New York Financial Regulator Releases Final Bitcoin Rules and Guidelines

Benjamin Lawsky, superintendent of New York’s Department of Financial Services (DFS), issued the final version of the controversial BitLicense. The 44-page document is designed to actively regulate virtual currency businesses in New York.

“There is a basic bargain that when a financial company is entrusted with safeguarding customer funds and receives a license from the state to do so - it accepts the need for heightened regulatory scrutiny to help ensure that a consumer’s money does not just disappear into a black hole,” highlighted Lawsky.

Strict compliance is a common theme in the controversial document, citing that without a license, companies will not be able to engage in virtual currency-related activities.

The initial cost for a licensing application is $5,000, which covers processing, reviewing and investigating fees. Payments are non-refundable for denied or withdrawn applications.

Businesses will be required to have a dedicated compliance officer who manages the company’s adherence to BitLicense regulations. Books and records must also be maintained in its original condition or format for seven years, starting from the date the files were created.

Such barriers to entry are likely to discourage startups from entering the nascent market. It may also make the industry less attractive for forward-thinking investors, which could stifle support for already established businesses.

Many feel that the BitLicense rules were drafted to protect traditional financial institutions by subjecting virtual currency firms to regulations unfit for the six-year-old technology.

Lawsky defended this accusation, clarifying that government regulations are crucial to the legitimacy of bitcoin.

“We are excited about the potential digital currency holds for helping drive long-overdue changes in our ossified payments system,” said Lawsky. “We simply want to make sure that we put in place guardrails that protect consumers and root out illicit activity, without stifling beneficial innovation.”