With the help of Ben Lawsky the New York Department of Financial Services pushed forth its BitLicense. The measure of regulations and guidelines consists of a 44-page document giving the state’s requirements for Bitcoin businesses. These regulations released back in April, were posted with a deadline of August 8 2015. All companies must submit their application to operate digital currency throughout the entire state of New York.
Also Read: Ben Lawsky’s Revolving Door
“We remain concerned over specific components of the BitLicense that were left unchanged, including state-specific AML rules that are inconsistent with federal guidelines. Moreover, it’s troubling that this nascent industry is being subjected to more onerous regulations than those typically applied to legacy financial institutions.” — Coinbase
Executives and Investors have been very concerned that the BitLicense would hurt New York innovation and starting businesses. With KYC and AML rules and quite an extensive guideline to give the state private information many companies are unsatisfied with this law. Calling it and invasion of privacy, causing leaders like Erik Voorhees to create “Please Protect Consumers”. Businesses who join Please Protect Consumers make a pledge not to patronize consumer data collection. When creator Ben Lawsky announced his resignation many pundits and vocal Bitcoin communities celebrated throughout social media. Many thought that Lawskys creation of his newly formed venture, a cryptocurrency law firm was a bit “crony” after building the BitLicense. Meaning now Lawsky and his fellow members of the state can now find loopholes for their own benefit. The business he started is located in California, another state which looks as though it will adopt heavy regulation.
Since the announcement of the “official” BitLicense droves of existing businesses and exchange/wallet services have left New York. Some companies seemed skeptical like Coinbase, saying: “We remain concerned over specific components of the BitLicense that were left unchanged, including state-specific AML rules that are inconsistent with federal guidelines. Moreover, it’s troubling that this nascent industry is being subjected to more onerous regulations than those typically applied to legacy financial institutions.” CEO of Boston based Bitcoin startup Circle told press: “Would I welcome lighter touch? Sure, but I think it’s an important stake in the ground — for others, not so much.” It seems there are a lot of “others” not very pleased with the BitLicense regulations. On August 9 Nejc Kodrič CEO of BitStamp told twitter followers that their business would comply with the BitLicense submission.
The company Shapeshift, a cryptocurrency exchange based in Switzerland discontinued its services shortly after the first announcement of its finality. Voorhees said his company would not work with the implementations of the license. Noting consumers personal information is at risk and the regulations stifling innovation from the gate. After drawing his business away from NY the CEO announced his newly formed website called PleaseProtectConsumers.org. The websites initiative is a pledge to stop the collection of needless data from consumers. When leaving the state of New York the Shapeshift Founder, told CNBC: “It’s a moral and ethical stand we’re going take.”
The digital wallet service Xapo also has left the State of New York, moving its headquarters to Zurich. US based cryptocurrency exchange Poloniex terminated its featured services to users in the state on August 8. Customers of the site were issued this warning: “In accordance with the New York State Department of Financial Services, Poloniex will no longer be allowed to provide services to residents of the State of New York starting on August 8th, 2015. If you are a resident of New York, please take appropriate measures to withdraw your funds by 11:59pm Eastern Daylight Time on August 7th, 2015.” The company’s statements reveal that working in NY is not profitable after the license takes effect.
BitFinex one of the largest Bitcoin exchanges also closed its doors to the users located in the New York region. The BitFinex team said on its blog: “Due to financial regulation changes in the State of New York, certain Bitfinex services are no longer available for New York Residents. Bitfinex is not applying for a BitLicense at this time. Accordingly, Bitfinex is modifying account privileges for New York Residents, effective August 10th, 2015.” BitFinex is a longstanding crypto exchange that has operated in the US with a very large user base. As of August 15 New York residents must withdraw their assets from the exchange, otherwise all holdings will be exchanged to USD at spot price.
BTCGuild and Eobot has also closed their doors in the state of New York. Eobot the cloud company claimed the BitLicense was very restrictive and ceased operations on July 1st stating: “To All Customers: If you are residing in and/or accessing Eobot within the State of New York, US, please withdraw all coins and cease all mining with Eobot as of July 1, 2015, as we are ceasing all Eobot mining connections from within New York at that time. We regret that we must cease Eobot business within New York State, however the new BitLicense requirements in this state in place of compliance and cost burdens upon Eobot that we believe are excessive.” With basically the same reasons BTCGuild closed its operations on June 30th, citing the NYDFS license as an “invasive” set of regulations.
The Bitcoin exchange Kraken has announced it is also cutting off its services to New Yorkers on August 9. In a humerous blog statement the company says:
“Today Kraken discontinues service to New York residents.
Regrettably, the abominable BitLicense has awakened. It is a creature so foul, so cruel that not even Kraken possesses the courage or strength to face its nasty, big, pointy teeth. It’s at least a 40-man, bro.”
Listing a group of negatives to the BitLicense, Kraken tells its blog readers nine reasons why the company refuses to comply:
Additional attributes, attacks and debuffs include:
- no guarantee of support from New York banks
- no guarantee of enforcement against unlicensed competitors
- reduced consumer protection
- unjustifiable burden and restrictions on global operations
- unjustifiable bifurcation of the service for New York alone
- unjustifiable expense for the opportunity to compete for the small market
- no exemption from traditional money transmission licensing
- no onramp for small businesses
- dubious value to the consumer
A following statement from Kraken says that the protection from law enforcement “exceeds the market opportunity” to continue its operations in New York. The company suggests residents escape from the borders of NY and its territory before a fence of regulation confines the state. At the end of Kraken’s funny blog post statement the company offers information to contact politicians in New York over the issue.
With exchanges, wallet services, mining pools and other services stopping its operations in New York in large quantities it’s no wonder people agree regulation is not the answer. The free market is the explicit idea of Bitcoin and blockchain technology, the idea being the Ledger and associated businesses can self-regulate. Investors feel that the financial regime that used to hold the great state of New York has now lost its grip. Expressing that California will be also challenged by its implementations of law and policy. When pushing so hard for this license with his vocal politics and implementations, the law creator and vocal leader Lawsky should note the strong message from the late and great Murray Rothbard:
“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”
What do you think about Bitcoin services, leaving NY? Let us know in the comments below!