There could be changes to the stringent “Bitlicense” rules of New York after fresh assessment by The New York State Department of Financial Services (NYDFS) as reported by Reuters on June 24, 2020. Reports indicate that the main financial regulator in the cosmopolitan city may tweak rules, subsequently eliminating hurdles faced by virtual currency businesses looking to set base in New York.
Towards this end, they are seeking input from the public by August 10, 2020. Thereafter, changes may be made making New York attractive to crypto and blockchain businesses desirous of expanding into the critical financial hub of the United States.
What is Bitlicense?
The Bitlicense rules were unveiled in 2015, a year after the failure of Mt. Gox that saw millions of dollars of Bitcoin stolen. Then, in a reactive move, the state decided to step in and ensure that such a heist never happens in New York.
The Bitlicense is a safety net for New York-based traders and investors. It is a regulatory framework specifically meant to streamline processes in the increasingly important cryptocurrency industry.
Then, the Superintendent of Financial Services, Ben Lawsky, said Bitlicense “sought to strike an appropriate balance that helps protect consumers and root out illegal activity – without stifling beneficial innovation.” He added that “These regulations include provisions to help safeguard customer assets, protect against cyber hacking, and prevent the abuse of virtual currencies for illegal activity, such as money laundering.”
Aware that it wouldn’t be positively received, the regulator wanted to create a “common-sense rules of the road is vital to the long-term future of the virtual currency industry.”
Therefore, issuers of virtual currencies, exchanges, businesses that facilitate the buying and selling of cryptocurrencies, virtual currency transmitters, and coin custodians fell under the category of “virtual currency” businesses and had to comply with the rules as set out by the regulator.
The NYDFS is the body tasked with assessing and approving applications and issuing licenses. Only 25 licenses have been issued out in the last five years amid a wave of migration that saw crypto businesses close shop in New York.
Crypto Community On Bitlicense
As expected, the reception was negative.
The crypto community then said it made no sense for an emerging asset class to be rigorously regulated and muffled by-laws which were more stringent than those applied to traditional money transmitters under U.S. state and federal laws.
However, with this announcement, the DFS seems to be thawing up, realizing that cryptocurrency as an emerging sector could after all complement traditional businesses.
Part of their proposed easing will also involve issuing a list of pre-approved coins from which recipient of the Bitlicense can select and self-certify.