BitLicense Blowback No Surprise to NYDFS Officials
Just as it seemed like the dust was settling around the New York Department of Financial Services (NYDFS) BitLicense regulations released last week, Erik Voorhees of ShapeShift.io raised new criticisms of the NYDFS, calling them “Orwellian” and making comparisons to North Korea.
NYDFS’s Matt Anderson was not surprised, telling Bitcoin Magazine: "We always recognized that there is going to be some part of this community that is against even pretty standard financial regulatory oversight measures, such as anti-money laundering controls and other consumer protections. That said, one digital currency company has already received a license from NYDFS and a number of others have stated they intend to seek BitLicenses shortly.”
Although ShapeShift.io is a Switzerland-based exchange, it has cut off service to it’s New York State customers who are redirected to its website PleaseProtectConsumers.org, with an explanation of why they are leaving New York and how bitcoin and blockchain technology can prevent fraud and identity theft.
The website calls on other digital currency companies to suspend service to their New York state customers and redirect its website to the PleaseProtectConsumers page.
Voorhees' company ShapeShift.io, which provides exchange services without asking customers for identifying information, recently launched the first digital currency exchange app for iOS.
Lots of unhappy campers in the Bitcoin community
In the week since the final BitLicense regulations were released digital currency companies and organizations have been weighing in, and it hasn’t been a pretty sight.
There weren’t enough changes between the second and final drafts to satisfy most of the original criticisms – that changes in the company’s products will be held up by a lengthy approval process, that smaller startups won’t have the cash to apply and that customers' private information should not end up in the hands of government bureaucrats.In addition, several company executives noted that there should have been an exemption for multi-sig products in the final draft noting that these don’t involve the company having full custody of customers’ bitcoin.
Organizations such as Coin Center are concerned that other states will follow suit and use the BitLicense program as a template. The nonprofit advocacy group Coin Center has launched a tracker that compares government policies about digital currencies between states.
The glass is half full
However, there was some recognition among bitcoiners such as Circle CEO Jeremy Allaire that the BitLicense program actually gives added credibility to digital currencies among the public and brings it inside the circle that includes governments.
Cameron and Tyler Winklevoss have been supportive of the BitLicense program and are waiting for their license to launch their NY Gemini exchange, saying “we feel like it's weeks …”Writing at Nasdaq.com, Martin Tillier says: “Some of the regulations are sensible and, by increasing public confidence in the currency, could give the growing industry a serious boost… There is no reason that Bitcoin-related businesses should be exempt from requirements that apply to other financial concerns, although it should be noted that they don’t stop criminal behavior. Bernie Madoff, et al, have proved that over the years. What they do, however, is increase consumer confidence, an important development if Bitcoin is to gain widespread acceptance.”
As NYDFS’s Matt Anderson notes: “Ultimately, we believe that prudent regulation will be important to building greater consumer confidence in digital currency and sparking wider adoption."
Job creation by government
Meanwhile, enterprise compliance company Identity Mind is selling its services to company compliance officers and administrators offering assistance in complying with BitLicense rules.
And, not to miss an opportunity, the New Jersey legislature sees a chance to lure disaffected digital currency business from New York State by offering tax breaks to these companies.