New Proposal Clarifies N.Y. BitLicense Requirements

Dec. 22, 2014

New Proposal Clarifies N.Y. BitLicense Requirements On Thursday, during a speech at the Bipartisan Policy Center in Washington, New York Department of Financial Services Superintendent Benjamin Lawsky outlined a new proposal regulating companies that enable Bitcoin transactions for online commerce. When the DFS announced the initial proposal this summer, criticism from the Bitcoin community was immediate and sharp. Many felt New York’s proposal to issue BitLicenses was overbroad and didn’t give affected parties time to adequately comment. The new proposal, offered Thursday after the original comment period was extended, seems to have addressed some of the original concerns.

Lawsky said one of the most important aspects of the new proposal is clarifying exactly who would be subject to the regulation. Many critics said the initial proposal, as written, would have subjected individual users and holders of virtual currencies to the regulations. Lawsky said the new proposal makes it clear that is not the case. In addition, software developers, loyalty and rewards programs and bitcoin miners are not required to obtain a license under the new proposal. The new proposal also will treat startups less strictly.

“One of the most consistent concerns we heard in the comments was about the impact of the compliance costs on new or fledgling virtual currency enterprises,” Lawsky told the audience in Washington. “We have faced somewhat similar issues in the community banking context as a regulator, and we wanted to work in good faith to try and identify a solution. As such, the revised regulation will offer a two-year transitional BitLicense, which may be issued to those firms who are unable to satisfy all of the requirements of a full license, and will be tailored to startups and small businesses.”

DFS made several other concessions including shortening KYC record-keeping requirements. The full text of the new proposal has not been made available yet. When it is, Lawsky said, there will be an additional 30-day comment period and the agency hopes to have the final regulatory framework ready in “early 2015.”