-advocacy group for digital currencies, voiced their objections, saying the conference started out with good intentions but didn’t follow through in this final report.

Peter Van Valkenburgh, Coin Center Director of Research, said:

“Unfortunately, we’ve strong concerns about the vagueness of the language they’ve chosen in this final draft: vagueness that could encumber plenty of innovative but non-custodial companies, whom CSBS likely never intended to be regulated at all.”

Coin Center has taken a balanced approach to regulation in the past, for example, working with and supporting California’s digital currencies regulations.

Van Valkenburgh added: 

“We urge any state regulators who are encountering these issues to look for a clearer, more justiciable standard of ‘covered activities’…”

In their report, the bank supervisors call for an iron grip on companies, who must get a license and show state regulators the details of their business plan.

In addition, Coin Center notes, the proposed framework covers too wide a scope and includes businesses that don’t directly hold a customer’s funds.

“Covered activities” in the report include: “Services that facilitate the third-party exchange, storage, and/or transmission of virtual currency (e.g. wallets, vaults, kiosks, merchant-acquirers, and payment processors.)”

The Electronic Frontier Foundation’s Rainey Reitman is currently reviewing the proposal, but notes it is a throwback to a different age:

 “At the end of the day, cryptocurrencies are distributed software projects that can be accessed from across the world. They shouldn’t be regulated like brick-and-mortar businesses that serve a specific locality or community.”

The Bank Supervisors justify their proposals by saying:

“Licensing and supervision serve as a mechanism for protecting consumers, ensuring system stability, safeguarding market development, and assisting law enforcement …”

The State Bank Supervisors can make recommendations in a model framework, and despite the fact that the organization carries some weight in the banking community, state governments are not required by law to adopt these proposals.

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Coinkite Processes $250 Million in Third Quarter; 10% of Total Daily Bitcoin Transactions
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Leading bitcoin platform, multi-sig vault service provider and bitcoin merchant payment processor Coinkite has powered more than USD$250 million over the past three months, processing around 10 percent of the world’s total daily bitcoin transactions.

“It is remarkable what can be done with the right team and bitcoin. We are processing 5 to 10 percent of all bitcoin transactions. Over the past two years that we’ve been in business, we have never lost customer funds. I hear even well-funded competitors are pivoting away from our space due to our unparalleled uptime, security and the feature-rich bitcoin platform that we offer,” announced Coinkite CEO Rodolfo Novak.

Today, Coinkite backs businesses and individuals in more than 180 countries to support, send and receive bitcoin instantly and securely.

Rapid Growth

The bitcoin platform has seen a significant increase in volume since its previous quarter due to its trending multi-signature vault service and the increase in bitcoin sales of its supported startups.

“It’s close to 40 percent increase, and is due to better communication, our unparalleled features, truly enterprise class uptime and a greater volume from startups that had their services providers not be able to cope with their transactions. We even hold funds for some competitors,” the Coinkite team told Bitcoin Magazine.

The Coinkite team further explained that the reason behind the platform’s substantial increase in bitcoin volume is its expansion and diversification of its services. Although the startup declined to disclose the names of bitcoin platforms that are using its services, Coinkite told Bitcoin Magazine that the platform’s bitcoin vault service has been a vital factor of the startup’s success.

Coinkite provided Bitcoin Magazine with an infographic of its enterprise-level services and products. The Coinkite platform connects a user to five services, including web-wallet API for developers, multi-sig wallet, Coinkite co-sign, bitcoin vault and bitcoin exchange platform, providing an all-around bitcoin platform for its users.

HSM (Hardware Security Module)  

Coinkite explains that the number of developers using its API has increased substantially over the past few months, after the release of the platforms HSM or Coinkite co-sign, a robust solution to secure and hold bitcoins safely.

“We built the HSMs because we couldn’t find a robust solution for our services over two years ago. It is the only secure and sane way of scaling bitcoin solutions for users and developer’s API,” the Coinkite team said.

Hardware Security Module stores key data in hardware separate from the server. With several tamper-proof security measures, HSM secures bitcoin of its users on the platform by preventing the theft of the keys. In a potential data breach, hackers may obtain vital information from the server, but the safeguards of HSM prevent the hackers from stealing the keys, thus, eliminating a large probability of bitcoin theft.  

“Our system is designed in such a way that even if our web servers were to be compromised, the private keys that protect the funds are not stored on those machines. The private keys for your funds are stored exclusively on our custom HSM Hardware Security Module which is carefully isolated from the web servers and the Internet,” said the Coinkite team.

 

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