New York BitLicense may soon be reworked after years of public backlash
The future of New York’s much-criticized BitLicense is uncertain amidst mounting public pressure. Several concerns have been raised over the inherently intrusive nature of the program, with some even believing that a complete overhaul is in order.
More recently, a legislator proposed “The New York Cryptocurrency Exchange Act” as a complete replacement to BitLicense. One of the primary motives of the Act is to “Prohibit the collection of any licensing fees for cryptocurrency business activities,” which remains to be a major concern with BitLicense’s application fee of $5,000.
BitLicense, introduced exclusively within the New York State jurisdiction, was one of the earliest forms of cryptocurrency regulation in the country. Any company looking to conduct cryptocurrency-related business is required to obtain one of these licenses from the New York Department of Financial Services. While this does represent a significant compliance overhead for small companies, it is a far less involved process than obtaining a money transmitter license.
Since the introduction of BitLicense in 2015, only a few other states have also introduced their own form of cryptocurrency legislation. None of the other laws enacted so far have generated nearly as much controversy, however. Notably, the U.S. government has not been keen on regulating the digital currency market on a federal level as of yet. Apart from the Securities and Exchange Commission, no department is known to be keeping an eye on laws related to the ecosystem.
Getting a BitLicense
So far, only four businesses in the state have successfully been licensed to operate within the state. Even ignoring the five rejected applications, it is clear that there are some inherent problems with BitLicense driving companies out of the state to operate their business. Chief among these is that there is no clear documentation for applicants to follow. Besides a sparse set of answers available on the DFS’ website, no specific guidance is offered.
The problem with BitLicense is not limited to the application process either. Businesses working with cryptocurrencies and seeking a license have to bear the overwhelming burdens of fraud, money laundering, and information security-related policies. It is likely because of these compliance constraints that most small businesses operate without seeking a license at all.
Even if New York state lawmakers significantly revamp BitLicense, or abolish it in favor of other less intrusive regulation, there is no guaranteeing the return of the several companies that left the state following its introduction close to three years ago. Bitfinex and Shapeshift are two notable cryptocurrency services that stopped serving residents from the region. Square Cash, however, recently suggested that it may be applying for a BitLicense to cater to residents of the state.
Considering that cryptocurrency and blockchain innovation is moving at a faster rate than ever before, New York lawmakers have perhaps finally understood the need for more moderate legislation. Senators agreeing with public sentiment over this issue is perhaps proof that the state wants to attract more cryptocurrency-related companies, rather than force them out of the region.