A new three-strike rule is now in effect for crypto businesses looking to apply for New York’s dreaded BitLicense.
The Dreaded BitLicense Just Got a Lot Worse
Regulators have issued a warning telling users that anyone looking to apply for a BitLicense could potentially have their applications thrown out or quickly rejected granted they do not follow the feedback or rules brought forth by New York-based lawmakers. Granted a rejection occurs three times, the company will not be permitted to try for a BitLicense again.
In a statement, the New York Department of Financial Services (DFS) explains:
If all deficiencies involving a particular application requirement or set of requirements have not been fully and effectively addressed by the end of the response period for the third deficiency letter… the DFS may, without further notice, deny the application.
The BitLicense represents a serious conundrum for crypto ventures looking to do business in New York. In fact, it has done so ever since its introduction five years ago. For one thing, New York’s attitude towards crypto appears rather hostile thanks to the installation of the BitLicense program. There are multiple fees to pay – some of which exceed $5,000 – and a long list of permissions to obtain.
The breaking of any set rules or regulations could potentially lead to more fees, and should the company in question fail one time too often, their license could potentially be revoked, meaning whatever headquarters and customer bases they’ve established in the Big Apple could become null and void from one day to the next.
It can be argued that regulation is required if bitcoin and cryptocurrency ventures are to become more legitimate and mainstream in the coming years, though many companies believe the BitLicense is things a bit overboard. When it was first announced in 2015, many companies – including popular San Francisco-based cryptocurrency exchange Kraken – announced that they would not adhere to the license’s rules, and said that they would simply not do business with New York customers. Other companies simply picked up and moved away, saying goodbye to the big city they once called home.
Will New York Fall Behind?
The implementation of this new three-strike rule could potentially do a lot more in the field of preventing crypto activity, rather than pushing it forward. Granted too many applications are rejected, New York could find itself lacking a crypto presence, which may put it behind other regions when it comes to blockchain implementation.
Thus far, it is estimated that only about 25 companies have obtained BitLicenses over the past five years. That means that around five companies have garnered licenses each year since it was first introduced, and even still, only about six of these companies have actual licenses. The other 19 have what are called limited trust charters, which allow them to engage in crypto-related business on a limited basis.