By Lydia Beyoud
BitPay, Inc., a virtual currency payment processor, has resumed processing charitable donations, campaign donations and non-profit giving using Bitcoin and other cryptocurrencies in New York state following conversations with that state’s financial regulator.
On March 6, BitPay informed its New York-based customers processing charitable or non-commercial donations that their accounts had been unfrozen.
“After speaking with our regulators yesterday, we received confirmation that all of our virtual currency activity, including donations, would be OK to keep on processing, " Jeremie Beaudry, the company’s compliance and regulatory affairs counsel, told Bloomberg Law. BitPay is waiting for a decision from the New York Department of Financial Services on its application for a BitLicense, which would allow the company conduct virtual currency processing inside the state.
BitPay has processed more non-profit transactions so far in 2018, globally totaling $14 million, than it did in all of 2017, at $10 million, the company’s spokeswoman Jan Jahosky told Bloomberg Law. The category includes political campaign donations, charity donations, church and university gifts.
Companies are allowed to operate in New York under a safe harbor while their applications are pending. However, BitPay said it was unclear whether that safe harbor extended to charitable giving. The payment processor halted processing non-commercial transactions in November 2017, the beginning of the annual peak charitable giving period, due to the uncertainty. BitPay’s processing of commercial crypto transactions in New York were unaffected during that period.
The NYDFS has approved six firms for virtual currency charters or licenses. They include licenses to bitFlyer USA, Coinbase Inc., XRP II and Circle Internet Financial, and charters to Gemini Trust Company and itBit Trust Company.
Several other companies, including BitPay, still have BitLicense applications pending before the NYDFS. Other companies, such as Kraken, have ceased operating in New York due to the BitLicense requirements.
New York isn’t the only state that BitPay has had trouble doing business. The payment processor has completely halted transactions in Connecticut due to the state’s money transmitter licensing requirements, Beaudry said.
The licensing costs and low transaction levels just didn’t make it worth the company’s while, he said. “There are other states more pressing for us” in terms of obtaining licenses, Beaudry said. Those include Florida, Georgia, Mississippi and Washington, among others, he said. Other states, such as California, don’t require some cryptocurrency companies to obtain a money transmitter license.
The company has put some of its money transmitter license application efforts on hold as it waits to see whether it will participate in a pilot program that could streamline that processs, said Beaudry, a member of the fintech advisory panel at the Conference of State Bank Supervisors.
The Conference of State Bank Supervisors announced an agreement Feb. 7 among seven states to offer reciprocity for companies seeking money transmitter licenses. Those states include some where BitPay said it’s seeking a license.
Idaho has joined the group since the announcement, CSBS spokeswoman Catherine Pickels told Bloomberg Law.
BitPay’s announcement is also a boon for New York’s political candidates accepting cryptocurrency donations.
The campaign for Patrick Nelson, a Democrat running for a congressional seat to represent New York’s 21st District, had to suspend accepting crypto donations in November after BitPay said it wouldn’t process the transactions in the state. BitPay converts Bitcoin campaign donations into fiat currency.
BitPay’s announcement will allow the campaign to resume accepting Bitcoin donations, Nelson’s campaign press secretary Paul Paterakis told Bloomberg Law. “BitPay plays an important role in the cryptocurrency ecosystem as they are a comfortable bridge between fiat and bitcoin for campaigns and charities who are not familiar with the technology,” Paterakis said.
The campaign sees cryptocurrency and the distributed ledger technology underpinning it as part of the future. “Our motto is twenty-first century policy,” Paterakis said. “We’re embracing some of these new technologies like blockchain, and these cryptocurrencies are certainly the future,” he added.
“As we are currently gearing up for a competitive primary in NY-21, Bitcoin gives us an added advantage in our grassroots movement to accept one additional currency over the other campaigns,” Paterakis said.
(Corrected to reflect that BitPay is a virtual currency payment processor, not an exchange. The third paragraph corrected to explain that a BitLicense would allow the company to conduct virtual currency processing inside the state. The third paragraph also corrected Jeremie Beaudry’s title as BitPay’s chief compliance and regulatory affairs counsel.
The ninth paragraph corrected to reflect that other states don’t require some cryptocurrency companies to obtain a money transmitter license.
An earlier version corrected the fifteenth paragraph to reflect Paterakis is press secretary, not campaign manager.)
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