The digital currency ecosystem in New York State is currently hanging on a string as the deadline to apply for BitLicense closes. Today, the 8th of August 2015 marks the end of 45 day grace period extended to Bitcoin and digital currency companies in the state to apply for BitLicense.
Few Bitcoin companies like ShapeShift, Eobot and Poloniex have already left New York State for good. ItBit became the first company to receive BitLicense and Gemini, the exchange whose promoters are Winklevoss Twins is still awaiting confirmation. All these companies falls on either side of the spectrum, while the fate of the rest that falls in between the spectrum is still uncertain.
BitLicense has been a topic of debate since it was first introduced by Benjamin Lawsky, the Superintendent of New York State Department of Financial Services at that time. After receiving lot of objections from the Bitcoin community, BitLicense draft was revised thrice, without really addressing a lot of concerns.
Few companies like MonetaGo have filed last minute applications with days to spare. According to the CEO of MonetaGo, the company submitted a 500 page application which took almost a month for their legal team to put together. Along with it, there is a $5000 non-refundable which the companies have to pay for the application. Even after paying the $5000 fee, there is no guarantee that the company will be issued the license.
Established digital currency based businesses are willing to follow the regulations and apply for BitLicense in order to ensure their presence in New York. While it is easier for the big companies to meet BitLicense requirements, smaller startups can’t possibly meet the BitLicense requirements nor do they want to part with $5000 as fees when they know that the probability of getting the BitLicense is next to nothing.
BitLicense imposes a lot of restrictions on the still nascent bitcoin ecosystem, hampering innovation in digital currency and blockchain technology. There are concerns raised about the customer data requirements imposed by BitLicense on companies which potentially violates privacy and also increases the risk of data breach for companies collecting and storing customer information.
The aftermath of BitLicense implementation is yet to be observed, it is just a matter of days!