A line from immortal comic strip Calvin & Hobbes goes “a good compromise leaves everybody mad.” When it comes to laws governing crypto, authorities are usually asking for pretty major compromises because they are, at their very best-intentioned, trying to work things out. While it’s a fast-developing area of law — honestly a treat to cover — that means it’s fast-developing relative to law, not tech.
There is an innate conservatism to anything having to do with how people handle their money. That extends to laws governing how money and investments function. Consequently, everything regulators touch in crypto develops slower than the industry would necessarily like.
It is, however, not an unreasonable instinct that regulators are resolute in setting up controlled ecosystems and sandboxes for all developments before releasing them into the wild. But restricting crypto’s technological capacities requires some compromises. The major news from this week has seen that dynamic play out worldwide, as everything because a test case.
PayPal’s crypto payments test out New York’s conditional BitLicense and vice versa
After months of rumors, PayPal formally announced that the platform would be onboarding crypto payments.
While Bitcoin’s price leapt at the news, there is a catch. PayPal’s crypto will be locked up on the platform. No tokens in or out, a veritable Alcatraz. PayPal, meanwhile, will be operating on a probationary basis.
PayPal’s crypto platform received the tentative green light from New York’s Department of Financial Services, arguably the most important sub-national financial regulator in the world and the issuer of the famed BitLicense. But in this case that license is conditional. Just as PayPal is testing out crypto in an extremely limited capacity, the DFS is testing out its new format for testing out firms looking to obtain that coveted license.
A fascinating byproduct of this new system is that it pairs firms looking to get into…