In response to a Bitcoin Foundation filing yesterday, the New York Department of Financial Services (NYDFS) quickly promised to provide the foundation more information about its controversial “BitLicense” proposal.
Citing New York law that requires a clear statement of “needs and benefits” for proposed regulations, the Bitcoin Foundation’s comments included a request under New York’s Freedom of Information Law (FOIL) for “any risk management and cost-benefit analysis (or any other systematic assessment) that is a part of the ‘extensive research and analysis’” the NYDFS cited when it issued its proposal.
“The community can help you fit regulatory means to public interest ends if they have access to the risks your study of digital currencies identified,” wrote Bitcoin Foundation Global Policy Counsel Jim Harper to New York’s Superintendent of Financial Services. The NYDFS promised hours later to deliver that information to the foundation within 20 days.
Echoing and extending community demand for more time to comment, the Bitcoin Foundation also suggested that the NYDFS adopt “an iterative process, in which you issue drafts, take comments for three months, re-draft, and take comments again until the many, many issues raised by the proposed regulation are thoroughly vetted in true collaboration with the community. ”
Citing the NYDFS Superintendent’s willingness to engage with the community on Reddit, the Bitcoin Foundation letter highlighted tools such as News Genius and GitHub that would support a truly collaborative rulemaking process. “[T]he department should resist the constraints of administrative procedures developed in the era of postage stamps,” Harper wrote. “We are confident that the community will meet you wherever you announce you will be engaging with them.”
The Bitcoin Foundation will publish all of the material it receives from the NYDFS for the Bitcoin community to review. If the agency takes the full 20 days to respond, the materials will be available just days before the close of the original comment period on the regulations, which was the minimum 45 days allowed by New York law. The NYDFS has signaled that it will extend the comment period on its sweeping, controversial draft digital currency regulation.
Digital currencies have been creating quite a stir in the payments industry. Whether it is Bitcoin, Dogecoin, Darkcoin, or any other coin-of-the-crypt – regulators can’t seem to decide on the best way to handle their presence.
With an in-depth look at the regulators, the legal definitions, exchanges and futures this webinar will prove an interesting one.
The webinar will feature Tim Byun the Chief Compliance Officer at BitPay, Carol R. Van Cleef from Manatt, Phelps & Phillips, LLP, Houman Shadab the Editor-in-Chief of the Journal of Taxation and Regulation of Financial Institutions and will be moderated by Felix Shipkevich from Shipkevich PLLC.
Those interested in the webinar may register now at: http://paymentweek.com/part-1-defining-bitcoin-legality/
On Wednesday, August 13th at the New York City Bar Association in Midtown Manhattan, former Financial Crimes Enforcement Network (“FinCEN”) Assistant Director Thomas Fleming will address the second annual Virtual Currencies Compliance Conference (VC3), hosted by the National Money Transmitters Association.
Tom Fleming has over 46 years experience in both the financial services industry and Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance. Most recently he was the Assistant Director for the Office of Compliance at the Financial Crimes Enforcement Network (FinCEN) responsible for ensuring industry compliance with the Bank Secrecy Act through active partnerships with regulatory and law enforcement agencies as well as financial institution trade associations. Mr. Fleming is a founding member of Tom Fleming & Associates, LLC, consultants specializing in Bank Secrecy Act / Anti-Money Laundering Compliance.
Tom will be joined by other speakers such as, Wendy Kamenshine – the CFPB Ombudsman, Jorge Guerrero – the founder and first Executive Director of the NMTA, Martine Niejadlik – the Chief Compliance Officer at Coinbase and many more.
More information and tickets for the event can be found at: http://www.nmta.us/virtual-currencies-compliance-conference-2014
With all of the recent discussion about the proposed NYFDS regulations we’ve seen discussions around how it impacts exchanges, tipping programs, and more but one area that has been overlooked in part is mining pools.
BTC Guild however is apparently thinking of the potential impact it will have on the mining pool after posting a notice on the website that reads:
This news update is being made to remind all users that BTC Guild is not a bank. Leaving BTC anywhere that is not your own wallet is always a risk that is outside of your control. Automatic withdrawals should always be set to trigger at least once a week, if not more frequently for large users, limiting your exposure.
The above is also important as news comes out of the New York Department of Financial Services, with proposed regulations which are extremely broad. Under the current proposals (subject to public comment and revision), operating a pool within the US will be impossible to do legally without obtaining significant personal information on ALL users, not just those in the US. There would also be significant financial costs which would exceed the amount of money the pool has generated since inception. Since there is no way anybody will mine on a pool with those requirements, it means that any pool in the US will be forced to shut down, or operate illegally and hope they’re ignored.
If the regulations are finalized (this is unlikely to happen for at least 3-4 months if not more) in a form that still applies to pools, the pool will be forced to shutdown. This news post is being made as notice that this is an exception to the stated 3-month closure window identified in our FAQ and the forum thread. If the regulations pass, the 3-month window will be reduced to 45 days due to legal requirement to cease operations prior to the regulations taking effect.
This warning is pre-emptive. Nothing has changed as of this news post, and I am still waiting on feedback from legal counsel regarding whether or not it is possible for New York to extend its reach into another state if the pool has users in it from New York.
As it stands BTC Guild isn’t shutting down but they are thinking in a very forward manner by speaking with legal counsel about how these regulations could impact the mining pool and other mining pools.
Some have argued that the current theories are alarmist regarding regulation while others would state that the regulations are not clear in many regards and until they are clarified further that caution should be exercised and the assumption should be worst case scenario especially when left intentionally or unintentionally vague stances from regulators.
While BTC Guild reports it is unsure if while it does not operate in New York if the regulations would apply to the pool the rules have been quite clear in that regards. The regulations read:
(n) Virtual Currency Business Activity means the conduct of any one of the following types of activities involving New York or a New York Resident:
Most attorneys seem to agree that if you deal with New York residents in any way shape or form regardless of what state you are in the rules equally apply to your business. If something is typically spelled out in a law specifically than it is typically exactly as it is read.
With that said it is a simple fact that regulation is coming. We have reached a point where it will be impossible to prevent regulation.
What the impact of regulations will be on cryptocurrency has yet to be seen but it should serve as a reminder how important it is now for your voice to be heard as the comment period begins.
How BTC Guild and others react to this set of regulations has yet to be determined but it is apparent that everyone is thinking about it and preparing to batten down the hatches.
itBit today reaffirms its intention to meet full regulatory compliance with the New York Department of Financial Services BitLicense.
“We applaud the thoughtful and transparent approach that Benjamin Lawsky and the NY DFS have taken in examining consumer protection issues surrounding virtual currency and related businesses. We believe this framework is important for the ecosystem to operate in a compliant and trustworthy way, and shows the DFS’ ongoing dedication to improving the stability of the industry,” said itBit CEO Charles Cascarilla. “We take every possible measure to ensure that itBit protects consumers, prevents abuse and provides security. The proposed BitLicense aligns with our current standards and practices, and we have every intention to be in compliance with the final guidelines.”
The proposed measures can be read in entirety at: http://www.dfs.ny.gov/about/press2014/pr1407171-vc.pdf
The regulations will be formally published in the July 23, 2014 edition of the New York State Register – which starts a 45-day public comment period. After that public comment period, the rules are subject to additional review and revision based on that public feedback before DFS finalizes them.
Ben Lawsky the Superintendent of Financial Services at the New York State Department of Financial Services stated the following regarding the new regulatory framework,
In developing this regulatory framework, we have sought to strike an appropriate balance that helps protect consumers and root out illegal activity – without stifling beneficial innovation. These regulations include provisions to help safeguard customer assets, protect against cyber hacking, and prevent the abuse of virtual currencies for illegal activity, such as money laundering.
We recognize that not everyone in the virtual currency community will be pleased about the prospect of a new regulatory framework. Ultimately, though, we believe that setting up common sense rules of the road is vital to the long-term future of the virtual currency industry, as well as the safety and soundness of customer assets. (We think the situation at Mt. Gox, for example, made that very clear.) Moreover, given that states have specific regulatory responsibilities in this area, we also have a legal obligation to move forward on this framework.
By the same token, we also recognize that – like any part of the financial industry – no regulatory framework can ever completely eliminate the risks customers face when dealing with financial firms. As such, we’ve included a strong set of consumer disclosures to help make sure customers have the information they need to make the choices that are best for them.
itBit offers a secure global currency exchange for trading fiat currency with digital currency like Bitcoin. The exchange provides investors with high liquidity and advanced security, storing clients’ bitcoin offline in cold storage. itBit employs extensive know-your-customer and additional monitoring systems to ensure the highest compliance standards, similar to international banks.
The New York-based bitcoin exchange was founded by CEO Charles Cascarilla. The company is venture-backed by RRE Ventures, Canaan Partners, Liberty City Ventures and angel investors including Jay W. Jordan II and Ben Davenport.