NEW YORK (InsideBitcoins) – Sean Neville is the co-founder and CTO of Circle Internet Financial, a “digital currency company.” Headquartered in Dublin, the company’s U.S. base is in Boston. Well-funded, with $26 million of venture capital under its belt, Circle is well-positioned for success. But the outspoken Neville says the company is preparing for the worst: If the BitLicense is implemented as proposed by the New York Department of Financial Services (NYDFS), business “will be impossible and illegal in New York.”
“We’re realists,” Neville recently wrote in a blog post. “If we seek broad mainstream adoption — which is not the only path, but it is the path that interests us — then some form of regulated consumer protection is inevitable, and required for attaining banking, auditor, and underwriter relationships and operating fiat-crypto gateways (gaining such relationships today are impossible for most). Unfortunately the proposed “BitLicense” makes this worse, not better. At Circle, we may be forced to block all New York residents from using our services. We’re not alone.”
Will BitLicense stifle an industry or just relocate it?
The NYDFS BitLicense could place substantial restrictions on businesses that use cryptocurrencies. And the compliance requirements could be extensive, according to Amy Davine Kim with Washington, D.C. based BuckleySandler, a firm that specializes in providing legal counsel to the financial services industry. Kim says the proposed regulations include “anti-money laundering, cyber security, advertising and marketing, consumer complaints and consumer protection, as well as remarkable capital requirements.”
While it is certainly to be expected that more jurisdictions will be cracking down on the use of bitcoin over time, there are other jurisdictions which are more likely to establish themselves as havens where businesses and consumers can feel free to use the cryptocurrency sans governmental intervention. As Kim asks in a recent blog post, “Will New York’s BitLicense stifle an industry, or just relocate it?”
“In the U.S., states are grappling with definitional issues – does ‘virtual currency’ qualify as ‘money’ or ‘currency’ under existing statutes and should it be regulated as money transmission,” Kim told Inside Bitcoins. “New York has taken the approach to regulate it under its own unique licensing regime, rather than rely on its existing money transmission statute.”
Every state could come to its own conclusion about whether cryptocurrencies can be put in the same category as traditional money, and choose to regulate or not to regulate bitcoin in accordance with their own conclusion.
Blocking New York
“Certainly this will significantly increase compliance costs for virtual currency companies,” Kim adds. “The larger, more established and sophisticated virtual currency companies will likely see this as a benefit. If they can meet the licensing requirements, they will establish themselves as achieving a high standard and that may attract more customers and growth. On the other hand, smaller technology startups will likely avoid New York for the time being (and we are aware of some expressing a desire to avoid the U.S. altogether at the moment), until the regulatory environment becomes more predictable. These smaller companies may develop their software and/or build their companies elsewhere until they can meet the NY standard or be acquired by the larger players. The states will likely watch BitLicense developments with interest.”
Circle is a startup hoping for the best but planning for the worst. While painting a dire prospect, Neville says his outlook is upbeat.
“I choose to be optimistic: The “BitLicense” over-reaches, relies on vague and broad definitions, paints beyond its jurisdiction, and (regardless of intent) squashes innovation that stands to improve the lives of consumers across the globe — yet I choose to expect the next iteration of the proposal to repair many of these issues.”
But, as he stated at the beginning, Neville is also a realist.
“I would never bet against innovation, so I remain optimistic about creative solutions. Yet we’re also preparing for reality under the existing proposal. “Reality” currently means eliminating New York residents from our services, and collaborating with colleagues at similar companies planning the same.”
Written by Nilani Thiyagarajah and Hal M. Bundrick