New York Department of Financial Services Issues 14th BitLicense
Today, November 14, 2018, the New York State Department of Financial Services (DFS) announced that it has approved the application of NYDIG Execution LLC, a subsidiary of NYDIG LLC, for a virtual currency license and a money transmission license. The approval of this so-called “BitLicense” or “Virtual Currency License” application is the 14th of its kind and is required under New York State law in order for a company to engage in “any Virtual Currency Business Activity.”
Under the BitLicense, NYDIG Execution LLC is allowed to offer secure custody and trade execution services, as well as to operate as a custodian for virtual currencies, including bitcoin, bitcoin cash, ether, ripple and litecoin.
DFS Superintendent Maria T. Vullo approved the request, stating, “Today’s approval further demonstrates that operating within New York’s robust state regulatory system leads to a stronger fintech marketplace and promotes innovation and necessary compliance with effective risk-based controls.”
First enacted in August 2015, BitLicense regulations caused an outcry from the community. Some industry companies such as Circle pursued a BitLicense, and others such as itBit (now Paxos Trust Company) received approval to operate as a “chartered trust company” with DFS oversight. However, many left the state for more accomodating jurisdictions in what the New York Business Journal called “the Great Bitcoin Exodus,” citing overly burdensome regulatory hurdles, excessive disclosure requirements and financial disincentives in pursuing the license applications.
San Francisco–based exchange Kraken withdrew from servicing New York residents because of the state’s new licensing requirements. In a blog post titled “Farewell, New York,” the founders of Kraken stated, “Regrettably, the abominable BitLicense has awakened. It is a creature so foul, so cruel that not even Kraken possesses the courage or strength to face its nasty, big, pointy teeth.”
The process of granting Virtual Currency Licenses had been slow initially, with Coinbase acquiring the third-ever BitLicense in January 2017, 16 months after the final rules around virtual currencies were adopted. However, 2018 has seen a rise in the number of licenses granted, with nine this year, the seventh of which was awarded to ATM operator Coinsource only two weeks ago. NYDIG’s license comes eight months after a proposed alternative to BitLicense regulations was put forth in the New York State Assembly. As of this writing, that proposed legislation is still in committee.