Sept. 22 — Circle Internet Financial Limited became the first virtual currency business to be licensed under New York’s new BitLicense, the state’s Department of Financial Services said Sept. 22.
The BitLicense, which became the first in the nation to specifically regulate virtual currency when it was approved in June, has been criticized by Bitcoin advocates such as the group Coin Center. The critics, which include several Bitcoin companies that stopped doing business in New York because of the license, have said it creates regulatory hurdles that could stifle innovation in the still-emerging technology.
New York acting superintendent of financial services Anthony Albanese said in a Sept. 22 statement announcing Circle’s licensing that the new license will ultimately help the industry by increasing consumer confidence. The issuance of the first BitLicense “is an important milestone in the long-term development of the virtual currency industry,” Albanese said. “Putting in place rules of the road that help protect consumers from loss or theft and root out illicit activity is vital to building trust in this new financial technology.”
While several states license Bitcoin companies under money transmitter laws, New York was the first to create a license specifically for virtual currency. The license requires that companies be well capitalized and have proper disclosure and cybersecurity procedures, New York Department of Financial Services spokesman Matt Anderson told Bloomberg BNA in a Sept. 22 interview.
“There are always going to be folks who want less or no regulations,” Anderson said. “Our broader hope is that this will spur a race to the top among digital currency companies.”
Despite departures by some businesses, 25 virtual currency businesses have applied for the license, Anderson said.
Coin Center spokesman Neeraj Agrawal, however, said his group remains concerned that other states might copy the BitLicense. “Not only is there an application fee for the BitLicense but there are significant legal costs associated with the actual preparation of the application,” he told Bloomberg BNA in a Sept. 22 e-mail.
The license only includes a “costly compliance regime” that goes beyond other payment companies, he said. “Multiply those costs by 50 as more and more states follow New York's example, and you've got a serious barrier to innovation,” he said.
A Circle spokesman referred Bloomberg BNA to a Sept. 22 blog post by the Bitcoin company’s co-founders Sean Neville and Jeremy Allaire. Initial concerns about the BitLicense have been resolved, “and though still not perfect, the BitLicense and its requirements became clear and irrefutable prerequisites for serving and supporting everyone in New York,” Neville and Allaire wrote.
The company on April 29 announced it received $50 million in investments from Goldman Sachs and IDG Capital Partners. It said in the Sept. 22 blog post that it is now allows customers to hold U.S. dollars in the companies and make Bitcoin transactions without purchasing the virtual currency and “being exposed to bitcoin price volatility.” The company instantly converts one currency into the other as customers send and receive bitcoins, the blog post said.
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