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Bitcoin steps a little closer to acceptance

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By David Z. Morris

FORTUNE -- In a space of two days, one of the largest consumer banks in the U.S. and the state regulatory agency that often sets the baseline for nationwide financial regulation held fact-finding events about the peer-to-peer cryptocurrency bitcoin. Bitcoin has been the focus of intense scrutiny, hype, and fear over the past three months, and the dramatic arrest on Monday of bitcoin advocate and entrepreneur Charlie Shrem on charges of money laundering threatened to cast a shadow over proceedings. Despite this, both meetings were largely forward-looking, and indicate that regulators, bitcoin leaders, and traditional banks are on a path to cooperation.

The New York Department of Financial Services hearings were called by Superintendent Benjamin Lawsky, who throughout the hearings displayed a deep understanding of, and even enthusiasm for, bitcoin and the protocol supporting it. Lawsky opened the meeting by reassuring the room that "our agency approaches the issue of virtual currencies without any prejudgements." The Shrem arrest, though alluded to several times, took a back seat to discussion of more fundamental questions, with Lawsky stating that "no industry should be defined entirely by its bad actors."

Representatives of the bitcoin world generally took the position that while regulations unique to bitcoin and other math-based currencies should be kept as minimal as possible, clarification of reporting requirements and anti-money-laundering standards would in fact be welcome. Many saw the appropriate focus for regulation to be the various points where bitcoins become dollars. Fred Wilson, a bitcoin investor with Union Square Ventures, flatly stated that "we should not regulate how the [bitcoin] system works" internally. But Fred Ehrsam, co-founder of the bitcoin brokerage Coinbase, emphasized that consumer protection in bitcoin-for-dollar sales was essential to broader adoption, and that "[Coinbase] welcome(s) appropriate guardrails to ensure that bitcoin companies handling the money of others are run by reputable individuals and have appropriate practices to create a sound consumer experience."

MORE: Inside the bitcoin confab

The benefits of regulation were highlighted by the testimony of law enforcement officials, whose dim view of cryptocurrency seemed to indicate increased risk for bitcoin operators. Deputy U.S. Attorney Richard B. Zabel equated bitcoin itself with both the unrelated electronic money-laundering service Liberty Reserve, and with Silk Road, the online contraband marketplace that accepted payment in bitcoin. Of course, as Jeremy Liew of Lightspeed Venture Partners had pointed out earlier in the hearing, Silk Road has been shut down quite effectively under existing regulations -- one reason why, as Zabel revealed, the U.S. Attorney's office has become a large holder of bitcoin through civil forfeiture. Even those who most fear bitcoin's potential for misuse, it seems, now have a stake in its success.

Directly after the first round of NYDFS hearings on Tuesday, some panelists headed to a similar meeting hosted by Wells Fargoin New York, though this one was closed-door. Attendees described it as organized but not dominated by representatives from the San Francisco-based bank's merchant services, marketing, and regulatory divisions, who mostly listened to a lineup of speakers giving a crash course in bitcoin. "All in all it was pretty basic, but the panel was insightful for the beginner," observed Rik Willard, who runs the bitcoin startup incubator MintCombine and was at the Wells Fargo meeting.

Wells Fargo (WFC) has a reputation as one of the most progressive large banks in adopting new payment technologies, and though no statements were made about Wells Fargo's plans, simply holding the meetings positions it as a leader in integration between bitcoin services and conventional banking. That process has been slowed by banking compliance officers' nervousness about bitcoin's association with criminal activity, and the scarcity of banking access for American bitcoin services is one of the major reasons it remains difficult to buy bitcoin with U.S. dollars. Currently, Coinbase is the only U.S.-based service that sells bitcoin for dollars and is serviced by a conventional bank, though it has declined to name its servicer. Wells Fargo's seeming openness to bitcoin may signal new opportunities to develop exchange infrastructures, which would in turn greatly ease mass adoption of bitcoin payments.

MORE: What the arrests say about the future of bitcoin

More than anything, this kind of high-level discussion of bitcoin shows that it is being taken seriously by leaders across many sectors, primarily as a promising innovation in payments. But there was little insight to be gained from this week's meetings about what the pace of regulation and mainstreaming will, or should, be. Superintendent Lawsky has indicated his office's intention to propose a regulatory framework for digital currency in 2014, but it is uncertain when those might go into effect, leaving significant time for unfettered innovation and risk.

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Bitcoin steps a little closer to acceptance

UK spy chief to step down: GCHQ boss Iain Lobban leaves in wake of Edward Snowden NSA leaks – Video

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UK spy chief to step down: GCHQ boss Iain Lobban leaves in wake of Edward Snowden NSA leaks
The British Spy Chief, whose agency was accused in documents leaked by former NSA contractor Edward Snowden of playing a principal role in mass UK-US surveil...

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UK spy chief to step down: GCHQ boss Iain Lobban leaves in wake of Edward Snowden NSA leaks - Video

Snowden nominated for Peace Prize

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By Laura Smith-Spark, CNN

updated 11:23 AM EST, Wed January 29, 2014

An image of Edward Snowden on the back of a banner is seen infront of the US Capitol in October 2013.

STORY HIGHLIGHTS

(CNN) -- Two Norwegian lawmakers have jointly nominated National Security Agency leaker Edward Snowden for the Nobel Peace Prize, they said Wednesday on their party website.

Snowden has "revealed the nature and technological prowess of modern surveillance," and by doing so has contributed to peace, said a joint statement by Bard Vegar Solhjell and Snorre Valen of the Socialist Left Party.

Nominations for this year's Nobel Peace Prize -- whose previous winners include such figures as the late South African President Nelson Mandela, Myanmar opposition leader Aung San Suu Kyi and President Barack Obama -- close on Saturday, with the winner announced in October.

According to the Norwegian Nobel Committee's rules, Solhjell and Valen are qualified, as national lawmakers, to make a nomination. The names of each year's nominees are not revealed until 50 years later.

"There is no doubt that the actions of Edward Snowden may have damaged the security interests of several nations in the short term. We do not necessarily condone or support all of his disclosures," said the statement by Solhjell and Valen.

"We are, however, convinced that the public debate and changes in policy that have followed in the wake of Snowden's whistleblowing has contributed to a more stable and peaceful world order.

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Snowden nominated for Peace Prize

Why Silicon Valley sticks up for Snowden

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By Peter Swire

Published: January 30, 2014

Is Edward Snowden a whistle-blower or a traitor? There is a vast cultural divide between Silicon Valley and Washington on this issue, and the reasons reveal much about the broader debates about what to do in the wake of his leaks.

In terms of my own perspective, I have written about privacy and the Internet for two decades, working closely with both civil liberties groups and Internet companies. On the government side, I first worked with intelligence agencies in the late 1990s when I chaired White House task forces on encryption and Internet wiretap laws.

As a member of President Barack Obamas Review Group on Intelligence and Communications Technologies, I spoke with numerous people in the intelligence community. Not one said that Snowden was a whistle-blower. The level of anger was palpable.

Part of the anger arises from the daily routine of working with classified materials. Merely carrying a cellphone into a secure facility by mistake amounts to a security violation. Thousands of security officers enforce the rules, and people can and do get fired when they are not scrupulous with classified materials.

Intelligence officers see Snowden as a serial destroyer of classified secrets. He plotted for months to violate the law on a massive scale. He has tipped off foreign adversaries about numerous programs that will require countless hours of work to revise; many will not regain their previous effectiveness.

Even though Snowden rejected all the existing options for a whistle-blower including congressional committees or avenues within the National Security Agency the view from Silicon Valley and privacy groups is much different. Last fall, I asked the leader of a Silicon Valley company about the whistle-blower-vs.-traitor debate. He said that more than 90 percent of his employees would call Snowden a whistle-blower.

Part of that reaction is based on the view that this robust national debate about NSA programs would not be happening had Snowden not leaked what he did.

The Silicon Valley concern about the NSA arises to some extent from a philosophy of anti-secrecy libertarianism. A well-known slogan there is that information wants to be free.

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Why Silicon Valley sticks up for Snowden

Report puts Snowden-like leaks as No. 2 threat to US security

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WASHINGTON Insiders like Edward Snowden who leak secrets about sensitive U.S. intelligence programs pose a potentially greater danger to national security than terrorists, Americas spy chiefs warned Wednesday in their annual report to Congress on global security risks.

For the first time, the risk of unauthorized disclosures of classified material and state-sponsored theft of data was listed as the second-greatest potential threat to America in a review of global perils prepared by the U.S. intelligence community. The risk followed cyberattacks on crucial infrastructure but was listed ahead of international terrorism.

U.S. officials previously have said it will cost billions of dollars to repair or revamp communications surveillance systems in the wake of the disclosures by Snowden, a former contract employee at a National Security Agency listening post in Hawaii who began leaking classified documents to the media in June and who later fled to Russia.

Appearing before the Senate Intelligence Committee, James Clapper, the director of national intelligence, said the leaks represent the most damaging theft of intelligence information in our history. He urged Snowden to return the material, saying he made the nation less safe and its people less secure.

Weve lost critical foreign intelligence collection sources, including some shared with us by valued partners, Clapper said. Terrorists and other adversaries of this country are going to school on U.S. intelligence sources, methods and tradecraft, and the insights that they are gaining are making our job much, much harder.

Army Lt. Gen. Michael Flynn, who directs the Defense Intelligence Agency, said the leaks had endangered the lives of intelligence operatives and troops. Matt Olsen, heads of the National Counterterrorism Center, said they had made it tougher to track al-Qaida and its affiliates.

What weve seen in the last six to eight months is an awareness by these groups of our ability to monitor communications and specific instances where theyve changed the ways in which they communicate to avoid being surveilled, Olsen said.

Investigators believe Snowden copied 1.7 million documents from NSA servers, the largest breach of classified material in U.S. history, although only a fraction have been disclosed so far. Last summer, a military judge sentenced Army Pvt. Chelsea Manning, who was born Bradley Manning, to 35 years in prison for sending 750,000 classified diplomatic cables, military field reports and other material to WikiLeaks.

Both Snowden and Manning have been condemned by critics as traitors and hailed by supporters as whistle-blowers who exposed government wrongdoing.

Only critics spoke at the hearing. Sen. Susan Collins, R-Maine, said the classified documents Snowden downloaded, if printed out, would form a stack more than three miles high.

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Report puts Snowden-like leaks as No. 2 threat to US security


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