[Update Aug 22: On August 21, NYDFS superintendent Benjamin M. Lawsky responded to the public requirement and extended the comment period on the drafted rules by 45 days, postponing the deadline to October 21.]
Regarding the issue of the global influence that the current BitLicense proposal would have on Bitcoin-related businesses throughout the world, Lawsky said to be welcoming"as many points of views as possible" in order "to make the best decisions possible."
China's "Big Three" Bitcoin exchanges BTC China, Huobi and OKCoin, transmitted their joint-comments regarding the BitLicense proposal, a series of rules which were designed to regulate virtual currency-related businesses, submitted in late-July by the New York State Department of Financial Services.
On August 20, China's most prominent Bitcoin exchanges BTC China, Huobi and OkCoin, submitted a joint letter to the NYDFS, noting that the BitLicense proposal was too broad and suggesting significant changes for the sake of the industry. OkCoin, Huobi and BTCChina are the three tops Bitcoin exchange platforms in volume, and capture about 69% of market share.
Because of the decentralized nature of Bitcoin and because NY is known to lead the way for regulation, the three exchanges believe the BitLicense proposal would hamper the entire Bitcoin industry and suggested that some fundamentals in the proposed framework should be changed prior to enactment. The department started its 45-day open comment period on July 23.
The letter suggested "the BitLicense regime should cover only virtual currency businesses with meaning connection to the State of New York". The current proposal was designed so one single New York customer would force a whole Bitcoin business to comply with the BitLicense proposal. The exchanges said these licensing criteria could significantly affect their ability to operate and innovate.
The BitLicense proposal also requested Bitcoin exchanges to submit fingerprints of all their employees to the FBI. As Chinese companies and because the vast majority of their customers are Chinese, the exchanges said it was "difficult for [them] to understand why such sweeping regulations should apply when we have little meaningful business in New York State."
The letter stated:
"Licensee's affiliates should have no obligation to allow the NYDFS to examine their respective facilities, books and records that are unrelated to the licensee's operations."
The exchanges qualified the disclosure requirements falling into the proposed framework as excessive, adding the NYDFS would be granted power to examine any business operations even those that are unrelated to virtual currencies.
Finally, the three exchanges said the "enhanced due diligence" was "exceedingly US-centric" and "triggered by the wrong criteria." They suggested EDD should apply when the virtual currency business and the prospective client are from different jurisdictions, instead of whether or not the customer is a US person.
Since its submission, the BitLicense proposal has generated discontent among the community, qualified as abusive and inappropriate by many. Bitcoin businesses and enthusiasts fear the proposal framework will hamper the industry and isolate NY from the technology and its startups.
Both BTC China and Huobi said the BitLicense proposal was too difficult to comply and added they would be forced "to avoid doing business with ‘New York persons’ or avoid the US entirely" if the proposal was enacted. A spokesperson from BTC China told CoinDesk:
"The greatest concern is that other regulators in the US and around the world will follow New York State, which would be very damaging to the industry."
Huobi said it would "geofence" NY and not apply for the BitLicense, adding:
“The reason why we feel the need to [make the statement] is because Huobi is an international platform, and Bitcoin regulation in the US will definitely affect our plan of expanding in America directly. Moreover, we believe there will be direct influence to Chinese regulation because the Chinese government watches closely BitLicense in NY [...] Huobi definitely wants to expand our legitimate business in the US but also needs a flexible Bitcoin environment.”
Zane Tackett, manager of foreign operations at OKCoin, is also worried about the incidence of such a legal framework on a global scale:
"The regulations implemented in New York will likely be used as a model for other states and countries alike. [...]It is important to try and help the NYDFS draft the best possible BitLicense for both users of Bitcoin, and the state itself."
The Chinese exchanges aren't the only businesses that would rather block NY customers instead of complying with the BitLicense proposal. Last week, Circle's CEO Jeremy Allaire, mentioned that if the BitLicense rules were enacted, "they would have no other option but to block New York customers from accessing their services."
Did you enjoy this article? You may also be interested in reading these ones:
- Bitcoin Foundation Releases a Primer on Jurisdictions for BTC Businesses
- Huobi CEO: “In the Bitcoin Industry, Centralization and Decentralization will complement Each Other”
- Australia’s Tax Office Releases Bitcoin Guidelines
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