Bitcoin License (and Registration) in New York

In case you haven’t seen the news yet, New York State is taking a stab at passing laws for Bitcoin – Bitlicense – as a precedent for other cryptocurrencies. The biggest part of this, in my opinion, is the wall of anonymity is obliterated when trading in the currency. With the bad press about thefts, hacks, and other non-legal stuff going on something needed to shift, and so the legal folks decided that anonymity was the thing that was to be targeted. Interesting choice.

I will reserve final judgement on whether or not this is a good or a bad thing. I will however point out some things that strike me as interesting in the first few minutes of the announcement being made:

1. It now returns cash, dollars, moolah, bank, green to the top dog spot as the best anonymous way to purchase weapons, weed, killer heroin, or human organs. Of course buying pizza, stuff from, and Newegg is still ok, it just doesn’t sell like buying a Hummer full of heroin off of Silk Road.

2. It now returns the central banks, Secret Service, and law enforcement to the top producers and controllers of the anonymous currency and makes them top cops when it comes to using the best anonymous form of currency we have had in the past 100 years. Back to normal folks, nothing to see here.

3. What remains to be seen is how effective the strategy is in reducing what amounts to a small problem (Bitcoin theft and shenanigans) for a relatively small number of people, while potentially stymying the adoption of the currency and the number of transactions that are made with it (which is where the money is). So at its face value it looks like lawmakers made the decision to make the cryptocurrency system a system of known users so that the key reason for the adoption of the cryptocurrency – anonymity – helps get it squashed.

Given the US Federal Government’s track record of spying on citizens, I question whether anonymity really exists, and what this law does to the reality that there is no more anonymity as evidence suggests, other than telling people if you use bitcoin you are not anonymous, at least in New York State.

It’s a place to start. If the intent was to generate fees (licenses) then they may have stifled growth by requiring fees from businesses vs taking a 1/1000 of a cent or bitcoin from every transaction that flows through the ecosystem. The ecosystem which is audited, auditable, and largely compliant and traceable.

The highlights from the bill:

The new DFS BitLicenses will be required for firms engaged in the following virtual currency businesses:

  • Receiving or transmitting virtual currency on behalf of consumers;
  • Securing, storing, or maintaining custody or control of such virtual currency on the behalf of customers;
  • Performing retail conversion services, including the conversion or exchange of Fiat Currency or other value into Virtual Currency, the conversion or exchange of Virtual Currency into Fiat Currency or other value, or the conversion or exchange of one form of Virtual Currency into another form of Virtual Currency;
  • Buying and selling Virtual Currency as a customer business (as distinct from personal use); or
  • Controlling, administering, or issuing a Virtual Currency. (Note: This does not refer to virtual currency miners.)

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