BitPay has issued a document outlining its concerns with the BitLicense proposal, joining a chorus of Bitcoin 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.
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.
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“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.”