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Comment by woah | Hacker News Reader

Your comment is completely unrelated to the matter at hand, and the article.

The controversy here is about this law potentially placing reporting obligations on software developers who never have any custody of client funds. Sort of like requiring the developers of Excel to report on users of Excel using it to manage their money.

> I've also been struck by the proliferation of bank-like services without bank-like obligations. This stretches from fractional-reserve and maturity-transforming services like Tether to exchanges/dealers like Binance and ersatz money transmitters like BitPay.

All these centralized services that have some involvement with crypto already comply with a large number of regulations, and usually do much more stringent KYC than non-crypto payment processors do.

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> reporting obligations on software developers who never have any custody of client funds

Custody doesn't haven an agreed-upon definition when it comes to crypto. That's the nut of the challenge. If we want reporting, someone who, in a traditional setting, would not have had to report, will when it comes to cryptocurrencies.

> these centralized services that have some involvement with crypto already comply with a large number of regulations

Many do. Many don't. Tether and Binance are exemplars of pathological noncompliance.

Could you please share an example or two where custody of funds is not clearly defined?

I'm not in finance, and to me this sounds weird. Unclear custody looks to me as an obvious opportunity to plainly steal someone's funds.

The basic example most others are built on is a locked smart contract, where none of the participants can control the funds until the smart contract is programmed to release them. Most crypto developers conceptualize this scenario as the smart contract having custody (you can only steal the money if you trick the smart contract into giving it to you), but the smart contract can't exactly report things to the IRS.

How does the tax system work for financial instruments implemented by pen-and-paper contracts? Seems to me very similar to owning shares in Special Purpose Vehicles, with the (perhaps important) difference that a judge can't overrule the contract.. but they can still bind the owners right?

Part of me wonders if you could create a contractual "shim" that judges can read, which mirrors what the smart contract does and dictates behavior of the parties for matters outside the contract itself. Sort of like the template contracts used for mortgage-backed securities.

The difference is that the SPV is itself a legal entity responsible for keeping track of who owns it. (That's not to say it's a silver bullet, since SPVs can be and quite regularly are used to try and play accounting tricks to hide stuff from tax authorities.)

> Custody doesn't have an agreed-upon definition when it comes to crypto.

This is not true, custody is very well understood when it comes to blockchain assets. Legal definitions of ownership are another question altogether that do require continual legislative attention, see Wyoming’s work in this area.[1]

You’ve also repeated the sins of the top comment by glossing over the actual issues with this provision by focusing on facts that almost everyone in the cryptocurrency space are in total agreement on.

> Tether and Binance are exemplars of pathological noncompliance.

The amendments to this provision are focusing on who should be excluded from these new requirements, of which Binance & Tether (or terms that could be construed to mean Binance or Tether) are nowhere to be found. The exceptions focus on miners, node operators, noncustodial software providers, and alternative consensus mechanism validators.

[1] https://www.google.com/amp/s/slate.com/technology/2021/06/wy...

I’m anti-crypto cause not enough people can understand how it works as a value store.

It’s fascist to peddle what is effectively magic as truth of reality when it’s just another man-made concept power brokers will (already have?), manipulate for their outsized gain.

Nation state money schemes are low tech and well known; they haven’t changed much. We don’t need to make a meta-value store to exchange for nation state currency, at great material expense. I’d propose the opposite; we stop treating people like concepts we must pressure to import our perspectives and preferences.

It’s unverified, but I’m pretty sure if we just made medicine, offered education, and built technology for those ends rather than moved at the drumbeat of elder rich to validate their once youthful existence, and pipe dreams none of us will live to verify came true, humanity would be in a much better place.

Talk about energy vampires; don’t focus on living a varied and full life! Focus on validating the rich! Focus on consuming what we can make the best margin on! Watch our ads so you never forget us!

And then once they’re empowered… my privacy! My freedom of speech!

Nice work.

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