Final Version of BitLicense Framework Published: Major Step for Regulation of Virtual Currencies Firms

May 15, 2015

After a nearly two-year-long regulatory inquiry that the New York State Department of Financial Services (NYDFS) began in 2013, the third and final version of the BitLicense framework for regulating virtual currency firms was published on June 3rd. This step created the basis for regulation of companies that want to do business around virtual currencies in New York.
According to the BitLicense framework “Virtual Currency means any type of digital unit that is used as a medium of exchange or a form of digitally stored value. Virtual Currency shall be broadly construed to include digital units of exchange that (i) have a centralized repository or administrator; (ii) are decentralized and have no centralized repository or administrator; or (iii) may be created or obtained by computing or manufacturing effort. Virtual Currency shall not be construed to include any of the following:
(1) digital units that (i) are used solely within online gaming platforms, (ii) have no market or
application outside of those gaming platforms, (iii) cannot be converted into, or redeemed for, Fiat Currency or Virtual Currency, and (iv) may or may not be redeemable for real-world goods, services, discounts, or purchases.
(2) digital units that can be redeemed for goods, services, discounts, or purchases as part of a customer affinity or rewards program with the issuer and/or other designated merchants or can be redeemed for digital units in another customer affinity or rewards program, but cannot be converted into, or redeemed for, Fiat Currency or Virtual Currency; or
(3) digital units used as part of Prepaid Card.”
The BitLicense frame is a guideline for firms dealing with virtual currencies in order to register their business in New York. This regulation will foster trust into innovation around different implementations or digital currencies that fall under the above definition of a virtual currency.
It has to be emphasized that the NYDFS tried to find a useful balance between robust standards for consumer protection, cyber security, and anti-money-laundering compliance and opportunities of new technologies. In addition, the NYDFS tried to ease the requirements for start-ups regarding initial inhouse personnel for compliance and risk management. We hope that the promises to provide an on-ramp for start-ups will be put into practice, especially for new service companies around virtual currencies and not only for pure software vendors. This will be the way, how New York can meet its goal to pull innovative companies around crypto currencies to New York and to stand out against the competition of other hubs to get such teams.
We from Leondrino Exchange welcome the issuance of the BitLicense framework and will accelerate our preparations for an application for a license to do business in all the roles that we will need for our future core activities. The BitLicense Framework improves considerably the pre-requisites for a successful introduction of branded currencies as defined and planned by Leondrino Exchange.
Peter Reuschel, New York/ Berlin June 5, 2015

Author:

Peter Reuschel

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Peter Reuschel is co-founder and COO of Leondrino Exchange, Inc. and has a background as serial entrepreneur and in venture capital. After completing his studies in computer science, he gained professional experience at IBM and SAP.