NYDFS Announces Changes to Proposed New York “Bitlicense” Regulation

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Much ado is being made about the state of New York’s proposed “Bitlicense” laws, structured as a banking license for cryptocurrency businesses in-state. The initial draft was introduced in late July by the head of New York’s Department of Financial Services (NYDFS) Benjamin Lawsky. Since then, officials have spun Bitlicenses as a way to safeguard money and to stop fraud with the hope of preventing another Mt. Gox-style hacking attack on the bitcoin economy.

In a set of prepared remarks by Lawsky presented at Cardozo Law School on Tuesday evening, however, the NYDFS superintendent changed tack. His remarks suggest that alterations to many of the proposed regulations were made after the initial proposal received heavy criticism from the cryptocurrency community. Lawsky told the audience in his remarks that he always intended to revise the bitlicense laws after taking community feedback into account. He said,

“To be clear, our proposal was meant as a beginning — not an end — to a healthy, vigorous public discussion about what the final regulation should look like.”

Currently, it appears that individual bitcoin users, software makers, bitcoin exchanges and bitcoin miners will not have to apply for a bitlicense. The banking license is primarily meant for banks looking to deal with cryptocurrencies and companies who want to provide financial services. Lawsky explains,

“When it comes to safeguarding customer money at a financial company – and unregulated world of caveat emptor has never been a sufficient answer… that is the basic bargain of financial services regulation. We do not, for instance, let someone run a bank out of their garage.”

The NYDFS will release a revised version of the proposal after the end of October after considering new comments on the current one.

Cryptocurrency businesses, both startups and established players alike, wait for the final piece of regulation anxiously. The implications of the final regulation, good or bad, will have big effects on the ability of cryptocurrency businesses to grow and will set a significant precedent for future bitcoin regulation.

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