While the BitLicense has caused many companies to leave New York, those that intend to stay are progressing though the regulatory process. This week, one of the world’s largest Bitcoin services and wallet providers Coinbase became the 25thcompany to file for a BitLicense, which is expected to cost more than $100,000 in legal and compliance fees, according to Bitstamp Executive Vice President and chief legal officer George Frost.
Since February, Coinbase has continued to work with the New York Department of Financial Services (NYDFS) to improve the regulations and restrictions set on digital currencies such as bitcoin. Today, Coinbase is trying to engage with NYDFS in other states to become a fully licensed bitcoin exchange across the United States.
“Plenty of attention has been placed on New York, but the BitLicense application process is just one part of a larger multi-state licensing strategy that Coinbase has been executing for nearly two years and at significant expense,” a Coinbase spokesperson told Bitcoin Magazine. “Our plan has always been to work with the [NY]DFS, as we have with other states, to get fully licensed and continue to serve consumers, merchants and developers across the U.S.”
Depending on the size and nature of the business, the total cost required to become licensed in New York and to be fully compliant with BitLicense varies. The total cost for Bitstamp, the third-largest bitcoin exchange by trading volume, was around $100,000 including all fees, legal costs, and labor. This does not include the ongoing costs of compliance or future filings with the NYDFS.
In contrast, medium-sized bitcoin exchange Coinsetter has spent around $50,000, according to Jaron Lukasiewicz, Coinsetter CEO and founder. “I think its bigger cost, though, has been in the uncertainty it created for investors looking to invest in our space – hopefully that will begin to reverse itself now,” he said.
Although a Coinbase spokesperson declined to disclose the total amount of money the company has spent to comply with the BitLicense, he told Bitcoin Magazine, “The process was a significant undertaking … and we’re fortunate to have the internal resources and competent team to get this done. Our plan has always been to obtain the licensing required to operate in the state of New York, and we applied for the BitLicense as soon as it had been finalized by the [NY]DFS.”
Coinbase’s Contribution to BitLicense
Coinbase is one of the companies that submitted comments on initial drafts of the BitLicense to the NYDFS. Feedback from the Bitcoin industry was responsible for many of the changes and improvements made to the initial drafts of the BitLicense.
In one of the early versions drafted by the NYDFS, there was significant overlap between existing money transmitter regulations and the provisions of the BitLicense. Coinbase submitted a formal response to the NYDFS, asking for this duplication to be removed.
Coinbase said “the Financial Crimes Enforcement Network put a powerful anti-money laundering policy in place,” and that some of the provisions of the BitLicense could compel licensees to manage proprietary payment networks, thus removing the open protocol attribute of bitcoin. Coinbase said the BitLicense should just apply to businesses that hold funds on behalf of their customers.
This marks the start of Coinbase’s ambitious mission to become the first fully compliant bitcoin exchange throughout U.S. The firm has secured $75 million USD in its latest funding round in January, and plans to allocate a big part of its fund to become licensed in as many states as possible, to keep the title of the largest bitcoin exchange in the country.