Regulatory design is a core competency in building start-ups in the cryptocurrency sphere, because the nature of the issuance and control of financial instruments goes down to the foundations of power in society. There are two schools of thought that have emerged in this regard, and they correlate neatly to the economic theory of Voice vs. Exit.
What do you do when a major business relationship is not cutting muster?
Do you express your displeasure to the counterparty, and try to work something out?
Or do you just give up and bounce for another counterparty?
What do you do when that key provider is providing you with governance services in the form of legal frameworks and enforcement thereof, and the quality continues to drop?
For example, the first draft of regulation from the NYDFS comes out at full tilt, pre-empting many business models, requiring companies to reinvest their profits in US-based fixed income only, and mandating information gathering about all transactions down to the participants’ physical addresses.
Do you voice your opinon? Form a Chamber of Commerce? Solicit funds for a Foundation to then go and lobby Washington?
Or do you, as Cody Wilson invited in hushed tones, “go dark”, purporting that “bitcoin is what they fear it is, a way to leave…” - of course Wilson has done his homework on the cross-currents of pop philosophy and economic theory, so this language is probably intentional.
These two options are not binary, but rather constitute attractors on a spectrum in which we may all place ourselves. Circle, Coinsetter, regulated on-shore Hedge Funds find themselves on the “Voice” side of the spectrum, even Ethereum spent up to 1.8MM on legal to prepare its highly qualified offering of - not any kind of legal shares - literally: Ether. Coinbase is on that side of the spectrum as well, following the letter of MSB licensing but playing fast and loose with the banking industry when it comes to ACH chargebacks. Darkwallet, SilkRoad and its ilk, and OpenBazaar in a less extreme sense are on the “Exit” side of the spectrum.
But there is a third way, and this is the intended path of Crypto Currency Concepts and a host of others. The third way involves releasing software so that for most operations, money-transmission laws don’t apply because end-users have custody. It involves looking at this systems as neutral tools that can find a regulatory context that is appropriate to them in different jurisdictions. It involves relegating the most experimental aspects of your functionality to the most automated and disintermediated execution, such that a crack-down on any particular legal or natural person is irrelevant to the free speech publication of software. Cody Wilson talks about fighting fire with meta-fire, and many others would fight fire with fire (lobbying and formal commentary) - this third way would fight fire with water.
A great introduction to this way of thinking can be seen here.