In the Big Apple , You May Pay Your Parking Ticket in Bitcoin

New York State is the home of the BitLicense.  In other words, New York is hoping for regulation amongst bitcoin businesses and entrepreneurs.  The latest edition has recently made the news, and the final 30-day commentary period is now underway, giving the public a chance to read the document and voice their opinions one last time prior to its solidification.

But now New York is suggesting something interesting… Rather, a New York City Councilman is really thinking out of the box, and to a degree, it just might work.

Mark Levine Proposes Bitcoins to collect New York FinesMark Levine, a councilman for the Big Apple, is suggesting bitcoin for the usage in payments of fees and fines.  Basically, bitcoin would make good “penalty money.”  Levine has written everything out in a bill that is set to be introduced tomorrow.  If adopted, bitcoin could suddenly find itself being used to pay off court fees, parking tickets and other similar items in the city that doesn’t sleep.

Levine is particularly passionate and excited about the bill, as he feels that bitcoin is primarily popular amongst the younger crowds, and bitcoin usage would place New York at the center of a more modern world:

“Today you can buy almost anything with Bitcoin… For young, internet-savvy people, it’s become the currency of choice… This would convey to the world that New York is on the cutting edge.”

Other advantages suggested by Levine would be that the bill would literally create several additional tech jobs and companies, and that it would save the Department of Finance millions in processing fees, as right now they are particularly high for credit cards.

The Department of Finance, which collects over $600 million dollars in penalty fees each year, has suggested that it is open to the idea.

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No doubt, there’s be no shortage of discussion surrounding the so-called BitLicense proposal put out by the New York Department of Financial Services (NYDFS). The proposal, which is currently in a commenting period, has attracted the attention of consumers and businesses alike. Many, it seems, aren’t fond of the strict regulations the NYDFS plans to put in place, citing the possibility that these regulations could stifle innovation in the cryptocurrency industry in the state of New York.

And one of the loudest voices when it comes to telling the Department of Financial Services whats on the minds of the community is the Bitcoin Foundation.

The organization today submitted comments highlighting the need for public access to the “extensive research and analysis” allegedly conducted by the NYDFS during the composition of their proposal.

From today’s news release:

[blockquote style=”2″]The Foundation’s comment seeks to learn the rationale the NYDFS used to substantiate its technology-specific regulatory proposal, which bucks the consensus among state and federal regulators that are integrating Bitcoin as a new financial technology into existing regulatory programs. [/blockquote]

Back in early August, the Foundation had requested “copies of any risk management and cost-benefit analysis (or other systematic assessment) that is part of the ‘extensive research and analysis’ referred to in the statement of needs and benefits for the proposed regulation” to the NYDFS.

The same day the request was made, the NYDFS had promised to deliver the requested information within a 20-day period. However, on the 9th of September, the NYDFS delayed the delivery of that information until December. That is well after the date when the public commenting period ends on the 20th of October.

“The sacrifice of some decentralization in furtherance of other benefits to the Bitcoin ecosystem must meet a high burden of proof. Nobody should want a regulation that sacrifices Bitcoin’s benefits if doing so produces unknown or merely speculative benefits for New York consumers of the New York financial services marketplace,” said Jim Harper, Global Policy Counsel for the Foundation.

He adds, “The language of the ‘BitLicense’ proposal would apply non-financial uses of Bitcoin’s public ledger, including communicative and expressive uses. This would run afoul of U.S. constitutional protections against regulation of speech.”

“A regulatory regime that is markedly out of step with others is very likely to create inefficiency in national and global markets, which would suppress competition, hamper the delivery of benefits to consumers and frustrate consumers,” he concludes. “New York is a very special state, but we recommend that it join the national and global community of regulatory bodies that are taking a methodical, iterative approach to Bitcoin business regulation.”

A new report is surfacing suggesting that former BitInstant CEO and member of the Bitcoin Foundation Board of Directors, Charlie Shrem, is expected to plead guilty to unlicensed money transmission next Thursday in New York Federal Court.

The report comes from Reuters Friday evening, citing Shrem’s attorney, Marc Agnifilo, as the source of the news.

Previously, Mr. Shrem has pleased not guilty against the counts against him, of which include running an unlicensed money transmitting business, money laundering (in connection with the now-defunct original Silk Road illicit marketplace), and neglecting to report suspicious activity reports to the United States Treasury’s Financial Crimes Enforcement Network (FinCEN).

Shrem was arrested in January of this year at John F. Kennedy International Airport in New York City, upon his arrival from a bitcoin-related conference in Europe.

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Another man, Mr. Robert Faiella, was also arrested at about the same time, facing similar charges. It’s unclear whether Mr. Faiella will proceed with a trial scheduled in late September, but like Shrem, he has plead not guilty previously.

Shrem is well known in the bitcoin community, and remains an active evangelist of the digital currency. He often participates in bitcoin-related events and activities.

A plea deal will bring Shrem less risk as opposed being convicted at a trial — which was originally scheduled for later this year.

More information on the matter will be available next week, when Shrem appears with his legal counsel in court. Updates are forthcoming.

As many may already be aware, July 17, 2014, the New York Department of Financial Services (NYDFS) issued its proposal for the regulation of virtual currencies (Proposed Regulations).¹

At this point, the Proposed Regulations are exactly that – a proposal. There is a 45-day period of public comment, after which the NYDFS may or may not consider the comments it receives. Then, with any revisions that NYDFS deems necessary, the Proposed Regulations will become final and official.

Understandably, there has been quite an uproar about the Proposed Regulations among the virtual currency world, as well as from some political spheres too. In order to understand the potential impact of the Proposed Regulations and what to make of all the recent press, the Proposed Regulations themselves first need to be understood.

This article shall serve as a primer on the key points to know about the Proposed Regulations, followed by discussion.

The Proposed Regulations

I won’t bore you with a commentary on administrative law policy and procedure, but let’s suffice to say that the NYDFS has the authority to issue the Proposed Regulations and promulgate the eventual final version of the regulations.

It is interesting to note that the Proposed Regulations are littered with instances of deference to the Superintendent of the NYDFS – which as most are aware is currently Benjamin Lawsky. Whether such wide-ranging deference is within scope of the NYDFS mandate may arise later, so I only mention it to raise the issue. So, with that out of the way, here it is:

Virtual Currency

  • Any type of digital unit used as a medium of exchange – a form of digitally stored value – what everyone thinks of as virtual currency, including Bitcoin and the like
  • Does not include units used in customer affinity programs, in gaming platforms or other mediums of exchange that are not convertible

License Required/Virtual Currency Business Activity

  • License issued by the NYDFS Superintendent is required to engage in a Virtual Currency Business Activity – this is the “BitLicense” referenced in the press
  • Virtual Currency Business Activity – involving New York or a New York Resident
    • Receiving Virtual Currency for transmission
    • Securing, storing, holding or maintaining custody or control of Virtual Currency on behalf of others
    • Buying and selling Virtual Currency as a customer business
    • Performing retail conversion services, including the conversion or exchange of Fiat Currency
    • Controlling, administering or issuing a Virtual Currency

This is extremely wide-ranging and the only exceptions are merchants and consumers that use virtual currency for the purchase or sale of goods. So really anyone dealing in virtual currency with anyone residing in New York, temporarily located in New York or working in New York, that is not a goods merchant or consumer, will need to have a BitLicense.

In order to obtain a BitLicense, an application to the Superintendent must be made that includes a mountain of information, all sworn to by the applicant under penalty of perjury.

Once one has a BitLicense, it can be revoked for any violation of the Proposed Regulations, including on any ground that the Superintendent may refuse to issue an original BitLicense. That includes a provision for complete discretion by the Superintendent to deny an application.

Capital Requirements


There are strict capital requirements in the Proposed Regulations for every BitLicensee. Broadly speaking this is defined as “such capital as the superintendent determines is sufficient to ensure the financial integrity of the Licensee and its ongoing operations.”

There are however a number of factors that the Superintendent may consider in analyzing a BitLicensee’s capital structure and assessing the financial integrity of the BitLicensee.

Bond/Trust Account Required:

The Proposed Regulations require that each BitLicensee must maintain a bond or trust account in United States dollars for the benefit of its customers in such form and amount as is acceptable to the Superintendent for the protection of the BitLicensee’s customers. Implicit in this is that there is no minimum/maximum on the bond or trust account. Whatever you are holding on account in virtual currency for customers must have corresponding funds via a bond or trust account.


A BitLicensee may only invest retained earnings and profits in:

  • Insured Certificates of Deposit
  • Money market funds
  • Government Securities


If a BitLicensee secures, secures, stores, holds or maintains custody or control of virtual currency on behalf of another person, such licensee shall hold virtual currency of the same type and amount as that which is owed or obligated to such other person.

So a BitLicensee must maintain a customer reserve of virtual currency. What this really means is that a BitLicensee cannot lend, spend or otherwise use any of the virtual currency it holds for customers. Absolutely no “bitcoin banking” will be permitted.

Reporting Requirements

Quarterly financial statements must be submitted by a BitLicensee to the Superintendent and audited financial statements must be submitted annually. The composition of the financial statements is generally what is standard for a financial services business, though the devil is always in the details and there is a requirement that off-balance sheet items must be included in the statements.

Anti-Money Laundering

There is a comprehensive anti-money laundering scheme within the Proposed Regulations, though it generally follows and duplicates what is already required for crypotcurrencies by FinCEN (Financial Crimes Enforcement Network) – the federal regulator for money laundering and other financial crimes. Thus, the Proposed Regulations create a secondary repository of the same information that is required to be reported to FinCEN.

What does it all mean?

Often times there is a backlash in an industry that is facing strict regulation for the first time. Such is the case with the Proposed Regulations in the cryptocurrency community. It should be remembered that this is a proposal and rarely will any regulatory agency get things exactly right on the first shot.

However, all of the negative comments and press so far seem to have a great deal of validity. One big issue is the breadth of regulation and the fact that so much could be encompassed under the Proposed Regulations. The Proposed Regulations will be applicable to any cryptocurrency exchange, broker, trader, etc. dealing with anyone connected to New York.

There are also plenty of key provisions that are especially heavy handed such as the nature of the bond/trust account, reserve and investment provisions. It is interesting to note that these do not apply (at all or in a different, less onerous fashion) to other institutions in the financial services industry.

Can one imagine if the NYDFS made some of the Proposed Regulations applicable to banks? Told Bank of America that it could only invest funds on deposit in government bonds? Not happening, ever. When one looks at the Proposed Regulations along these lines it starts to look more and more like a win for big banks, most of which coincidentally are either headquartered in New York or have large footprints in New York.

Finally, certain provisions of the Proposed Regulations such as the anti-money laundering scheme are simply duplicative of regulation already in place and applicable to the virtual currency industry in the United States.

That last point raises a fundamental issue that hasn’t been given much attention lately, which is the state versus federal issue. New York is taking the first comprehensive step to regulation of virtual currency at the state level. Other states are also currently exploring crypto regulation (9 states are working jointly on the matter). Texas for one has enacted cryptocurrency regulations, but wisely, Texas took the light-touch route.

New York State NYDFS Logo

Its regulations contain protections for the public, such as minimum capital requirements for exchanges, but otherwise are generally hands off and Texas regulators have said they’ll revisit the regulations as things further develop in the cryptocurrency world. The federal government has decided to not regulate crypto for the time being, other than as absolutely necessary such as the applicability of FinCen and some tax rulings.

So the comprehensive regulations of New York may be the start of U.S. state initiative in regulation of cryptocurrencies (rather than federal regulation). That is not good for cryptocurrency because state-by-state regulation of anything results in fragmentation and uncertainty is an almost guaranteed result. As evidence, one need only look to the quagmire of current state-based payment systems laws in place or the difference between the Texas virtual currency regulations and the New York Proposed Regulations.

Unfortunately, the world is in a wait-and-see pattern right now with the Proposed Regulations, though there is no lack of speculation as to the impact of the regulations. Some are predicting it will crush the industry, others are saying it will kill the industry in New York, while others are predicting that cryptocurrency will go down an alternate path in terms of values based on jurisdiction of the source of the currency.

As alluded to previously, I think the potential trend that is being set by New York, with states taking up regulation rather than the federal government (or none at all), is more of a potentially crushing effect for virtual currency than just one state doing so. The notion that we could see the development of a jurisdictional approach to crypto values has a lot of appeal because it’s uber free-market thinking at its best. Virtual currency is resilient so we may just see the development of “New York Bitcoin” trading at a discount once the Proposed Regulations go final.

Reach out

The clock is ticking on the 45-day public comment period, which will expire September 6, 2014. There is still time left to voice your thoughts so don’t hesitate to exercise your right to speak out to the NYDFS.

Joshua T. Klein is a partner with Fox Rothschild LLP, who focuses his practice on financial services, restructuring and related services. The views expressed herein may not necessarily represent those of He can be reached at [email protected]

Regulations outlining so-called Bit-Licenses and regulations related to virtual currencies in the State of New York were set to be released “no later than the end of the second quarter of 2014,” but we haven’t yet heard a thing.

Until this afternoon.

New York State Department of Financial Services Superintendent Benjamin Lawsky took to social media (Twitter, specifically) to deliver a progress report of sorts on the work his Department is doing, adding that “good progress” is being made on the front.

Lawsky added in his tweet that he expects to have a proposal out in the next week, perhaps two.

These regulations have been highly-anticipated in the crypto-currency community for a number of different reasons: chief of which is the importance of New York being the first State in the USA to piece together regulations at this level.

And members of the community are expecting it to be done right. These regulations will no doubt serve as a precedent for the time other states decide to follow suit in establishing their own rules.

The regulations are also expected to carry weight in the business community with the possibility of the aforementioned ‘BitLicense’, a potential requirement for companies dealing in the virtual currency space.

This license was discussed in January during a NYDFS “fact-finding” hearing that took place in New York City.

“Ultimately, it’s our expectation that the information we’ve gathered in this fact-finding effort will allow us to put forward, during the course of 2014, a proposed regulatory framework for virtual currency firms operating in New York,” said Lawsky at the time. “That is, in part, why we’re evaluating whether our agency should issue a so-called ‘BitLicense’ specifically tailored to virtual currencies.”

It will be interesting to see what comes from this, and it won’t be long now until we all find out.

BitPay Logo

With the recent announcement the Atlanta-based company has surpassed 26,000 approved bitcoin-accepting merchants, it’s clear the company is growing fast.

And not long after announcing the opening of the company’s Latin American headquarters in Buenos Aires, Argentina comes the news that they have opened offices on either coast of the United States — in San Francisco and New York.

The two offices, according to BitPay, will help the company’s main office in Atlanta deal with sales, implementation, and operational support.

“BitPay has many merchants accepting bitcoin throughout Silicon Valley so we are thrilled to extend our exceptional sales and customer support by opening an office in San Francisco,” said Paige Freeman, VP of Sales at the company. “We look forward to expanding into various markets both here in the U.S. and internationally.”

Two employees will work out of the San Francisco office, and one will work out of the New York office.

BitPay now employs 31 full-time employees — 22 of which operate out of the company headquarters in Atlanta.

TechCrunch Disrupt NY

Popular technology and start-up blog TechCrunch announced on Wednesday that they would be accepting bitcoin for admission to their Disrupt event taking place at the Manhattan Center in New York City.

Disrupt is a technology conference that focuses on bringing together tech startups — bringing together entrepreneurs, investors, hackers, and technology enthusiasts. The event features panels with well-known entities and even a hackathon.

TechCrunch is working with Coinbase to process the transactions, which comes as no surprise, as the San Francisco-based company in the midst of the start-up scene on the west coast.

Ticket prices aren’t cheap, starting at $497, going up to $1795 for an all-inclusive pass.

It raises the question: could it set the trend for tech conferences everywhere? Read more about TechCrunch Disrupt NY here.

Bitcoin Center NYC Banner

It seems like the Bitcoin Center in New York City (just 100 feet from the NYSE) is getting into a number of different activities. From bitcoin classes, to hackathons, to in-person trading — the center is adding something else: debates.

The Center has organized a debate on bitcoin, and named Andrew Schiff of Euro Pacific Capital and Jeffrey Tucker of as the two opponents.

The purpose? “To discuss divergent, uniform views on Bitcoin”.

Schiff specializes in communications for media and clients at Euro Pacific Capital, and Tucker has written a number of books and contributes to the Bitcoin Magazine and the Let’s Talk Bitcoin podcast.

The debate is slated to take place at the Bitcoin Center on 40 Broad Street in New York City at 7:00PM. For more information, follow this link.

New York Times SquareA hedge fund based in New York by the name of NYSO HEDGE and specializing in “high risk, high return” investments has revealed that it has accepted roughly $5.4 million in bitcoin deposits.

This news follows an initial announcement by the fund to begin accepting bitcoin for deposits on the 7th of February — so it’s taken just about three days for them to amass that amount from bitcoin holders.

“NYSO HEDGE’s own Risk management team (due to these circumstances), has deemed bitcoin deposits as safe as wire transfers with careful research and considerations.”

NYSO applied to get regulatory approval in order to accept bitcoin in June of 2013, and it’s taken up until now to get approved.

Each of NYSO HEDGE’s accounts require a $25,000 minimum investment, and options range from managed accounts, certified investor accounts, and margin accounts.

[Full Report – CoinDesk]

New York State NYDFS Logo

As planned, the New York State Department of Financial Services (NYDFS) is holding a hearing on Tuesday on the use of virtual currencies like bitcoin.

Tuesday’s session runs from 11:30AM through 4:30PM, and will feature notable panelists the likes of the Cameron and Tyler Winklevoss, Barry Silbert (founder, Bitcoin Investment Trust), and Charlie Lee, creator of litecoin.

Wednesday’s session will run from 10:00AM through 4:00PM and will feature a representative of (who recently began accepting bitcoin), Jeremy Allaire (Circle Internet Financial), and Fred Ersham (co-founder of Coinbase).

The possibility of discussions surrounding the regulation and start of ‘BitLicense’ issuance are reported to be topics of interest.

You can view the sessions here. You can find a full list of panelists here.