US-based bitcoin exchange Laissez Faire (LZF) has legally launched its currency trading platform across 49 states by complying with the financial regulations of each state, to provide its users with an incentivized trading environment.
The platform utilizes a similar structure to SAAS (software as a service) platform implementing bank-level technologies and systems to autonomously process user requests. LZF co-founder Daniel Pusateri explained to Cointelegraph:
“A bank acts as the custodian of the funds deposited through LZF. LZF simply manages the ledger on our end and acts as a kind of software as a service, which allows us to circumvent state-level money transmitter licensing.”
However, LZF will be spending around US$30,000 annually to maintain their fiat markets and to keep the platform compliant with U.S. financial regulations.
“With the deal we signed, we'll likely only spend around $30,000/year to maintain our fiat markets,” he explained. “Despite what we've accomplished, from an investment standpoint LZF has been exceedingly efficient and has operated very frugally since its beginning. Thus we are well-funded by efficiency.”
Relationship with Banks
LZF’s local and international banking partners ensure that they act as the custodian of funds, allowing LZF to manage the ledger with FDIC-insured user deposits. However, due to the Know-your-customer (KYC) requirements of the states, all users are required to fill out a form and submit a photo before using the LZF exchange platform.
Users of the platform can instantly verify ACH-capable bank accounts to begin trading bitcoins. Currently, LZF supports 30 banks but by manually verifying and confirming two small deposits, users could add non-supported banks to the platform.
“Our goal is to introduce the world to a radically new, yet completely correct way of trading,” the LZF team writes. “Our incentivized market algorithm creates healthy markets that are deep, dense, and stable.”
‘No’ to New York’s BitLicense
LZF has successfully complied with regulations and licenses of all states except New York. Today, the BitLicense requires bitcoin startups to pay non-refundable application fees, compliance fees and management fees to operate “legally” in the state. The company decided that the BitLicense is unreasonably burdensome and chose not to comply with it.
However, the exchange may comply with the BitLicense in the future if the regulations and restrictions are eased. Pusateri told Cointelegraph:
“We will certainly review and take into consideration any changes to BitLicense, if and when made. We would be willing to comply if we see enough requests from NY residents or the terms of BitLicense become reasonable.”