BitPay on BitLicense proposal: Bitcoin gets unfair treatment, will hamper jobs and innovation

BitPay has issued a document outlining its concerns with the BitLicense proposal, joining a chorus of Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term enthusiasts and businesses worried that it would adversely impact Bitcoin. Two months ago, China's three largest bitcoin exchanges penned a joint open letter doing the same.

BitPay's letter was authored by its Chief Compliance Officer, Tim Byun, a former Visa executive brought aboard in June.

BitPay expresses its appreciation to Ben Lawsky, who has spearheaded the proposal, for his efforts to foster Bitcoin innovation. However, they believe the current proposal will have the opposite effect. The concerns are broken down into four sections:

"Lacks Innovative Rule Making That Will Deter Jobs & Innovation"

It seems as though the proposal is "a compilation of every banking rules and regulations that exist". For Bitcoin, a more appropriate treatment would take the form of a risk-based model and take into account the power of Bitcoin's Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Read this Term.

For example, the requirement for audited financial statements should be replaced with proof of solvency.

The requirement for a dedicated compliance officer (which happens to be Byun's current role) should be eliminated. It is sufficient for the principal officer to fulfill the required duties.

Cybersecurity requirements should also be risk-based, without the need for dedicated cybersecurity personnel, which can be a heavy burden for startups.

"Creates an Unlevel Playing Field for Bitcoin Transactions"

When it comes to reporting bitcoin transactions, Bitcoin is given tougher treatment than fiat. Names, account numbers, and physical address shouldn't have to be collected for every transaction. "Merchants on Broadway do not collect such information for each transaction whether via cash for a hotdog or via debit cards to attend a show."

Similarly, ID shouldn't be required for large transactions.

"Disregards Leveraging Existing Local/National/International AML Frameworks"

Existing anti-money laundering regulations should be leveraged, instead of customized rules for virtual currency.

There should be an exemption from licensing requirements to those transacting as "Agent of the Payee", as per the existing Banking Law. There should also be an exception to those transmitting funds solely for the purpose of the sale of goods and services, as found in the FinCEN regulations.

"Lacks Clarity Whether Ancillary Bitcoin Activities are Covered by Regulations"

It should be specified that ancillary activities, such as software development and mining, should not be construed as "securing, storing, holding, or maintaining custody or control of Virtual Currency on behalf of others" or "controlling, administering, or issuing a Virtual Currency."