Bitcoin company Xapo recently released its second comment letter on New York’s revised BitLicense. Additionally, the company has teamed up with other bitcoin industry leaders in submitting a combined comment letter to provide further feedback on the BitLicense proposal.
After BitLicense was introduced by the New York Department of Financial Services (NYDFS) last year, Xapo released its first letter providing its comments. The NYDFS released its revised BitLicense proposal in February 25, 2015. Shortly afterward, on March 27, 2015 Xapo released its second BitLicense comments.
Xapo’s BitLicense Comments
Xapo’s latest commentary highlights two key points:
1. The BitLicense Proposal remains overly broad in scope and application:
Many elements in the BitLicense Proposal relating to the application, granting and maintenance of a license remain subject to the Superintendent’s discretion. The risk is that this type of discretion can create unpredictability, may be inconsistently applied, and may even be subject to abuse (for example, favoring one business model or company over others).
2. The BitLicense Proposal continues to impose an undue burden on bitcoin companies:
The regulatory framework application to bitcoin companies would be in excess of New York’s existing money transmission licensure framework on several key points. This is unduly burdensome at present in light of the volume and activity of bitcoin companies. We believe that bitcoin transactions may be at a level so small as to not be suitable for existing regulation, or possibly any regulation at all, so to face increased regulation seems inconsistent with allowing a nascent industry to innovate in a responsible way.
Xapo and Industry Leaders’ Comments
Xapo, Coinbase, Bitpay, Coinx, Bitcoin Foundation, Circle, Bitstamp, Bitnet, and Bitreserve also submitted BitLicense comments on March 27, 2015 representing themselves as an “Industry Working Group”.
The companies express:
In its current form, while significantly improved from the previous draft, we believe the BitLicense Proposal still contains measures that impose disproportionate burdens on Bitcoin firms that will hinder positive innovation. This is worrisome given the potential for other
jurisdictions to emulate the NYDFS and the fact that many Bitcoin businesses have a presence in New York. As such, we believe the BitLicense Proposal should be revised in a few key areas.
They propose these clarifications and considerations for BitLicense:
- The meaning of “storing, holding, or maintaining custody or control of Virtual Currency on behalf of others.
- Whether obtaining a BitLicense would satisfy a licensee’s obligation to also obtain an MTL.
- It should not require prior approval for product updates.
- It will impair venture capital fundraising.
- It unnecessarily duplicates federal anti-money laundering (AML) obligations.
- It’s requirement of disclosure of material risks, general terms and conditions, the terms of transactions in both the English language and in any other predominant language spoken by the customers of the licensee is unduly burdensome.
- The requirement that each licensee furnish customers with a written disclosure of the terms and conditions “prior to each transaction in Virtual Currency” is overly broad and burdensome.
- The requirement that licensees furnish customers with receipts is duplicative in application.
BitLicense Regulation Near
The 30-day comment period for BitLicense has officially ended as of March 27, 2015. The next BitLicense draft will be officially introduced into New York law.
What are your feelings on BitLicense and it’s effects on Bitcoin and cryptocurrencies?