Bitcoin Industry Working Group: New BitLicense Better But Not Good Enough

Bitcoin industry leaders have issued a joint letter on the revised BitLicense proposal.

Bitcoin industry leaders have issued a joint letter on the revised BitLicense proposal, saying that while progress has been made, major issues are outstanding.

Benjamin Lawsky of the New York Department of Financial Services (NYDFS) released a revised BitLicense draft last month. The framework would regulate how businesses can work with digital currency in the state and took into account abundant critique received in response to the initial draft last year.

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Legal representatives from the following companies and organizations contributed to the letter: Xapo, Coinbase, BitPay, CoinX, Bitcoin Foundation, Bitstamp, Circle, Bitnet and Bitreserve. Collectively, they conveyed their message as the “Industry Working Group”.

The group lauded the NYDFS for its continued efforts and for its revisions to the original draft. However, the 7-page letter argued that there several requirements are highly burdensome and/or unnecessary. Among its arguments:

– NYDFS approval should not be required for product updates.

– The requirement to inform the NYDFS upon change of control will stifle venture funding because the threshold for control is too low. Instead of 10%, it should be 25%, as used in banking regulations.

– Disclosure of risks, terms and conditions to consumers shouldn’t have to be translated into their predominant language.

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– Disclosure of terms and conditions before every transaction is highly burdensome.

– Companies shouldn’t have to issue additional receipts

In addition, clarity is sought on the following issues:

– The definition of “storing, holding, or maintaining custody or control of Virtual Currency on behalf of others”, particularly as it pertains to self-hosted wallets.

– If a BitLicense absolves the need for a money transmission license. This leads to the question:

“What value results from requiring double licensing, especially as the BitLicense standards are in many cases higher than the equivalent money transmitter standards?”

– When a conditional license would be granted

As the letter was dated March 27, it did not include reference to recent allegations of federal law enforcement agents’ fraudulent bitcoin dealings. Future commentary may well include requests for regulations to ensure the trustworthiness of law enforcement with bitcoins.

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