The BitLicense: A (Grimm) Fairytale of New York
Wednesday 23 December 2015
One of the biggest crypto developments of 2015 was the BitLicense. It was not a roaring success.
Next up in our tenuously-themed Christmas series and round-up for 2015 is the BitLicense. Benjamin Lawsky’s controversial attempt to regulate bitcoin businesses came into effect on 8 August this year. The first License was issued a month later, to Circle.
The BitLicense covers a wide range of activities relating to bitcoin. Any company that buys and sells bitcoin as part of their business, stores coins for a customer, performs exchange services, or controls or issues a digital currency, has to have a license - at a cost of $5,000.
That, at least, is the non-refundable up-front cost. The real cost, in terms of direct costs, lawyers fees and more, is far higher. Bitstamp is reported to have paid in the region of $100,000 in the course of their application, and that's probably not unrepresentative.
The costs and red tape are so high that many smaller organisations have inevitably shut up shop in the Big Apple. ShapeShift - hardly a minor player in the crypto space - took what they called a ‘moral and ethical’ stance and closed doors in New York. Their model of instant exchange simply couldn’t function effectively with the kind of KYC (Know Your Customer) requirements that the BitLicense requires.
Since the BitLicense came into effect, large- and medium-sized businesses like Coinbase and Coinsetter have applied, whilst the smaller startups and outfits have generally gone elsewhere.
Land of the Free? Not so much. Many bitcoin entrepreneurs started their businesses in New York, believing the streets would be paved with gold and they would have unparalleled opportunities to change the world. 2015 was when the reality set in.
Which reminds me of this hopeful couple:
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