Coin Center files comment on NY DFS revised BitLicense proposal

The latest version of the BitLicense takes into account many of the changes we suggested but there are still a number of issues that need to be worked out. 

Today Coin Center submitted its public interest comment on New York’s revised BitLicense proposal. The revised proposal, which was released on February 4th, takes into account many of the changes we and others in the Bitcoin space suggested during last year’s comment period. We appreciate this good faith effort by the New York Department of Financial Services, which shows a definite receptiveness to feedback.

However, there are a number of outstanding issues that were not addressed which, if allowed to remain in the proposal, will seriously hamper the ability of New York digital currency businesses to compete or even operate. We outline these concerns in depth and offer solutions in our comment. They are listed here in summary:

Key terms must be defined more specifically. Unclear or vague definitions could require licensing for businesses which were never intended to be covered by the BitLicense.

An on-ramp for StartupsUnder the new BitLicense, exemptions from the costs of licensure are available yet are granted at the “sole discretion” of the NY DFS superintendent. With discretionary regulatory comes uncertainty. We asked that a formal carve-out be made for small startups in a way that sets clear ex-ante standards and safe-harbors for budding entrepreneurs.

New product pre-approval. The BitLicense requires that licensees seek pre-approval from the superintendent for the introduction of new products. This is a bottleneck on innovation which will hurt New York businesses attempting to compete in a fast paced global marketplace.

Double licensing. A virtual currency business should not need to acquire both a money transmission license and a virtual currency license. Both kinds of licenses aim to accomplish the same thing: that companies are well-run, well-capitalized, and adequately serve consumers.

Extraordinary AML requirements. The BitLicense’s AML requirements go too far, imposing costs onto Bitcoin businesses that are not borne by any other money transmission business under state or federal law.

Lawful transaction obfuscation. As a matter of consumer protection, businesses must be allowed to obfuscate an individuals transaction history. The BitLicense as it is currently written would make this practice illegal, thereby exposing consumers to considerable risk.

To read the full comment, including our suggestions for addressing these issues, click here.

Based in Washington, D.C., Coin Center is the leading non-profit research and advocacy center focused on the public policy issues facing cryptocurrency and decentralized computing technologies like Bitcoin and Ethereum. Our mission is to build a better understanding of these technologies and to promote a regulatory climate that preserves the freedom to innovate using permisionless blockchain technologies.