Cryptocurrency exchange ShapeShift has announced it will terminate service to Washington state residents due to the BitLicense-style regulations imposed by the passage of Senate Bill 5031. The company called the state’s position “unethical, wasteful, and reckless.”
ShapeShift made the announcement in a blog post, explaining that state had made the regulatory burden too great to operate effectively and protect their users’ personal information. The company joins several other major cryptocurrency exchanges in leaving the state over Senate Bill 5031, including Bitstamp, Bitfinex, and Poloniex.
The new rules, which took effect in July, apply money transmitter laws to virtual currency operators. Exchanges such as ShapeShift are required to apply for a license and post a surety bond, a process which could cost hundreds of thousands of dollars. The law also requires virtual currency operators to obtain and store personal data about their clients, which ShapeShift argues will make their information subject to theft from hackers.
As the company states in the post:
The state’s regulators have taken the position that a new law, “Senate Bill 5031”, should require a license for blockchain service providers operating in the state. Under this interpretation of the law, we would now be required to ask permission from Washington before we buy and sell our own property for our own account. Moreover, we would be required to spend hundreds of thousands of dollars to maintain a license, only to extract our users’ personal information and store that information for hackers to steal.
The company excoriated Washington regulators for taking such a “reckless” position on digital currency:
We believe the position that Washington’s regulators have taken is unethical, wasteful, and reckless. We cannot expect the same people, and the same thinking, that designed, built, and promoted the legacy fiat financial system to do what is needed to build a better alternative.
The Washington regulations are reminiscent of the controversial BitLicense policies passed in New York. After these laws were passed in 2015, a number of bitcoin businesses–including ShapeShift–terminated service to the state in what was described as the “Great Bitcoin Exodus” by the New York Business Journal.
Replying to a client who claimed it was a “shame” that ShapeShift was leaving the state rather than submitting to the regulatory process, CEO Erik Voorhees stated the decision was made with customers in mind.
We will not be extorted. And what our customers deserve is to make their own decisions with their own property, not be told by politicians which private parties they are permitted to transact with….We’ll continue protecting users by building systems which are safer than the status quo; the hideous banking system such regulators have long endorsed, designed, and shielded from competition.
“Since such protection is longer permitted in Washington State,” Voorhees continued, “we are no longer able to work with its people.”
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