A business license granted for the activities involving virtual currencies is BitLicense. It contains a set of regulations that are issued by the New York State Department of Financial Services (NYSDFS). In order to regulate the digital currency like bitcoin, the framework of this regulation covers those that are located, reside, conducts business or have a business place in New York.
In July 2014, the details of the proposed license were first released. From July 23, a 45 days comment period has started which resulted in a revised proposal in February 2015.
What does BitLicense actually Means?
The BitLicense is basically required for those firms that are engaged in any of the following virtual currency business activity:
- Receiving or transmitting virtual currency on behalf of consumers;
- Securing or maintaining control of virtual currency on the behalf of others;
- Performing exchange services;
- Buying and selling the virtual currency as a customer business (not for personal use); or
- Controlling, administering, or issuing a Virtual Currency (excludes virtual currency miners)
However, the regulation excludes those that utilize digital currency only for the purchase or sale of goods or services. Also, “firms chartered under the New York Banking Law to conduct exchange services and are approved by DFS to engage in Virtual Currency business activity” aren’t required to have BitLicense.
A point worth noticing is a key requirement that a BitLicense firm needs to follow which is the reports and financial disclosures. Under this requirement, each firm that has BitLicense has to submit its quarterly financial statements within 45 days.
Furthermore, in order to deal with money-laundering, fraud, and cybersecurity, Bitlicense imposes several operational burdens on the companies that require them to fulfill several requirements and compliance with its processes and policies.
BitLicense Companies: Circle, Ripple, and Coinbase
Once, BitLicense came into effect in August 2015, several cryptocurrency companies stopped their business in New York due to this new regulation.
However, in September 2015, that first company that received the first BitLicense was Circle. Then, in July 2017, Ripple was granted the second BitLicense while later on, Coinbase received it in January 2017.
There were numerous companies that applied for Bitlicense but were denied by the authorities. Now, Square is also seeking to acquire BitLicense to expand its business in New York.
Given that disclosure of financial statements is one of the key requirements, all of these cryptocurrency companies have to abide by the rules and regulations of the New York state authority and share the complete transaction details with them as well.
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