The last post in this series by Atlanta Bitcoin attorney Mark Richardson VI familiarized the reader with the regulatory vernacular of the New York BitLicense law now in effect. Let’s now examine to whom exactly that license requirement applies.
The crux of the BitLicense regulations is that, “No Person shall, without a license obtained from [New York Department of Financial Services] as provided in [these Regulations], engage in any Virtual Currency Business Activity” (§200.3(a)). Have a good look again at the definition of VCBA highlighted in the last post, as it is obviously key to the scope and reach of the first state digital currency regulation. It would be difficult on first blush for these rules to be more sweeping!
There are exemptions to the license requirement, though, for: (a) those chartered under the New York Banking Law and approved by NYDFS to engage in Virtual Currency Business Activity; and (b) merchants and consumers that utilize Virtual Currency (including, of course, bitcoin) solely for the purchase or sale of goods or services, or for investment purposes. You must know first-off, however, that these exemptions are inapplicable to the commercial conduct of any other bitcoin transactions under New York’s jurisdiction.
There was an initial phase-in period prescribed by the BitLicense regulations whereby a business already engaged in Virtual Currency Business Activity could apply for the license within forty-five (45) days of the effective date of the Regulations (§200.21), but that safe harbor window is irreversibly closed now!
To still provide some cushion, a conditional BitLicense grant of up to two (2) years for a virtual currency business applicant not fulfilling the full licensing requirements may be granted (§200.4(c)). That is, of course, discretionary on the part of NYDFS, and is not very easy to get, either.
Regardless of the form of license granted or refused, the application fee is a stout and non-refundable Five Thousand Dollars ($5,000), and additional charges may apply if a given applicant has to submit additional application materials (§200.5). The truly major costs to the applicant of obtaining the mandatory bitcoin business license, however, are in man-hours, and legal and accounting costs, as already verified by hard data (see, e.g., this Coindesk article).
Richardson Sixth Crypto-Counsel ℠ will next show you the consumer protection requirements in this bitcoin legislation causing commercial cryptocurrency concerns to allot what may be a surprisingly sizeable budget.