Coinbase has joined the list of Bitcoin-related companies responding to New York’s BitLicence proposal.
While the company remains “cautiously optimistic” about the NYDFS’ intentions, and they “applaud the NYDFS for being forward thinking on virtual currencies”, they “feel the proposed BitLicence falls short of its stated goal of balancing customer protection and rooting out illegal activity.”
Main Points
Coinbase explains that money transmission regulation is already in place, and that having a separate BitLicence would be redundant.
There is a surprising amount of overlap between the proposed BitLicense and Money Transmitter Licenses. The current money transmitter licensing system already has a great deal of overlap between each state, requiring companies to go through the same processes up to 48 times, including fingerprinting, surety bonds, capital requirements, costly on-site examinations, and reporting obligations. Adding a BitLicense would further duplicate this effort. This is especially true for Bitcoin business that wish to engage in other forms of money transmission (i.e. stored value).
They also believe the BitLicence would damage Bitcoin’s potential as an open payment network, which they describe as Bitcoin’s “greatest feature”.
By requiring the collection of information not supported by the protocol (such as the names, account numbers, and physical address of all parties to a transaction), the proposed rule would force licensees to operate closed, proprietary payment networks (similar to Visa or PayPal), effectively eliminating the utility of this feature and stifling innovation.
Their final point is that regulation should only be applied to businesses which actually hold other peoples’ bitcoins, like money transmission businesses, exchanges, and Bitcoin banks. There’s no point applying financial regulation to businesses which don’t operate financial services.
Consequences
Coinbase explains their commitment to help the NYDFS develop their regulatory framework. This is in stark contrast to many other companies who have come out against it.
Circle CEO Jeremy Allaire has called the BitLicence “technically impossible to comply with“, and said that unless the BitLicence is significantly modified, they will have no choice but to block any New York residents from using their service.
Xapo CEO Wences Casares and OKCoin CTO Changpeng Zhao echoed his sentiments.
There is frustration across the cryptocurrency world with the BitLicence proposal. Superintendant Ben Lawsky, in charge of overseeing the BitLicence’s execution, may have more work than he bargained for.
Coinbase Puts In Their Two Satoshis On The BitLicence
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