What is a BitLicense?
A document released in June 2015 based around digital currencies (like Bitcoin) designed to strike a balance between protecting consumers and implementing common sense rules.
To give you a brief picture of the importance of BitLicense, the document states:
Bitcoin businesses that receive, transmit, store or convert virtual currency for customers; buy and sell virtual currency as a customer business; control, administer or issue a virtual currency; or perform conversions between bitcoin and fiat or any value exchange will need to be licensed to operate in New York.
You won’t need a license if you’re a retailer accepting Bitcoin as a form of payment.
“We are pleased that Superintendent Lawsky and the Department of Financial Services have embraced Bitcoin and digital assets and created a regulatory framework that protects consumers. We look forward to New York State becoming the hub of this exciting new technology.”
Superintendent Lawsky also told Business Insider:
“We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity – without stifling beneficial innovation. Setting up common sense rules of the road is vital to the long-term future of the virtual currency industry, as well as the safety and soundness of customer assets.”
The BitLicense is required for businesses engaged in the following virtual currency businesses:
- Receiving or transmitting virtual currency on behalf of consumers;
- Securing, storing, or maintaining control on the behalf of customers;
- Performing retail conversion services, including the conversion or exchange of Fiat Currency or other value into Virtual Currency, the conversion or exchange of Virtual Currency into Fiat Currency or other value, or the conversion or exchange of one form of Virtual Currency into another form of Virtual Currency;
- Buying and selling Virtual Currency as a customer business (as distinct from personal use); or
- Controlling, administering, or issuing a Virtual Currency. (Note: This does not refer to virtual currency miners.)
Key requirements for firms holding BitLicenses include:
- Safeguarding Consumer Assets
- Virtual Currency Receipts
- Consumer Complaint Policies
- Consumer Disclosures
- Anti-money Laundering Compliance
- Verification of Accountholders
- Reporting of Suspected Fraud and Illicit Activity
- Cyber Security Program
- Chief Information Security Officer
- Independent DFS Examinations
- Books and Records
- Reports and Financial Disclosures, Audit Requirements
- Capital Requirements
- Compliance Officer
- Business Continuity and Disaster Recovery
- Notification of Emergencies or Disruptions
- Transitional Period
These are the companies that have applied for a BitLicense in New York:
There have been a total of 22 companies that have applied for the BitLicense in New York to date.
These are the companies that have/are ceasing operations in New York:
- Local Bitcoins
- BTC Guild
- Genesis mining
Times have changed and the tech behind Bitcoin is tectonic.
For more information on the BitLicense check out The original DFS BitLicense framework on the NY .gov site.
If you want a summary of the details check out CoinDesk’s awesome report about the BitLicense.