ShapeShift Leaves New York After New Bitlicense

A few weeks back, we reported that New York had finally released their long awaited Bitlicense, which included 40 pages of rules and regulations that companies wishing to work with Bitcoins in New York had to comply with, besides purchasing a license for a fee of $5,000. 

At the time there was a general positivity regarding the Bitlicense. While many felt that it was far from ideal and that it might benefit the larger companies, it at least gave a clear way of operating legally with Bitcoins in the state.

The positivity also boosted from the fact that the architect behind the Bitlicense, Benjamin Lawsky, Superintendent of the New York Department of Financial Services, is to step down at the end of this month and many hoping that his replacement would losen up the rules.

While this may still happen, the Bitlicense has already driven out its first start-up from the state, as ShapeShift  announced that they will no longer operate in the state due to the new Bitlicense.

ShapeShift is a Bitcoin startup where users can exchange Bitcoins without registering an account, which is impossible to comply with in the rules of the Bitlicense. ShapeShift also felt that the Bitlicense would hold down their technological innovations and that it was better to just leave, rather than wait for a change.

Excluding New York Customers

Following the leave, ShapeShift also excluded all residents from New York from trading inside the platform, to avoid any legal trouble. When users from New York tries to visit ShapeShifts website, they get redirected to a site set up to explain how the Blockchain and Bitcoin can prevent identity theft.

“Bitcoin and blockchain technology have enabled a new standard of financial privacy and consumer protection… Unfortunately, in spite of the technological achievements that now protect consumers, some jurisdictions have legally mandated the continued extraction of sensitive private information.” A section of the states.

“Since New York has mandated unethical and dangerous data collection of users, we have no choice but to suspend service to that territory. We hope other jurisdictions will be less reckless with the private information of their residents. Finally digital commerce can be safe—if only regulators would let it happen.” Erik Veorhees, Chief Executive Officer at ShapeShift said to the press on Wednesday.

Not Affecting The Bitcoin

While this will not have any effect on the Bitcoin as a whole, it shows that the regulations that are being imposed around the globe needs to be better than they are today, to allow the technology to blossom and create something unique that we can use in the future.

ShapeShift will still continue their operations outside of New York, as there are no other states in the US that has currently regulated the Bitcoin or any other cryptocurrency. Hopefully we will see the rules lighten up in New York, allowing smaller companies to continue operating in the state as well as seeing that the tracking of customers doesn’t need to be as extreme as it currently is.

New York’s Bitlicense Rules Officially Released

New York has been looking into regulating the usage of Bitcoins for companies for a long time and while rumours have been circulating in regards to what exactly the Bitlicense rules would include, nothing has been made official – Until today that is.

Because today the official rules for the Bitlicense were released, which means that companies who wants to use the cryptocurrency now have an official guideline with rules to follow if they wish to operate in New York.

What’s interesting about the Bitlicense is that it might be the first step towards complete regulation in the US, with many other states expression interest in the Bitlicense. Ben Lawsky, Head of New York’s Department of Financial Services (DFS) officially released the rules and answered a few of the press’ questions.

The new regulations has a whopping 44 pages of rules, laws and guidelines on how to operate with Bitcoins in New York, which you can read more about here. 

The DFS has regulatory oversight over many companies, including banks and insurance companies. Amongst the companies regulated under them are Goldman Sachs and Barclays, proving that they are serious about the Bitlicense.

All companies who wants to operate in New York and use Bitcoins needs to obtain a Bitlicense, which costs $5,000, a mere cost for most companies. The fee is not refundable and the license can be revoked if a company breaches any of the rules stated in the Bitlicense agreement.

“No person shall, without a license obtained from the superintendent as provided in this part, engage in any virtual currency business activity.” The document states, making it clear that you cannot operate with cryptocurrencies in New York without a license.

But despite the low cost for a Bitlicense, it still won’t be easy for small startup’s and medium sized companies to obtain the license, as the agreement also states that every company needs a compliance officer. The compliance officer will be in charge of ensuring that the company follows all state and federal laws in regards to money transmission and money laundering.

This has led to some concerns from people who believes that the Bitcoin should be usable for all companies, not just the big ones who already makes a ton of money in the fiat-money industry. They fear that the Bitcoin industry will be taken over by the larger corporations and leave the small companies, who can use the Bitcoin the most, out in the dark.

“Getting that balance right is hard, but it is key. We want to promote and support companies that use new, emerging technologies to build better financial companies. We just need to make sure that we put appropriate regulatory guardrails in place,” Lawsky said to the press in a speech he held at the BITS Emerging Payments Forum in Washington DC.

While the regulations seems to not be ideal, it is at least a step in the right direction to boost the Bitcoin usage in the US and make the mainstream consumer more aware of the fiat-money alternative.