- The New York BitLicense has been the bane of many New York-serving companies
- The BitLicense, introduced in August 2015, is aimed at protecting crypto investors in the state
- The process is costly, confusing, and very long, hence why it is hated by so many companies
The New York BitLicense, otherwise known as the ‘License to Engage in Virtual Currency Business Activity’, is one of the few pieces of U.S. legislation signed into law regarding the use of Bitcoin and other digital currencies within businesses. It continues to stir debate today, so it’s important to know a bit more about it. Here’s our brief overview of this controversial bill.
What is the New York BitLicense?
The BitLicense is a series of regulations put forward by the New York State Department of Financial Services (NYDFS). It impacts companies working with Bitcoin who serve New York residents. It was proposed in July 2014 and was signed into law in August 2015.
Why was it needed?
Following the collapse of Mt. Gox, New York regulators decided that action needed to be taken to protect consumers and the financial industry from something similar happening in their state, which was then Bitcoin’s ground zero. They also wanted to regulate the exchanges to ensure that they weren’t involved in any tax evasion or other criminal activity.
How do you get a BitLicense?
With a good lawyer, or a team of them. It costs a non-refundable $5,000 to apply for a BitLicense, but that’s just the start. You’ll need legal help to wade through the application, which doesn’t come cheap – companies have reported spending between $20,000 and $100,000 on legal fees to negotiate the application, not including the man hours needed in-house. And, all so they could continue to operate in the state.
How long does it take to get a BitLicense?
Each case is different, but as a guide Gemini applied in August 2015 and received their BitLicense in May 2018.
What happens if you don’t have a BitLicense?
Ask Kraken and ShapeShift – they were among the crypto companies that left town rather than play ball. ShapeShift founder Erik Vorhees said last year that the BitLicense had been “an absolute failure” while Kraken founder Jesse Powell has said, “I think the people of New York have missed out hugely, and maybe they’ve been protected—they’ve been protected from an explosion of wealth.” If you don’t have a BitLicense and you deal in cryptocurrency you’re likely to face a hefty fine.
Why don’t people like the BitLicense?
BitLicense detractors like Powell and Vorhees argue that it is unnecessary and expensive, and that it has stifled innovation in the once thriving New York crypto scene. Others argue that it favors those with big pockets or institutional backing over the startups trying to make it, which flies in the face of the ethos of cryptocurrency and blockchain, that anyone can create a project and make it a success. It also massively reduces consumer choice to the big players, often backed by millionaires or, now, by Wall Street banks. A final insult, Benjamin Lawsky, the man whose office pushed the BitLicense into law, left office and opened a consultancy firm for companies looking to apply for the BitLicense.
BitLicense is Still Going Strong
We hope this has given you a good overview of the New York BitLicense and why it was so disliked by those who got caught up in its implementation. Despite continued complaints, it shows no sign of being reversed, meaning that companies who wish to have a customer base in New York will have to continue to go through the process and pay through the nose for the pleasure.