New York’s bitcoin regulations may not be as onerous as many have feared.
In a speech at Cardozo Law School in New York on Tuesday night, Benjamin Lawsky, superintendent of financial services for the state of New York, said that the state will not require digital-currency software developers to have a license, as it had previously proposed. “To clarify, we do not intend to regulate software as software or software development,” he said, according to Reuters. “For example, a software developer who creates and provides wallet software to customers for their own use will not need a license.”
The news marks a change of heart for New York State regulators, who previously proposed a far-reaching plan for a so-called “BitLicense” back in July. The regulations would have required bitcoin businesses to track their customers’ addresses, as well as the addresses of people who send their customers money. These rules would also have applied to a wide swath of bitcoin-related businesses, including online wallet companies like Blockchain and BitGo. As WIRED wrote when the license was first proposed in July, such a regulatory environment would “undermine the fundamental value proposition of bitcoin,” a digital currency poised to change the way money is handled both online and off.
But in his speech, according to the Wall Street Journal, Lawsky painted a picture of a much less stringent regulatory environment. “The virtual currency industry is at a bit of a crossroads regarding whether it will become an important part of the future financial system,” he said. “We’re committed to proceeding thoughtfully since virtual currency could ultimately have a number of benefits for our financial system.”
Still, he acknowledged the very real need for regulating this new world of digital currency, which has also enabled hives of criminal activity, like the infamous Silk Road, to operate. Lawsky maintained that any business that wants to offer financial services using virtual currencies—be it a bank or a startup—would have to deal with some regulatory oversight.
“When it comes to safeguarding customer money at a financial company – and unregulated world of caveat emptor has never been a sufficient answer,” he said. And while he acknowledged that such regulations may become too onerous and costly for a startup to deal with, Lawsky said that is, quite literally, the cost of doing business in the financial services industry. “We do not, for instance, let someone run a bank out of their garage,” he said.
The open comment period on these regulations is expected to end this month, after which, the Department of Financial Services will release an updated version of its proposal. That, too, will be open to public comment. “Suffice it to say, there is and will be a significant amount of time for stakeholders to provide input,” Lawsky said.