BitLicense

What Is a BitLicense?

A business license is given by the New York State Department of Financial Services that allows for regulated virtual currency activity. BitLicense, went into force in August 2015, was the first legal structure in the United States aimed specifically at cryptocurrency enterprises. It governs a wide range of crypto operations, including bitcoin transportation, exchange services, and the generation of digital assets.

A BitLicense is necessary for any New York resident engaging in regulated bitcoin operations and any non-resident individual or other business engaging in those operations with New York residents. On the other hand, individuals who make or receive cryptocurrency payments are exempt. BitLicense sparked outrage in the crypto community at its initial release and continues to do so. 

Exploring the Idea of a BitLicense

Many crypto firms argue that the regime imposes unjustifiably onerous restrictions and requirements on them and that the price of applying for the BitLicense (estimated at $100,000) is punitive. When the restrictions were enacted in 2015, at least ten crypto-related businesses declared that they would suspend all trading activities in New York. 

Indeed, just a few companies have received BitLicenses since its inception. Regardless of industry reaction, BitLicense is an important component of a broader attempt by worldwide politicians to regulate cryptocurrency – a sector naturally resistant to governmental intervention.

However, as recent events demonstrate — such as the pushback from central banks to Facebook's Libra project - stronger control of cryptocurrencies and decentralized technology generally appears unavoidable.

Background of BitLicense

The NYDFS held the first public hearings on the Virtual Currency regulations in November 2013. It introduced BitLicense at the time. The NYDFS announced BitLicense information in July 2014, which included a list of proposed rules and restrictions for Bitcoin trading in New York. 

The approval of BitLicense ideas altered the 2015 crypto-economic landscape. Over 20 organizations applied, with Paxos, a cryptocurrency company, gaining the first trust charter and Bitcoin wallet, and Circle Internet Financial Limited obtaining the first BitLicense. 

Nonetheless, ten cryptocurrency companies suspended their operations in New York in protest of what they saw as discriminatory regulation. Since its inception in the crypto industry, the NYDFS has only issued BitLicenses to 25 crypto businesses. These lucky few are all well-known and respected personalities in the cryptocurrency world.