New York State has become one of the first jurisdictions in the world to propose explicit licenses for companies wanting to carry out business in bitcoin.
The proposal, known as the “BitLicence” would require businesses to keep records of the identities and real-world addresses of their customers, to actively keep an eye out for illegal activity, and to always have in its possession the amount of bitcoin that is owed to its customers.
For some members of the bitcoin community, the proposals – available online in draft form – are what they’ve been waiting for, the first step in turning the currency from an unregulated wild-west into a mature, respectable area of commerce.
“As a New York City-based company, the BitLicence is an important asset that will allow us to provide US banking and regulatory protection to our target customer group,” Jaron Lukasiewicz, CEO of bitcoin trading exchange Coinsetter, told Bitcoin news site Coindesk.
“I’m happy to see the New York Department of Financial Services making tangible progress towards offering the first achievable regulatory bitcoin licence in the country.”
But others argue that the requirements are too restrictive, the areas covered by the license are too broad, and that the new rules would even have prevented the creation of bitcoin in the first place.
Ryan Selkis, a bitcoin entrepreneur who gained fame as the source of the leaked documents revealing trouble at Mt Gox, argues that the license covers companies which have little to do with the financial industry.
“The department overreaches by including under its purview many services that never actually access user funds,” he writes.
“These include wallets like Blockchain.info, tipping apps like Changetip, and mixing services like CoinJoin. The inclusion of non-hosted wallets is especially troubling as it essentially outlaws the personal possession of bitcoins for these users.”
Since licence holders need to monitor their users for illegal activities, Selkis argues, companies selling bitcoin wallets which they don’t then host are in an impossible position: their product is illegal to sell without a license, but they have no way to monitor their users to fulfil the terms of the licence. The situation looks similar to a government requiring Diesel to comply with money-laundering legislation before they can sell purses.
But Selkis reserves much of his ire for the requirement that any party “controlling, administering or issuing a virtual currency” requires a licences.
“This provision would have outlawed Satoshi Nakamoto’s original bitcoin invention, and it certainly seems to ban any new alt-currencies and tokens that might be created in the future,” he writes.
The measures are currently only in draft form, and still liable to change – something Selkis hopes he can bring about by being “assertive and convincing in our arguments”. Interested parties have 45 days to comment on the proposal, with the consultation beginning on Wednesday 23 July.