BitQuick and Local Bitcoins Terminate Service in NY due to BitLicense Compliance Costs
The world’s largest peer-to-peer bitcoin marketplace Local Bitcoins and bitcoin marketplace BitQuick have terminated their services in New York due to the strict restrictions and fees demanded by New York’s BitLicense.
Local Bitcoins is a unique case; as every single seller on Local Bitcoins would be required to pay $5,000 to apply for BitLicense. The Local Bitcoins team wrote on their blog:
“From today onwards users from New York are no longer allowed to use LocalBitcoins because of the legislation known as the BitLicense (23 NYCRR 200) which makes it a federal offense to sell virtual currency to people living in New York unless you have applied for the license. This new regulation would require anyone selling Bitcoins through our service to acquire the BitLicense if they sell Bitcoins to residents of New York.”
New Yorkers who have depended on the services of Local Bitcoins would have to cross the river and sell or purchase bitcoin in New Jersey legally.
Boost VC-backed bitcoin trading platform BitQuick has restricted access to New York residents and decided to join Shapeshift and GoCoin’s PleaseProtectConsumers.org campaign. The Please Protect Consumers campaign was first started by Shapeshift to educate the general population about the government’s deep involvement in Bitcoin, privacy and security.
“The fee and the compliance costs are just the start,” Jad Mubaslat CEO and founder of BitQuick told Bitcoin Magazine “No doubt those two things make it a deal killer for any small startup, but even putting that aside, this sets a dangerous precedent to other states. If every state did what New York did, it’d be $250,000 just to apply to do business in the United States. No American wants that.”
BitQuick said that the regulations and restrictions set for digital currency startups in New York is overbearing compared to the size of the Bitcoin industry. The worst part, BitQuick and Shapeshift say, is that the government is trying to get hold of sensitive customer data of all exchanges. Such storage of data leaves sensitive customer information vulnerable to data breaches and hacking attacks.
“Even multinational companies and trillion-dollar governments have been unable to build a track record of data security,” the Please Protect Consumers campaignstates. “Consider that in America alone, identity theft resulting from these treasure troves of personal data caused over $24 billion in losses to consumers and businesses in 2012, compared with only $14 billion for all household burglary, vehicle and property theft combined.”
Once exchanges begin to store sensitive customer data for every transaction/trade, they’d have to build separate storages to keep such data for government agencies and law enforcements to retrieve.
While eight bitcoin startups have already left New York, one bitcoin exchange, CoinSetter, has decided to meet every requirement of BitLicense.
Almost every startup in New York has left or is planning to leave the state due to BitLicense. By submitting to BitLicense, CoinSetter hopes to remain as the only “legal” and “licensed” bitcoin exchange in New York to serve bitcoin users abandoned by their previous bitcoin exchanges/startups.
“While we serve a global user base of bitcoin traders, New York has long been Coinsetter’s home,” Coinsetter CEO Jaron Lukasiewicz said. “We are happy to announce that Coinsetter will continue to be headquartered in New York City, a global capital of banking and financial technology, and to serve customers throughout New York State.”