NYDFS superintendant Benjamin Lawsky recently made an appearance at Cardozo Law School in New York to speak on the BitLicence.
He provided some interesting insight into the NYDFS’ process when getting to know virtual currency and Bitcoin, and why he believes a BitLicence is necessary.
Why Is Regulation Necessary?
“Bitcoin and virtual currency came up on the DFS’ radar some time last year”, he said. However, current moneyary regulations were created “before anyone had ever thought of an internet”, let alone cryptocurrency. As a result, he believes the NYDFS has a responsibility to regulate virtual currency-related businesses and bring old laws up to 21st century standards.
He also cites Liberty Reserve and Silk Road as examples of virtual currency’s history with money laundering and criminal activity.
Bitcoin’s Potential
Lawsky lists several important features of virtual currencies which he believes underscores “the power behind this technology”.
One of the biggest is lower fees. Citing remittance rates of up to 8% being fairly standard in New York, Bitcoin can lower that to 1% or even lower.
This will provide a competitive effect, which will force banks to lower their fees and improve their service in order to remain competitive in the industry.
Transactions also don’t require credit card information, which means “far less chances of identity fraud.” He admits to having been a victim of identity fraud himself in the past, and that Bitcoin’s potential to prevent this is exciting.
Mt. Gox
Lawsky mentioned the NYDFS’ original plan to have a BitLicence proposal prepared by the end of 2014, but the collapse of Mt. Gox changed that.
As a result of the hundreds of millions of dollars in Bitcoin having disappeared, the NYDFS pushed forward their proposal and rushed it out quickly.
When Mt. Gox collapsed, there was no regulatory body to step in and get timely answers for customers. Instead there was radio silence.
As a result of the lack of regulatory oversight, Lawsly believes, Mt. Gox’s collapse caused more damage than it needed to.
Clarity On The BitLicence’s Reach
One of the most eye-opening moments of this talk, though, is the clarity on the BitLicence’s reach.
Lawsky clarified that most people operating in the cryptocurrency community will not be subject to the BitLicence’s regulations. Software developers and miners, for example, will not need a BitLicence to operate. Nor will the average person using Bitcoin.
However, any business that acts as a “financial intermediary” will need one.
Most of the entities who have come out most strongly against the BitLicence are those that will be subject to its regulation. Coinbase, Circle, Xapo, OKCoin, and even the Bitcoin Foundation itself have come out in opposition to it.
Goals
The BitLicence is geared toward protecting consumers while at the same time keeping the cost of compliance down. Rather than strangle startups, the goal is to foster their growth.
He concluded by stating that bitcoiners and virtual currency advocates can still make a profit playing by the BitLicence’s rules.
Most in the Bitcoin community, however, seem to disagree.
Ben Lawsky Speaks About The BitLicence At Cardozo Law School
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