The long-awaited final revisions to the precedent-setting New York State BitLicense regulatory program were released today by their architect, Ben Lawsky.
New updates look to improve functionality and clarify the state regulators’ focus on how businesses in the digital currency industry can be more compliant, without hurting innovation. Lawsky, the Superintendent of Financial Services for the New York State Department of Financial Services (NYDFS) has released two previous versions that have been much-maligned within the Bitcoin community.
Today, he wanted to assure the Bitcoin community that he was listening to their concerns and using reactions to improve the regulations going forward. Lawsky said at the BITS Emerging Payments Forum in Washington:
“When facing new financial technologies, it is very important for regulators to look before they leap. Attempting to force novel technologies and business models into existing regulatory boxes, simply because ‘that is the way it has always been done,' may not be a sensible approach. We need, at times, to be more creative than that as regulators, even if it takes us outside our comfort zone.
“Similarly, regulators also need to realize their own limitations; recognize what they do not know, and keep an open mind when approaching new technologies.”
The final regulations include five different revisions to remove duplication, increase efficiency and make compliance easier for those affected. The changes include:
- Companies will not require prior approval in running app or software adjustments or updates. If “material changes” to the actual product or business model change, that will need to be reported.
- The NYDFS has “no intention” of regulating the development of software, only the middle men who deal in the finances. If you are not holding consumers’ funds, this regulation should not affect you.
- They will not require a new set of applications to be submitted if a company wants to apply for both a BitLicense and a money transmitter license. Firms will be able to cross-satisfy many of those license requirements. Duplication is to be avoided, and with NYDFS’ connections in government, these issues can be avoided.
- Companies that are already compliant with federal regulations and the submission of SARs (Suspicious Activity Reports) will not have to file a duplicate set of those same SARs with NYDFS.
- Finally, companies also would not need prior approval from NYDFS for every new round of venture capital funding, unless a “control person” is added who will have a management position in the company. If a venture capitalist comes onboard and wants immediate control of company power, this should be reported to regulators in the state of New York.
The updates are fairly modest in the actual fabric of the BitLicense scope, but look to remove confusion and extra paperwork. This was not enough for some critics, however. Coin Report’s Executive Director Jerry Brito had the following to say in his company’s response to the revisions:
“Despite the changes to anti-money laundering requirements that the superintendent cited in his speech, the final Bitlicense still creates an unprecedented and discriminatory state-level AML reporting obligation.
”The new language is vague and unclear about how compliance with federal regulations will exempt a BitLicensee from those state-level obligations. My question is, if you register with FinCEN, do you have AML obligations to New York State? Other states are already looking to the BitLicense as a model for their own frameworks. We are working with them to ensure they do not repeat the mistakes made here.”
The regulatory framework for Bitcoin in NY state began almost a year ago, in July of 2014, with the first proposed framework coming from Lawsky’s office. The amount of acrimony and derision generated over four thousand comments within the 90-day public commentary and review period.
Lawsky says that these comments were all taken into consideration when the revised BitLicense framework was re-released in February. According to Lawsky, the number of comments dropped from over four thousand to just thirty-five when the second version was released, indicating that the revisions were much better received.
Only time will tell if these revisions in this “final version” will make New York a more palatable place to do Bitcoin business in the future. If banks applaud the new regulation, Lawsky said in his press conference, it is a sign that the regulation is not quite right. Regulators will not please everyone. Any Bitcoin business lost will surely find a new home elsewhere in another state in the union, at least until that state models their future regulatory framework upon New York’s BitLicense.