Bitcoin in New York: The BitLicense Loses Some Bite

December 19, 2014         By: Steven Anderson

Bitcoin has been the subject of controversy almost since its inception, and with good reason.

Often misunderstood, sometimes clouded with biases, and packed with implications for the future of the economy as we know it, this is a currency that has as much potential as just about anything else out in the payments space right now.

With great potential comes great concern, and lawmakers have been very careful in terms of what’s allowed here and what isn’t. Benjamin Lawsky, superintendent for the New York Department of Financial Services, meanwhile, brought word about a BitLicense proposal that had some firms very nervous, but in this case, the news for those firms was on average pretty positive.

The BitLicense was specifically geared toward addressing firms that wanted to set up shop dealing with Bitcoin in New York.

In his keynote during a payments policy event hosted by the Bipartisan Policy Center, Lawsky offered up news that likely made many firms less on edge, as the revised BitLicense proposal was shown to offer quite a bit of flexibility.

Reports suggest that the final framework tackling these regulations would be in place in the opening days of 2015, and not long thereafter, Lawsky noted his office hopes to have “…several licensed firms and exchanges” operating out of the city.

That alone should be encouraging, but it gets better; Lawsky’s office noted that, under the new proposal, neither virtual currency miners nor software developers would need a license to operate in the city, nor would those who were holding bitcoin as a personal investment.

Not even retailers who accepted bitcoin as a currency would need licensing, freeing up a lot of smaller operations. Plus, those startups in the field would be allowed two years of grace period before needing to comply with the licensing terms, allowing said business to make sure operations were even viable to begin with.

What’s more, for those companies that do fall under licensing requirements, the requirement that addresses and transaction data be taken from all parties in a transaction is out, replaced with a simpler requirement that firms only get such data from their own customers—or account holders—and counter parties only where possible.

If it’s not possible, it won’t be held against anyone, based on reports. Just to top it off, record-keeping even got a bit of a break, with the time required to maintain records dropped from 10 years down to just seven.

None of this is set in stone of course, with a 30 day comment period to follow after official posting, which may come in the following days.

But the key point here is that New York is looking like it’s planning to be a lot more accommodating to bitcoin operations.

Maybe the city realized there was a lot of possibility in these operations, and the city could stand a boost to its tax base. Maybe the city was smarting over the feedback it got over the large soda ban attempts, and wanted to come down clearly on the side of not-bureaucracy.

There are any of a number of possibilities to explain just what’s going on here, but from the look of it, New York may be a bitcoin kind of place before too long. That opens up the field for a lot of opportunities—that miners and investors won’t be subject to licensing is a big enough step—and hopefully, this proposal will pass, or at least something like it.

2015 looks like it might be a big year for bitcoin in New York, and with the BitLicenses seemingly muzzled, it lends plenty of extra credence.