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 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 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]

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.[3] 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.[4] 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.[5] 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.[6]

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.[7][8][9][10][11][12]

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. [13]

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. Lawflash. Morgan Lewis.
  4. New York’s Final “BitLicense” Rule: Overview and Changes from July 2014 Proposal. Davis Polk.
  5. Lawflash. Morgan Lewis.
  6. New York’s Final “BitLicense” Rule: Overview and Changes from July 2014 Proposal. Davis Polk.
  7. NY Grants Fifth-Ever BitLicense to Genesis Global Trading. Coindesk.
  8. DFS GRANTS VIRTUAL CURRENCY LICENSE TO BITSTAMP USA, INC.. NYDFS.
  9. [https://www.dfs.ny.gov/about/press/pr1806141.htm DFS CONTINUES TO ADVANCE RESPONSIBLE GROWTH IN NEW YORK’S FINTECH INDUSTRY WITH NEW VIRTUAL CURRENCY APPROVALS Department Grants New Virtual Currency License to Xapo Inc. Paxos Trust Company LLC, an Existing DFS Licensee, is Now Authorized to Offer Additional Products and Services]. NYDFS.
  10. DFS GRANTS VIRTUAL CURRENCY LICENSE TO BITPAY, INC.. NYDFS.
  11. DFS GRANTS VIRTUAL CURRENCY LICENSE TO SQUARE, INC.. NYDFS.
  12. New NYDFS Division to Oversee Licensing for Cryptocurrency Startups. Coindesk.
  13. NYDFS GRANTS CHARTER TO “GEMINI” BITCOIN EXCHANGE FOUNDED BY CAMERON AND TYLER WINKLEVOSS. NY Department of Financial Services.