What is a New York State BitLicense? Why is it so important? Who’s applied?

in #bitlicense • 6 years ago

Is a license to control activity of holders of the license. Its purpose from the rule set is to protect and educate the end customers when dealing with virtual / crypto-currencies.

In addition, the license enforces an entity to comply with policies in place for recording, reporting such items that may be consider tax evasion, money laundering or any civil/criminal illegal activities.

It is a set of rules set by the New York State - department of financial services. Full PDF of rules here: https://www.dfs.ny.gov/legal/regulations/adoptions/dfsp200t.pdf

To hold a license, a firm would require to hand over a lot of information, including:

Biographical information of Principle Persons

  • Standard address, history, contact details

  • Photos

  • An independent background report

  • Fingerprints

  • Affidavit describing past, present or pending criminal or civil legal action

  • Verification from New York State Department of Taxation

  • Anything else that they require on request

Company Information

  • Management Structure

  • Financial Statement

  • Proposed, Current and Historical Business descriptions

  • Banking Arrangements

  • All terms and policies " anti-fraud, anti-money laundering, cyber security, privacy and information security"

  • Insurance policies

  • Methodology of calculating value of the virtual currency

The Licence is for 2 years with a fee of $5000, unless terminated on any conditions set out by the superintendent of the New York State.

Main Financial Requirements

  • Maintain a minimum capital requirement to ensure financial integrity.

  • Surety Bond / Trust Account held in USD

  • 7 Years of accounting history will need to be retained

  • Every quarter period financial information will need to be supplied to the superintendent.

Conditions

  • The Licensee can only on instruction from another person directing their funds, sell, transfer, assign crypto assets. Their cannot act upon custodian funds without the direction of the owner.

  • Each new product, will need to seek approval from the superintendent.

  • Change of control of ownership, will require prior written approval.

  • KYC on all the customers that exceed a value of $3000 in an account.

  • Complete historic records of all virtual currency transactions.

  • To report transactions that exceed $10,000 in one 24 hour period, by one person to the superintendent within 24 hours.

  • To monitor suspicious activity, that might signify money laundering, tax evasion, or other illegal or criminal activity.

  • Maintain an effective cyber security program.

How to obtain a license?

"If the superintendent finds these qualities are such as to warrant the belief that the applicant’s business will be conducted honestly, fairly, equitably, carefully, and efficiently within the purposes and intent of this Part, and in a manner commanding the confidence and trust of the community, the superintendent shall advise the applicant in writing of his or her approval of the application"

What is excluded?

It seems that tokens that are solely used within a gaming platform are excluded from the license:

"digital units that (i) are used solely within online gaming platforms, (ii) have no market or application outside of those gaming platforms, (iii) cannot be converted into, or redeemed for, Fiat Currency or 6 Virtual Currency, and (iv) may or may not be redeemable for real-world goods, services, discounts, or purchases."

The license rules set out have two major implications, a legal structure for companies that deal in virtual currencies, allowing industries to safely grow without unforeseen government interference and a rule set for education and protection of consumers.

The last one cannot be underestimated, with so many scams reported since the dawn of bitcoin, for the actual retail trade to use, buy or invest. There needs to be a safer structure. Using MEW or managing nodes is for the professionals, majority of consumers need an easy to use interface, that can be underlined by a trusted structure. This is what the BitLicense aims to do.

How will this affect price?

The market in the last week bounced twice, once when the SEC stated that decentralized virtual currencies cannot classed as securities and again on the 18th June. When Square a $14.26 billion company obtained its Bitlicense. The price rose by 4.68%.

Logic would dictate that each new license that gets approval, will have a net perceived benefit to the market.

Square.png

It also depends on how regular the announcements are made, in the past week, 2 licenses were granted to Xapo and Square, the gap being only a few days. Whereas previous licence announcements were months apart.

Is the New York State catching up on applications? If we start to see a consistent trend of approvals, then this may well keep the price action sustained.

Due to no definite list of applicants. One has to suss out from public announcements from applicants.

New York state have so far announced a handful of approved licenses, here is a list of so far approved entities:

  • Xapo ref

  • Coinbase ref

  • Square ref

  • Circle ref

  • Genesis Global Trading - Market Maker ref

  • Paxos Trust Company (formerly known as itBit Trust Company) ref

  • Gemini Trust Company ref

  • XRP II - a Ripple subsidiary that sells XRP ref

  • bitFlyer ref

According to various sources, like CoinDesk and Fortune.com articles, the following companies have applied and we listed ones to date, that we cannot seem to find approval or declined status for these:

  • BTCChina

  • Coinsource

  • Coinsetter

  • Bitstamp

  • MonetaGo

  • Bitpay

  • Robinhood

  • eToro

  • Goldman Sachs

There maybe more and according to Department of Financial services, as of June 13th 2016 only 26 applicants had applied Ref. This is in addition to two applicants being declined, Snapcard Inc and OKLink PTE.

We found 18 of the 26, but since a year ago, there may be many more applications. In our view, it seems that large entities are applying and this can only be good for the overall industry.

We expect many more announcements, and especially looking forward to BTCChina, Bitstamp, Robinhood and the infamous Goldman Sachs. If these announcements turn out to positive, we can expect a decent price increase.

Note: We are not financial advisors, we merely educate on the crypto-industry.

Posted on behalf of GetBlockChain
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#crypto #bitcoin #newyork #square
6 years ago in #bitlicense by
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