New York BitLicense Falls Short
Innovation under threat in New York as confusing language remains.
Washington, DC -- The final language of New York's Department of Financial Services (NYDFS) BitLicense, released today, contains several provisions which will impede digital currency innovation in the state.
Coin Center, a nonprofit research and advocacy group focused on the public policy issues facing cryptocurrency technologies, has been at the forefront of the push for a sound BitLicense.
"The Department was receptive to public input, and the language we see here is improved from the original proposal," said Executive Director Jerry Brito. "Yet the final BitLicense is far from perfect. Despite the changes to anti-money laundering requirements that the superintendent cited in his speech, the final Bitlicense still creates an unprecedented and discriminatory state-level AML reporting obligation. The new language is vague and unclear about how compliance with federal regulations will exempt a BitLicensee from those state-level obligations. My question is, if you register with FinCEN, do you have AML obligations to New York State?"
"The only consolation is that now businesses have clarity on some other obligations. It's a mixed bag, is the best that can be said about the BitLicense," he said. "Other states are already looking to the BitLicense as a model for their own frameworks. We are working with them to ensure they do not repeat the mistakes made here."
While Coin Center is pleased to see an improved BitLicense, it notes that there are still several problematic provisions, which they argue will impede the development of digital currency businesses in New York:
- Anti money laundering requirements are improved but vague.
- A requirement that new products be pre-approved by the NYDFS superintendent.
- Custody or control of consumer funds is not defined in a way that takes full account of the technology’s capabilities.
- Language which could prevent businesses from lawfully protecting customers from publicly revealing their transaction histories.
- The lack of a defined onramp for startups.
"The final BitLicense still creates a lopsided regime as between digital currency businesses and traditional money transmitters and banks. It has cybersecurity and state-level anti money laundering requirements that will not and have never applied to the legacy payments industry." said Coin Center Director of Research Peter Van Valkenburgh, who authored two comments on the proposal. "The Department has rationalized this discrepancy by suggesting that it would to apply the same heightened standards to the banks and money transmitters. With the Superintendent's imminent departure, however, we are left wondering if that will be the case."
Van Valkenburgh and Brito recently published a model framework for digital currency legislation designed to help lawmakers craft sound, attractive, policy for the technology.