BitLicense has caused an Exodus of Bitcoin Companies out of New York
Effects of BitLicense Bitcoin NYC community are in crisis due to the way BitLicense is changing how lawmakers, consumers, businesses and innovators utilize Bitcoin in New York State. These laws were created as a push to regulate all cryptocurrency with the rise of Bitcoin following a series of high-profile law suits and media field trips.
What is BitLicense?
BitLicense is a set of laws regulating the use of cryptocurrency in businesses created the by New York Department of Financial Services (DFS). It outlines the regulations that businesses must follow in order to utilize Bitcoin (and other cryptocurrency as well). Most importantly it requires anyone utilizing that business tremendous amount of information to be stored of anyone utilizing Bitcoin. The entire document can be viewed here. Being a legal document, it is written in legal-speak consistent with lawyers and not meant to be read by “commoners”.
The best-known company to publicly acknowledge leaving New York is ShapeShift.IO, founded by Erik Voorhees, whose SatoshiDice became the first multi-million dollar exit for a bitcoin company.
BitLicense is worse than people thought…
BitLicense is a set of redundant laws preventing Bitcoin (and other cryptocurrencys) from being used in an illegal manner and for tracking those who use it. Anti-Money Laundering and Ursury laws are already in place to deter and prevent money laundering through business. It’s clear that BitLicense was created to limit the proliferation of it. It may be used that Bitcoin to become taxable, but that’s more for accountants.
A BitLicense is Incredibly Tough to Obtain
Acquiring a BitLicense has cost Circle more than $50,000 in legal fees, preparation and lost profits. Although the DFS (Department of Financial Services) oversees this process, it may involve multiple agencies and many professionals.
BitLicense Changed the Bitcoin Center NYC
The CryptoCrooks initially became obsessed by Bitcoin by visiting the Bitcoin Center on Wall Street. It was a mecca where investors, entrepreneurs and consumers alike would visit to buy sell and discuss Bitcoin. I messaged the Bitcoin Center about buying some Bitcoin recently. To which they responded “Go to the new Bitcoin Center on Cleveland Place to buy Bitcoin”. So we made the trip, only to learn there were no Bitcoin in the Bitcoin center. Our Article covers our thoughts concerning the new Bitcoin Center NYC.
We believe they failed to mention the BitLicense fiasco, but the more I thought about it, the more it made sense. Since a BitLicense is required for a business to utilize, recieve or send Bitcoin; the Bitcoin Center NYC was essentially reduced to an ATM with no Bitcoin.
Benefits of Bitlicense:
- Reduced transparency in financial (investment) businesses
- Increased reliability (faith) amongst those investing in such businesses
- Better Accountability – Better bookkeeping by bitcoin storing/sharing businesses
Disadvantages of Bitlicense Regulations:
- Higher cost of entry for bitcoin, cryptocurrency or virtual currency businesses, this means costs for legal, filing, and bookkeeping fees
- Increased regulation, fees, and decreased profits associated to the latter
BitLicense Needs to Adjust for the Community
There are only two companies with an active BitLicense. Several more are undergoing the process of obtaining one, but many companies have left NY in search of better regulatory environments. This list grows everyday, but includes: ShapeShift.io, Bitfinex, Poloinex, and LocalBitcoins.
One of the first businesses to be granted a BitLicense has been Circle. Circle is a company focused on creating an bitcoin exchange and wallet app.
New York City is regarded as one of the financial capitals in the world. It’s easy to understand the swift action taken by the BitLicense legislation, but not at the obscene level currently enforced. New York City is no stranger to laws causing prices to go up. This is most notably seen with the construction/real estate market. As more regulations are enacted, real estate prices have gone up exponentially. Regulations continue to advance and our review of Taxbit, shows how software has the potential to make accounting simpler.
BitLicense needs to be re-considered in order to accommodate smaller businesses or provide exceptions to allow entrepreneurs to grow out of the thriving Bitcoin marketplace. New York has already lost a large amount of its population to California and Florida. Don’t kid yourself, it’s not the weather, it’s all about the green (money).