Banks, Not Startups, Will Need a BitLicense in New York

Benjamin Lawksy, superintendent of financial services of New York, said on Tuesday that the state will not require developers of digital currency software to take part in its proposed licensing regime, commonly known as the “BitLicense” plan.

“We are regulating financial intermediaries. We are not regulating software development,” Lawsky said in a speech at the Benjamin N. Cardozo School of Law in New York City. “To clarify, we do not intend to regulate software as software or software development. For example, a software developer who creates and provides wallet software to customers for their own use will not need a license.”

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The “BitLicense” plan, which is expected to unveil at the end of the month,  includes proposed rules on consumer protection, the prevention of money laundering, and cybersecurity. When it was first conceived many in the digital currency community warned that it might hurt New York as an innovation hub as developers will flee the state if strong and costly regulations will be applied to them. This statement seems to show the states regulators understand that risk and take it seriously.

While companies that are developing wallets or other software for virtual currencies will not need a license, nor will individual users, banks will not be exempt. “The banks we regulate cannot start providing virtual currency services without prior approval from DFS (Department of Financial Services), and they will be have to comply with any requirements that are otherwise imposed on virtual currency businesses,” Lawsky said.