A recent roundtable discussion involving representatives of leading companies in the Bitcoin industry reiterated that the current BitLicense proposal is unacceptable.
Representatives gathered from Circle, BitPay, Coinbase, Xapo- and even Visa- to discuss the implications of the current proposal, which may come into effect in less than a month. The group echoed comments made by the “Industry Working Group”, many of which were part of the roundtable discussion, several weeks ago.
Participants outlined four key pain points in the current proposal, which seeks to regulate how digital currency companies operate in New York State:
(1) Regulate exchangers, not the Bitcoin protocol. Individual wallets, based on open source technology, should not be the target of anti-money laundering (AML) measures. Attempts to do so “will likely prove ineffective, impeding the growth of the virtual currency sector in New York with little benefit to law enforcement,” according to the group.
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(2) Duplicate licensing: Many businesses have already obtained adequate money services business licensing. Requiring a separate license to operate with digital currency “is duplicative and unnecessary, introducing barriers and costs that will make it impossible for emerging startups to scale, compete and move the industry forward.”
(3) Permission shouldn’t have to be sought from the New York Department of Financial Services (NYDFS) every time a new product or feature is introduced. A simple notification to NYDFS, at most, should be sufficient.
(4) Permission shouldn’t be needed for transfers of ownership representing more than 10% of the company. For traditional financial services companies, the threshold is 25%.
While at first glance, the arguments are highly intuitive, the issue of contention may be if digital currency businesses warrant extra layers of control due to what some will argue is their more risky nature. For example, authorities are likely to never get their hands on a sum of bitcoins once they’ve been transmitted from licensed companies, especially if they are sent overseas. In general, it is possible to render transactions effectively anonymous, making the law enforcement exercise that much more difficult.