A BitLicense is the common term used for a
business license
Business licenses are permits issued by government agencies that allow individuals or companies to conduct business within the government's geographical jurisdiction. It is the authorization to start a business issued by the local government.
A ...
for
virtual currency
Virtual currency, or virtual money, is a digital currency that is largely unregulated and issued and usually controlled by its developers and used and accepted electronically among the members of a specific virtual community. In 2014, the Europe ...
activities, issued by the
New York State Department of Financial Services
The New York State Department of Financial Services (DFS or NYSDFS) is the department of the New York state government responsible for regulating financial services and products, including those subject to the New York insurance, banking and fina ...
(NYSDFS) under
regulation
Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. For ...
s designed for companies. The regulations are limited to activities involving the state of New York or a New York resident. People residing in, located in, having a place of business in, or conducting business in the State of New York count as New York Residents under these regulations.
The license was introduced and designed by
Benjamin Lawsky
Benjamin Meier Lawsky (born April 14, 1970) is an American attorney and New York State's first Superintendent of Financial Services serving through June, 2015, and former Acting Superintendent of Banks serving through 2011.
Early life and educa ...
, New York's first Superintendent of
Financial Services
Financial services are the Service (economics), economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, acco ...
, in July 2014. Chartered entities do not require an explicit BitLicense, but may instead proceed with virtual currency activities via limited purpose trust charters approved by the NYDFS.
Overview
The regulations define virtual currency business activity as any one of the following types of activities:
* receiving virtual currency for Transmission or Transmitting virtual Currency, except where the transaction is undertaken for non-financial purposes and does not involve the transfer of more than a nominal amount of virtual currency;
* storing, holding, or maintaining custody or control of virtual currency on behalf of others;
* buying and selling virtual currency as a customer business;
* performing Exchange Services as a customer business, or;
* controlling, administering, or issuing a virtual currency.
The two following activities are excluded from the definition of virtual currency business activity:
* development and dissemination of software in and of itself;
* merchants and consumers that utilize virtual currency solely for the purchase or sale of goods or services or for investment purposes.
History
On July 17, 2014, the department released details on a proposed "BitLicense", which places regulations on any company or person that uses
cryptocurrencies
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank
A bank is a financial i ...
residing in New York.
The proposed regulations were officially published in the ''
New York State Register
The ''New York State Register'' is the official journal of the New York state government that contains information on proposed regulations and rulemaking activities. The ''New York State Register'' is published weekly by the New York State Depar ...
'' on July 23, beginning a 45-day comment period.
[ On February 25, 2015, a revised proposal notice was published, beginning another 30-day comment period.
It came into effect on August 8, 2015. At least ten ]bitcoin
Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...
companies announced they were stopping all business in New York State
New York, officially the State of New York, is a state in the Northeastern United States. It is often called New York State to distinguish it from its largest city, New York City. With a total area of , New York is the 27th-largest U.S. stat ...
because of the new regulations. The ''New York Business Journal
American City Business Journals, Inc. (ACBJ) is an American newspaper publisher based in Charlotte, North Carolina. ACBJ publishes The Business Journals, which contains local business news for 44 markets in the United States, Hemmings Motor News ...
'' called this the "Great Bitcoin Exodus".
In September 2015, Boston-based Circle
A circle is a shape consisting of all points in a plane that are at a given distance from a given point, the centre. Equivalently, it is the curve traced out by a point that moves in a plane so that its distance from a given point is const ...
was granted the first BitLicense, although in December 2016 the company had pivoted away from its bitcoin exchange to focus more on payments.
Two virtual currency limited purpose trust company charters were approved by the NYDFS in 2015, the first in May 2015 to itBit, now Paxos Trust Company
Paxos Trust Company is a New York-based financial institution and technology company specializing in blockchain. The company's product offerings include a cryptocurrency brokerage service, asset tokenization services, and settlement services. ...
, and the second charter in October 2015 to Gemini.
In October 2015, an article 78 was filed in the Supreme Court of the State of New York challenging the authority of the New York State Department of Financial Services
The New York State Department of Financial Services (DFS or NYSDFS) is the department of the New York state government responsible for regulating financial services and products, including those subject to the New York insurance, banking and fina ...
to define virtual currency. Justice St George heard the case on October 10, 2017 and dismissed the case on December 27, 2017. The case is currently on appeal.
On June 13, 2016, XRP II, LLC, an affiliate of Ripple Labs, was approved for a BitLicense.
On 22 March 2017, Coinbase was awarded the second BitLicense.
In November 2017, Tokyo based bitFlyer was awarded the fourth BitLicense and Genesis Global Trading was awarded the fifth BitLicense in May 2018.
In June 2018, Hong Kong based Xapo
Xapo is an international, private bank headquartered in Gibraltar and licensed by the Gibraltar Financial Services Commission. The company originally provided a bitcoin wallet combined with a cold storage vault and a bitcoin-based debit card ...
was awarded the sixth BitLicense and Square, Inc.
Block, Inc. (formerly Square, Inc.) is an American multinational technology conglomerate founded in 2009 by Jack Dorsey and Jim McKelvey and launched its first platform in 2010. It has been traded as a public company on the New York Stock Exch ...
was awarded the seventh BitLicense.
BitPay was awarded the eighth BitLicense in July 2018.
In November 2018, Texas-based Coinsource, an operator of Bitcoin Teller Machines, was awarded the twelfth virtual currency license or charter.
In November 2018, New York-based institutional Bitcoin provider NYDIG was awarded a BitLicense.
In January 2019, Robinhood Crypto LLC, a subsidiary of Robinhood Markets Inc., and Moon Inc., dba LibertyX were awarded a BitLicense.
On April 9, 2019 Bitstamp USA, Inc., a subsidiary of Bitstamp Ltd. was awarded a BitLicense.
One day later, the NYDFS rejected Bittrex's application, citing concerns over capital requirements and lax anti-money laundering controls.
On December 3, 2019, SoFi Digital Assets, LLC, a subsidiary of Social Finance, Inc. was awarded a BitLicense as well as a money transmitter license.
On December 11, 2019, the NYDFS proposed a revision to BitLicense whereby a licensee can offer any coin from a public list on the NYDFS website. The revision is still pending.
In May 2020, Eris Clearing, LLC, a subsidiary of ErisX, secured a Virtual Currency License.
On June 24, 2020, DFS proposed a new conditional licensing framework that makes it easier for start-ups to enter the New York market. Under the proposed conditional licensing framework, entities may apply for a conditional license when partnering with an existing entity authorized by DFS to engage in virtual currency business activity.
On October, 21, 2020, PayPal
PayPal Holdings, Inc. is an American multinational financial technology company operating an online payments system in the majority of countries that support online money transfers, and serves as an electronic alternative to traditional paper ...
was the first entity approved for a conditional license in partnership with Paxos Trust Company
Paxos Trust Company is a New York-based financial institution and technology company specializing in blockchain. The company's product offerings include a cryptocurrency brokerage service, asset tokenization services, and settlement services. ...
.
References
External links
Virtual Currencies
in (Part 200 of Title 23 of) the New York Codes, Rules and Regulations
The ''New York Codes, Rules and Regulations'' (NYCRR) contains New York state rules and regulations. The NYCRR is officially compiled by the New York State Department of State's Division of Administrative Rules.
Contents
See also
* ''New York ...
BitLicense Frequently Asked Questions
From NYSDFS
{{Cryptocurrencies
Bitcoin companies
New York (state) law
United States business law
Cryptocurrencies
Economy of New York (state)