Industry analysts have stated that a BitLicense template is not the way forward for the U.K., according to a report from EuroMoney.
In June 2015, the New York Department of Financial Services (NYDFS) released its application for a ‘License to Engage in Virtual Currency Business Activity’, also known as a BitLicense. The New York BitLicense was created to protect consumers from fraud and loss of money, but seems a tad bit invasive and time-consuming.
Applying for the license involves large amounts of paperwork, burdensome reporting requirements, and expensive attorneys. Not only that, but there is the $5,000 application fee to face while a completed application can run up to 500 pages. Unsurprisingly, it received many critics who claimed that it put too much of a burden on fledging startups with many stating that they would not be serving people in New York.
After all, the whole point of using digital currencies such as bitcoin is to conduct transactions anonymously on a public ledger by a peer-to-peer network, thus ensuring an individual’s privacy while maintaining transparency.
However, the New York BitLicense took a step backward in this regard.
Of course, that didn’t stop Coinbase, one of the leading bitcoin businesses, from submitting for a BitLicense in New York State, to gain regulatory approval in August of the same year.
Unsurprisingly, though, there has only been two BitLicense issued to date.
Circle Internet Financial Ltd., a Boston-based bitcoin startup, became the first firm to receive a New York State BitLicense, permitting it to provide digital currency services in New York.
Ripple Labs Inc. recently received their license earlier this year.
Since then, however, no other company has officially received a license and doesn’t seem likely as the NYDFS continues to drag the license process on.
Despite the initial promises the BitLicense made at the start, they have failed to materialize as the licensing process gets clogged up.
In October, Steve Beauregard, GoCoin CEO, said the license was ‘not worth the effort.’ “It’s too overreaching and burdensome, especially for the smaller companies,” the executive said.
Brian Forde, director of the MIT Digital Currency Initiative, said in a blog that New York risked becoming the ‘bitcoin backwater of the U.S.’
While Jesse Powell, co-founder and CEO of Kraken, stated: “Many fear it will stifle innovation in the industry and exclude New York from the developing currency.”
And yet, while regulation of digital currencies such as bitcoin may eventually increase confidence in consumers and businesses, it doesn’t provide the answer for the U.K.
According to Dan Andersson, founder of LEOcoin, as reported on EuroMoney, too much regulation around digital currency can produce a negative impact.
Jim Harper, a senior fellow at Washington-based think tank the Cato Institute adds that:
The BitLicence did not create certainty about the rules of the road for bitcoin businesses in New York and it did not create an upwelling of bitcoin business activity.
Featured image from Shutterstock.
Last modified: May 21, 2020 10:11 AM UTC