Today, New York’s Department of Financial Services has released a proposal [PDF] for a “BitLicense” regulatory framework, becoming the first state to create regulations specifically for cryptocurrencies like Bitcoin.
WHO’S GONNA NEED A LICENSE?
Exchanges, online wallet providers, escrow services, and the creators, administrators, and issuers of virtual currency now have to get a license from the DFS to operate. This does not include cryptocurrency miners, so if you have a basement full of USB Bitcoin Miners with a box fan, you’re in the clear. If you’re buying with Bitcoins that you hold yourself or are selling directly in Bitcoin, you do not need one either.
AS A CUSTOMER, WHAT DO I STAND TO GAIN?
The biggest proposed regulation is that a “Virtual Currency” Business must “maintain a bond or trust account in United States dollars” as insurance for customers. That means no more MtGox Bitcoin Oblivion. If the exchange or wallet provider you work with goes out of business or loses your Bitcoins, you’ll get some of your money back. You’ll also get receipts, have a place to complain, and know that someone will inspect the business. Doesn’t that feel better already?
WHAT WILL I HAVE TO DO AS A BUSINESS?
Well, for one thing, you’ll have to act as a real business. That means such onerous regulations such as:
● Anti Money Laundering (AML) and Know Your Customer (KYC) compliance
● Offering receipts and contact info to customers
● Notifying customers that they can complain to the DFS
● Caring about cybersecurity so you don’t get hacked like everyone else
● Having a plan when your business implodes unlike some people
● Having enough money to meet capital requirements
● Keeping accurate accounting books
WHEN DID THIS ALL BEGIN?
The DFS has tried to be very open and transparent about this process. A year ago, the DFS started an investigation on the Bitcoin phenomenon. In January, they held a series of public hearings which are helpfully posted on Youtube. In February, DFS Superintendent Ben Lawsky even held a Reddit “Ask Me Anything.” Not only are these regulations posted on the DFS site, they’ve been posted to r/Bitcoin and their Twitter Accounts. After this, there will be a 45 day comment period starting July 23rd.
WHY ARE THEY REGULATING MY LIBERTARIAN DREAM WORLD, NOOOOO!
Have you seen the cryptocurrency landscape? If they’re not getting hacked, they’re crashing like crazy, being seized by the government for drug crimes, and engaging in illegal passport schemes. It’s a sad state of affairs for customers, so the DFS is doing something about it. New York State thinks its about time to grow up, get a tie, and drop your fantasy of anonymous anarcho-capitalist free market utopia.
Don’t tell me you’ll still be screaming caveat emptor, Ron Paul 2016 (Kill Your Parents) and Audit the Fed when your wallet is empty, your bitcoins are gone, and THERE IS NO BIT GOD.