Difference between revisions of "BitLicense"

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BitLicense is the common name for the license issued by New York State to [[cryptocurrency]] businesses. It was the first and, at least until mid-2019, only license or registration for [[cryptocurrency trading platform]]s and brokers in the U.S. The rules apply both to New York resident persons and entities and to persons and entities out of state that conduct cryptocurrency business with New York residents. On June 24, 2015 the [[New York State Department of Financial Services]] (DFS) published a set of rules called "Virtual Currencies," the application of which results in a so-called BitLicense that can be granted by the department.<ref>{{cite web|url=https://www.dfs.ny.gov/legal/regulations/revised_vc_regulation.pdf  
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BitLicense is the common name for the license issued by New York State to [[cryptocurrency]] businesses. It was the first and, at least until mid-2019, only license or registration for [[cryptocurrency trading platform]]s and brokers in the U.S. The rules apply both to New York resident persons and entities and to persons and entities out of state that conduct cryptocurrency business with New York residents. On June 24, 2015 the [[New York State Department of Financial Services]] (NYDFS) published a set of rules called "Virtual Currencies," the application of which results in a so-called BitLicense that can be granted by the department.<ref>{{cite web|url=https://www.dfs.ny.gov/legal/regulations/revised_vc_regulation.pdf  
 
|name=New York Codes, Rules and Regulations |org=New York State Department of Financial Services|date=May 18, 2018}}</ref><ref>{{cite web|url=https://www.dfs.ny.gov/legal/regulations/bitlicense_reg_framework.htm
 
|name=New York Codes, Rules and Regulations |org=New York State Department of Financial Services|date=May 18, 2018}}</ref><ref>{{cite web|url=https://www.dfs.ny.gov/legal/regulations/bitlicense_reg_framework.htm
 
|name=Bitlicense Regulatory Network|org=New York State Department of Financial Services|date=May 18, 2018}}</ref>  
 
|name=Bitlicense Regulatory Network|org=New York State Department of Financial Services|date=May 18, 2018}}</ref>  

Revision as of 12:51, 12 December 2019


BitLicense is the common name for the license issued by New York State to cryptocurrency businesses. It was the first and, at least until mid-2019, only license or registration for cryptocurrency trading platforms and brokers in the U.S. The rules apply both to New York resident persons and entities and to persons and entities out of state that conduct cryptocurrency business with New York residents. On June 24, 2015 the New York State Department of Financial Services (NYDFS) published a set of rules called "Virtual Currencies," the application of which results in a so-called BitLicense that can be granted by the department.[1][2]

Claiming that “DFS, of its own initiative, and without the New York State Legislature’s mandate or instructions, adopted a regulatory scheme (commonly called the ‘BitLicense’) to quash the growth of cryptocurrency-based businesses in New York,” Theo Chino sued to abolish the Bitlicense. First filed in 2015, Chino's suit claims that the Bitlicense discriminates against bitcoin businesses such as his payments company, Chino Ltd. The case moved to the New York Court of Appeals in September 2019.[3]


Bitcoin-bitlicense.jpg

Framework

The New York BitLicense is comprehensive. It applies to all persons in New York State or doing business with New York State persons from another location.[4] It covers a wide range of activities including transmission of cryptocurrency, holding cryptocurrency for others, buying and selling cryptocurrency as a customer business, providing exchange services to customers, and issuing cryptocurrency.[5] New York State-chartered banks are excepted from the rules if they have previously received specific appropriate permission from the Department of Financial Services to engage in cryptocurrency business activities.[6] Exempted also are persons simply making or receiving payments in cryptocurrencies, participants in customer affinity programs that award tokens, and software providers which do not handle or hold cryptocurrencies for customers.[7]

Any entity or individual who wants to conduct a cryptocurrency business in New York must apply to the Department of Financial Services and provide extensive information about the its own business and that of its affiliates, detailed biographical information about all key people along with an independent investigatory report, financial statements, banking details, copies of written policies and procedures. As of July 24, 2019 fourteen firms had been approved as BitLicensees: Circle, XRP II, Coinbase, Bitflyer, Paxos, Xapo, Square, Inc., BitPay, Coinsource, Robinhood, Moon Inc., LibertyX, Bitstamp, two subsidiaries of SeedCX, and Genesis Global Trading.[8][9][10][11][12][13][14]

As New York State-chartered trust companies, Gemini and itBit do not have BitLicenses. They have received specific authorizations from the Department of Financial Services to operate their cryptocurrency exchanges in accordance with their trust charters.[15] The Intercontinental Exchange's affiliate, Bakkt, received a trust company license which enables it to provide delivery services on the exchange's bitcoin futures contracts.[16]

Updates

In December 2019, the NYDFS released a press release in which it proposed two changes for companies seeking to list their digital assets in New York. According to the announcement, the proposed changes were designed to "enhance efficiency and enable VC licensees to offer and use new coins in a timely fashion." The first aspect of the proposal was the creation of a website run by the NYDFS that lists all coins permitted by the agency; the second part of was a framework for the creation of company coin-listing policies "that can be tailored to a VC licensee's specific business model and risk profile." The press release also said that the NYDFS would be seeking public feedback about the proposal.[17][18]

References

  1. New York Codes, Rules and Regulations. New York State Department of Financial Services.
  2. Bitlicense Regulatory Network. New York State Department of Financial Services.
  3. A lawsuit against NYDFS to abolish BitLicense moves to the state’s highest court. The Block Crypto.
  4. Lawflash. Morgan Lewis.
  5. New York’s Final “BitLicense” Rule: Overview and Changes from July 2014 Proposal. Davis Polk.
  6. Lawflash. Morgan Lewis.
  7. New York’s Final “BitLicense” Rule: Overview and Changes from July 2014 Proposal. Davis Polk.
  8. NY Grants Fifth-Ever BitLicense to Genesis Global Trading. Coindesk.
  9. DFS GRANTS VIRTUAL CURRENCY LICENSE TO BITSTAMP USA, INC.. NYDFS.
  10. Department Grants New Virtual Currency License to Xapo Inc.. NYDFS.
  11. Paxos Trust Company LLC, an Existing DFS Licensee, is Now Authorized to Offer Additional Products and Services. NYDFS.
  12. DFS GRANTS VIRTUAL CURRENCY LICENSE TO BITPAY, INC.. NYDFS.
  13. DFS GRANTS VIRTUAL CURRENCY LICENSE TO SQUARE, INC.. NYDFS.
  14. New NYDFS Division to Oversee Licensing for Cryptocurrency Startups. Coindesk.
  15. NYDFS GRANTS CHARTER TO “GEMINI” BITCOIN EXCHANGE FOUNDED BY CAMERON AND TYLER WINKLEVOSS. NY Department of Financial Services.
  16. FINANCIAL SERVICES SUPERINTENDENT LINDA A. LACEWELL ANNOUNCES DFS GRANTS CHARTER TO BAKKT. NYDFS.
  17. NYDFS proposes new guidance for listing tokens on licensed crypto firms. The Block.
  18. Proposed Guidance Regarding Adoption or Listing of Virtual Currencies. NYDFS.