How BitLicense 2.0 Might Impact Bitcoin Businesses
Several changes have been made to the BitLicense since it was first introduced. But how are the changes impacting the industry?
New York’s Department of Financial Services published the original BitLicense proposal in July 2014.
The proposal was appreciated by those who valued regulatory certainty but also faced a lot of criticisms for its imprecision and tendency toward over-inclusion.
Within the first 6 months, the NYDFS was flooded with written comments. The department also helped meetings to discuss the regulations with industry members.
It cannot be denied that they listened to the community.
A revision of the BitLicense was presented and it seemed much softer than the original version. Some of the most important changes to the BitLicense proposal have been mentioned here.
The article will also look at whether these major changes addressed the concerns of bitcoin businesses, consumers and investors.
The original draft required licensure from almost every business, including even software developers who wrote software which helped to secure the user’s digital currency.
This part has been removed in the latest version. Now, securing digital currency on behalf of the users does not subject a firm to the licensure requirement.
NYDFS included an explicit carve-out for companies related to software “development and dissemination.”
Businesses that store, hold, issue, administer, exchange or control digital currency will need a license to operate. There are still some confusion as multi-signature software providers “hold” and “control” the coin on some level.
Altcoin creators are in a similar confusion. As they have the power to remove it from circulation, it can be said that they “administer” the currency.
Many people also commented about original BitLicense proposal’s failure to account for non-currency uses of the Bitcoin protocol.
The “Bitcoin 2.0” applications lead use of tokens to trigger non-financial transactions.
The new version added an exclusion for the businesses involved in transactions for non-financial purposes.
This exclusion serves as a statement of intent to not regulate smart contract companies and other data verification applications of the blockchain.
NYDFS had announced informally few months ago that it would consider including some kind of onramp licensing for crypto currency businesses which couldn’t satisfy the BitLicense requirements otherwise.
The new proposal has a “conditional license” which the department might grant in its sole discretion if some reasonable conditions are sets.
The conditional license will be valid for 2 years and can be renewed if NYDFS allows. Even though the revised BitLicense does not provide much detail about this, it seems like a great change.
The definition of “permissible investment” has been broadened too. The original proposal prohibited a licensee from including its digital currency as capitalization requirement.
In addition, as BitLicense received the greatest criticisms for the requirement that licensees would have to identify both parties involved in the transactions, this has also been softened in the new version.
Finally, this version appears much more practical and extensive than the previous one. Comments are opened untill the beginning of March 2015.