An annual report by the New York State Department of Financial services reiterates the importance of regulating digital currency businesses. The report was released on June 15, and it summarizes the departments activities with regards to its Bitlicense regulation for crypto-companies.
Also read: Australian Financial Authorities Look Into Ethereum’s Conflicts of Interest
It said cryptocurrencies provide new challenges for regulators, because of their transaction speed and anonymous movement of funds. The report said, “Blockchain technologies present both opportunities and challenges for industry as well as regulators. Building innovative platforms for conducting commerce can help improve the efficiency of financial transactions, record-keeping and clearing.”
The report went on to say the technology allows for too many risks, because regulation can simply be bypassed by people or organizations. The speed of transactions and relative anonymity tend to deter oversight and control. The New York Agency said they want to protect customers and investors from fraud and other illegal behavior.
Easier facilitation of payments and anonymous movements of funds can be dangerous without the compliance and oversight designed to safeguard consumers, and to prevent money laundering and funding illegal activities
The regulation agency has already applied its licensing regulation requirements to several companies, which were mentioned in the report. It determined the Gemini Trust Company LLC could trade in ether. Recently it approved XRP II LLC, an affiliate of Ripple Labs, Inc. In total, 5 companies are registered with Bitlicense, and they are currently receiving periodic inspections and examinations via direct oversight from the agency.
The History of Bitlicense; Great Crypto-Company Exodus
The regulatory agency originally initiated the Bitlicense back in 2015 with the help of Ben Lawsky. The document was 44 pages and it outlined all the necessary requirements for businesses who want to trade in cryptocurrencies. To this day, it is mandatory that companies submit an application to manage and use digital currencies.
Jamie Redman covered it atbitcoin.com. He mentioned how many businesses criticized the licensing requirements. He said, “Executives and investors have been very concerned that the Bitlicense would hurt New York innovation and starting businesses. With KYC and AML rules and quite an extensive guideline to give the state private information many companies are unsatisfied with this law.”
The executives warnings rang true. When Bitlicense was put into place, it caused several popular companies to discontinue services in the State. Many of them made statements about how Bitlicense negatively impacted their ability to serve their customer base. They included Xapo, Shapeshift, Poloniex, Bitfinex, and Kraken among others.
Kraken’s response to Bitlicense was most pointed. The company said, “Today Kraken discontinues service to New York Residents. Regrettably, the abominable Bitlicense has awakened. It is a creature so foul, so cruel that not even Kraken possesses the courage or strength to face its nasty, big, pointy teeth. It’s at least a 40-man, bro.”
Do you think Bitlicense has been success or failure? Share your thoughts below!
Images courtesy of Shutterstock
Need to calculate your bitcoin holdings? Check our tools section.