The Superintendent of New York’s Department of Financial Services, Benjamin Lawsky, was the featured speaker at the Benjamin N. Cardozo Law School “Tech Talk” series on October 14th 2014. The title of this event, “Regulating Digital Currency: BitLicense and the Internet of Value“, featured a speech by Mr. Lawsky, followed by a robust question and answer period, and then a panel discussion with a variety of people in the Bitcoin industry and trade groups.
A great deal of due focus has been directed to the proposal put forth by Mr. Lawsky and his organization – many members of which were in attendance – as his BitLicense idea is the most directed effort towards the regulation of consumer-facing Bitcoin companies in the US to date. This is doubtless due to Mr. Lawsky’s position granting him oversight over the banking regulations of New York – specifically the New York City banking hub and Wall Street – which has made him certainly a very influential person in the future of Bitcoin in the US and even in other countries across the world.
Mr. Lawsky appeared to be very aware of his position in the spotlight, saying that the video stream of his initial hearing his department held back in January received 14k views, an extraordinary amount for that group, with over half of the viewers being overseas. So given the clear interest, he took this opportunity to chart out the immediate next-steps for his upcoming BitLicense.
He made clear that the comments for the first round are still scheduled to conclude on 21 October after already having been extended at the virtual currency community’s loud request earlier this summer. Then his office will complete their review of submitted public comments and combine those ideas with the input they have received from various ongoing consultations with industry experts and release a revised version of the BitLicense. This will be followed by an additional 45-day comment window where the public can weigh in on the revised edition. After that time period concludes, there will be a brief final-tuning of the BitLicense by the DFS and then it will be released in final form to become binding regulation. Mr. Lawsky said they are thinking that the final version should be in place by late 2014, early 2015. From there, he believes there will be a 45-day period for companies to get into compliance before any sort of enforcement steps will begin to take place.
Mr. Lawsky also took the opportunity to spell out 5 important BitLicense clarifications he wanted address right away before the revisions were formally released. Here the subject will be briefly mentioned followed by a direct quote from the Superintendent.
1) Who will (and will not) be required to get a BitLicense?
“To clarify, we do not intend and will not regulate software. We will not regulate software development. For example, if a software developer creates and provides wallet software to customers for their own use, they will not need a license. Those who are innovating and developing the latest platforms for virtual currency will not need a license. We are regulators of financial intermediaries – we are not regulating software development. Period. Now, individual users will be similarly exempt from the license requirement – people who want to use virtual currencies to make purchases or want to hold virtual currencies solely for investment purposes will not be required to obtain a license.”
2) Will businesses be forced to get several different licenses alongside the BitLicense?
“Our intent is to the extent that an applicant requires both a money transmitter and a virtual currency license – that is possible sometimes – the process will be streamlined and the applicants will be able to cross-satisfy the requirements of each license.”
3) Do the banks have an unfair advantage by not being required to get a BitLicense?
“The banks we regulate cannot start providing virtual currency services without prior approval from DFS and they will be required to comply with any requirements that are otherwise imposed on virtual currency businesses.”
4) Will mining be regulated?
“Mining per se will not be regulated. To the extent a miner engages in other virtual currency services, however, for example hosting wallets or exchanging virtual currency, a license may be required for those activities. But for mining itself, there will not be a license requirement.”
5) On the burden of placing additional compliance costs on new enterprises:
“In my view there has to be a way for startups to start-up and to play by the rules without getting crushed by huge compliance costs. That goes back to that original collision I think that I mentioned between traditional banking and tech innovation. It is going to require a creative solution and we are working through it. Some of you here today have submitted some creative proposed solutions and we are thinking about them carefully.
In part this concern is also why we wanted to make the revised regulation quite clear that software companies do not need a BitLicense to order to develop new software and innovate. We are not seeking to stifle technological innovation. But if a software company is also taking on the responsibility of safeguarding customer money, it can be a much more difficult calculation.”
To watch the full session, the Cardozo Law School has provided a full recording of Mr. Lawsky’s speech and other parts of the program here.