On July 17, 2014 the New York State Department of Financial Services (NYSDFS) released a proposed regulatory framework for businesses that use virtual currencies (e.g., Bitcoin) to apply for BitLicenses. The proposed policy would regulate businesses if they hold or transmit virtual currency on behalf of others, or if they convert virtual currencies to everyday currencies (e.g., USD). These rules were proposed to bring regulatory certainty, transparency, and clarity to virtual currency businesses (for background on the BitLicensing framework, read our previous post). Seeing areas that were ripe for improvement in these proposed regulations, ITIF filed comments with NYSDFS to encourage innovation, competition, and investment in virtual currency businesses.
Since the comment period ended on October 21, 2014, NYSDFS Superintendent Benjamin Lawsky has signaled that NYSDFS may adopt several of the recommendations outlined in our comments. Among them, Lawsky has signaled that BitLicenses will not apply to virtual currency miners—businesses or individuals that create and circulate virtual currency on the blockchain. Lawsky has also stated that NYSDFS is considering a transitional BitLicense for startups, and may exempt non-financial blockchain projects. We applaud Superintendent Lawsky and NYSDFS for their efforts to listen to stakeholders and adjust their proposal accordingly. As NYSDFS sifts through its bounty of rich suggestions, ITIF will continue to monitor the proceedings and add constructive input when possible. Going forward, NYSDFS should continue to work with stakeholders to ensure the BitLicense framework promotes innovation in virtual currency systems.
Photo Credit: Zach Copley