BitLicense, the parting gift by Benjamin Lawsky to the State of New York has got bitcoin companies leaving the state one after another. Poloniex became the latest one to make it to the list of bitcoin companies leaving New York.
Until now, three bitcoin based businesses have shut shop, which includes ShapeShift.io and Eobot along with Poloniex. BitLicense regulation requires the bitcoin based companies to meet various compliance and regulatory requirements. Apart from the costs and manpower involved in meeting all the requirements, there are issues regarding privacy of users as the companies are required to keep a record of all their users.
In order to operate in New York State, bitcoin exchanges and startups are required to pay fees and adhere to stringent regulations. With bitcoin industry still in its nascent stages, many startups do not have the required resources or funds to implement all the requirements as stated in BitLicense. In Poloniex’ example, the company was required to pay $5000 non-refundable application fee, which by itself is a huge amount for many startups.
Even after paying the application fee, the bitcoin companies are expected to comply with a long list of requirements which happens to be more stringent than the ones required to start a traditional banking business. It is virtually impossible for many small companies and startups to meet all these requirements.
It has been long contested that the BitLicense will hamper the growth of bitcoin industry in the state and effectively kills new innovations in the industry. While countries like Canada have decided to encourage innovation in the bitcoin and digital currency technology sector, the New York BitLicense is doing just the opposite. The creators of BitLicense seem to have forgotten that many bitcoin companies currently out there are still startups. The regulations are designed keeping only large companies in mind.
Seems like we soon will have more bitcoin businesses following Poloniex to leave the State of New York.